Fed survey finds US growth stalling as price pressures build nationwide

The American economy barely grew over the past six weeks while the cost of running a business kept climbing, the Federal Reserve said Wednesday, a combination that leaves policymakers with few easy choices as they prepare to meet again later this month.

The Fed's October Beige Book, the central bank's periodic survey of business conditions across its twelve regional districts, found that two districts reported moderate growth, three modest growth, four slight growth and three no significant change at all since the prior report. Manufacturing was the one bright spot, with broad-based gains concentrated in the Dallas district; most other sectors showed little momentum. At the same time, eight of the twelve districts described price growth as moderate and three called it robust, with businesses tracing the pressure to oil, tariffs and insurance costs rather than to strong demand.

The numbers

The full report, compiled by the Federal Reserve Bank of Philadelphia from information gathered on or before October 5, found that most districts registered little or no change in overall employment, with three reporting modest increases, five slight increases and four none at all. Wage growth ran from slight to moderate, but five districts said firms had already begun trimming headcount through attrition, delaying hiring or expecting to need fewer new workers after investing in artificial intelligence to lift productivity.

Consumer spending, meanwhile, was largely flat. Auto dealers in five of six reporting districts described sales as flat to modestly lower, and more than half of all districts said whatever spending growth existed was being driven by higher-income households. Even in Dallas, where retailers posted solid sales, contacts described "some reports of lower-income customers being more cautious with spending." On prices, the report said "higher oil prices permeated all District reports," with diesel costs and fuel surcharges working their way through supply chains, and firms in several districts said they expect to raise prices further as existing contracts and hedges expire.

How we got here

The Beige Book is published eight times a year, timed to give policymakers a qualitative read on the economy ahead of each meeting of the Federal Open Market Committee. It draws on interviews and questionnaires with business contacts, economists and community organizations in each Fed district rather than on hard government statistics, and the central bank is explicit that it is "not a commentary on the views of Federal Reserve officials."

This edition arrives less than two weeks before the FOMC's October 27-28 meeting, and it follows a run of increases rather than the rate cuts many businesses had been hoping for. The committee voted unanimously last month to raise its benchmark rate a quarter point, to a range of 3.75 percent to 4 percent, as persistent inflation from tariffs and energy costs has made officials reluctant to ease policy even as growth has cooled. Wednesday's report gives the committee fresh evidence that those cost pressures have not let up: four districts said the pace of price increases had actually picked up since the last report.

Who is affected

The strain described in the report fell hardest on lower-income households and the nonprofits that serve them. Contacts in the Boston district told the Fed that households were struggling with rising costs for utilities, groceries, housing, transportation, childcare and insurance, and warned that low-income families faced the risk of losing Medicaid, SNAP and other benefits in 2027 because of new work requirements and more frequent paperwork. In the New York district, community organizations reported "surging demand for food and emergency assistance as stricter eligibility and work requirements for SNAP and Medicaid took effect," with food pantries seeing a sharp rise in first-time users and one nonprofit leader comparing the strain to the pandemic, but without the government and philanthropic support that came with it then.

In Texas, nonprofits told the Dallas Fed that tightening SNAP eligibility rules were pushing food insecurity higher and that high utility costs from late-summer heat had become a top stressor on lower-income budgets, with some residents using credit cards to cover gaps and some retirees returning to work driving for ride-hailing apps. A semiannual survey of nonprofits in the Cleveland Fed's district found that 87 percent of respondents, the highest share in the survey's history, said their clients' financial well-being had declined over the prior six months.

"Families [are] one setback, such as a car repair, from losing their ability to meet basic needs."

That assessment, from a respondent to the Cleveland Fed's nonprofit survey, was echoed by a financial counseling provider in the same district that told the Fed demand had grown so high it had to close its waitlist to new clients. Businesses felt a different kind of squeeze: manufacturers and shippers across several districts cited rising diesel and shipping costs as a growing drag on margins, and in the Cleveland district one builder described the combination of tariffs and elevated fuel costs as a "double whammy."

What happens next

The report gives the Fed a mixed and arguably uncomfortable picture heading into its next policy meeting on October 27-28: an economy that is barely expanding in most places, a labor market that is cooling rather than tightening, and prices that are still climbing faster than officials would like. That combination complicates the committee's usual playbook, in which weak growth would normally argue for lower rates while persistent inflation argues for higher ones. Several districts told the Fed they expect further price increases in the coming months as firms renegotiate expiring contracts, hedges and delivery agreements, suggesting the inflation pressure described in Wednesday's report is unlikely to fade quickly. A separate community-conditions summary compiled from the same regional outreach flagged the SNAP and Medicaid changes as a risk that nonprofits expect to intensify into next year, adding another variable for policymakers to weigh as they assess how much slack remains in the economy.