The U.S. economy has maintained a modest growth trend since early July, and prices rose at a moderate level, according to an assessment. Demand related to data centers and defense supported manufacturing activity, but uncertainty grew around high energy prices and the Iran war.
The Federal Reserve said in its Beige Book on the 2nd that "10 of the 12 Federal Reserve Bank districts reported growth ranging from slight to modest, while two reported no change."
Employment increased very slightly, and prices were found to have risen at a moderate level.
The Fed said, "The overall outlook for the next few months was positive, but sentiment varied by industry," and explained, "Representatives of corporations reported increased uncertainty surrounding the effects of high energy prices, policy, and international conflicts."
The Beige Book is a report that gathers recent economic trends by contacting banks, corporations and experts in the 12 Federal Reserve Bank districts. It is typically released about two weeks before meetings of the Federal Open Market Committee (FOMC), which sets currency policy.
This Beige Book was prepared based on data collected through the 24th of last month ahead of the Sept. 15–16 FOMC.
By industry, manufacturing activity increased in most districts. In particular, orders related to defense and data centers stood out. Both the positive and negative effects of artificial intelligence (AI) on labor demand were reported.
In the consumer institutional sector, spending on high-priced products showed a solid trend, while consumers' price sensitivity appeared to have increased.
However, analysts said it is difficult to gauge the direction of the September benchmark rate decision from the Beige Book alone. The market is currently pricing in about a 62% chance of a rate hike and about a 38% chance of a hold.
Federal Reserve Chair Kevin Warsh said last week that unless there is confidence that the inflation rate is moving toward the Fed's 2% target "clearly and sufficiently quickly," the possibility of a rate hike would be left open.