Federal Reserve Beige Book: Overall economic changes are small, rising uncertainty may drag down the economy

The Federal Reserve's Beige Book report indicated little change in overall economic activity since the previous report, with three districts reporting slight to moderate growth, five reporting no change, and four reporting a slight slowdown. Overall consumer spending, particularly on retail goods, has declined slightly in recent weeks, though strong demand for electric vehicles boosted auto sales in some districts ahead of the expiration of federal tax credits at the end of September. International tourist demand for leisure and hospitality services declined further during the reporting period, while domestic consumer demand remained largely unchanged. Despite this, high-income households continued to spend strongly on luxury travel and accommodations. Several reports highlighted that middle- and low-income households continued to seek discounts and promotions in the face of rising prices and heightened economic uncertainty. Manufacturing activity varied across districts, with most reports citing challenging conditions due to increased tariffs and weakening overall demand. Agriculture, energy, and transportation activity declined across the reporting districts. Conditions were mixed in the financial services sector and other interest-sensitive sectors, such as residential and commercial real estate. Some reports noted an improvement in business lending in recent weeks due to lower interest rates, while others continued to highlight sluggish activity. The outlook for future economic growth varied across regions and sectors. Sentiment improved in some regions, with some anticipating an increase in demand over the next six to 12 months. However, many other regions continued to expect heightened uncertainty to weigh on economic activity. One report highlighted the downside risks to growth posed by a prolonged government shutdown.