Fed Beige Book finds price increases spreading as growth narrows to nine districts

The Federal Reserve's Beige Book, released at 2 p.m. Eastern time on Wednesday, October 14, found price increases spreading across more of its 12 regional districts, the areas covered by the reserve banks. Three districts called price growth robust, up from one in the September 2 report, and the summary said higher oil prices had reached every district. Growth narrowed to nine districts, down from 10 in that September report.

The Beige Book is the central bank's roundup of comments from businesses and other contacts. This edition was prepared by the Federal Reserve Bank of Philadelphia from information gathered on or before October 5. It summarizes those outside contacts, and it is not a commentary on the views of Federal Reserve officials.

The report's scale runs from robust, the fastest, down through moderate, modest and slight. Price growth this time was robust in three districts, moderate in eight and modest in one. Four districts said the pace of increases had picked up since the prior period, against one in the September 2 report. Of the eight that called overall price growth moderate, three said pressures on input prices were intensifying, if not already growing robustly.

"Higher oil prices permeated all District reports."

Firms reported elevated diesel prices and said fuel surcharges were passing increased costs through the supply chain. Contacts in multiple districts also cited other commodities, tariffs and insurance. Where price-sensitive customers pushed back, consumer-facing firms reported tighter profit margins. Several districts expected further increases as existing contracts expire and as input hedges or customer-delivery contracts are renegotiated.

Those interviews closed on October 5, before the Bureau of Labor Statistics published the September consumer price index at 8:30 a.m. Eastern time on Wednesday. The index rose 0.6% in September, after 0.4% in August, and was up 3.7% over the year. Gasoline rose 9.1% and accounted for over half of the monthly increase. Prices excluding food and energy rose 0.3% on the month and 2.6% over the year.

A narrower expansion

Nine districts reported growth: two moderate, three modest and four slight. Three reported no significant change. Chicago had been growing slightly, and was flat this time. New York and Philadelphia were still expanding, only slightly, down from a modest pace.

What growth remained was mostly in manufacturing. Robust, broad-based factory growth led Dallas's moderate expansion, and six other districts reported modest to moderate growth from their manufacturers. Five reported little or none. Outside manufacturing, the summary said, there was little growth overall.

Most districts reported little or no change in consumer spending, after slight growth on balance in the September report. Auto contacts in five of the six districts that discussed sales described them as flat to modestly lower. More than half of districts said high-income households drove consumer spending.

Most districts said firms had kept a positive outlook for the coming months.

"Expectations tend to be for slight growth, weighted toward manufacturing and burdened by persistent uncertainties."

What districts said about hiring

The October summary said most districts described little or no net change in overall employment. Under that line, three districts described modest increases, five slight increases and four no significant change. Slight is the smallest increase on the report's scale, which is why a slight gain can still be called little change.

The September 2 report had said employment rose very slightly, with three districts showing modest gains, four slight gains and five no change. One more district reported a slight increase this time, and one fewer reported no change, even though the October summary no longer said employment had risen.

Labor supply was generally adequate, though shortages persisted for specialized, technical and skilled trade workers. Five districts said some firms, after raising productivity by investing in artificial intelligence, had cut staff through attrition, delayed hiring, or expected to create fewer jobs.

Wages were still rising, from a slight pace to a moderate one, depending on the district. Several districts said inflation had added pressure through cost-of-living demands and higher benefit costs.

The decision on October 28

The Federal Open Market Committee, which sets the target range for the federal funds rate, meets on October 27 and October 28. On September 16 it raised that range by a quarter of a percentage point, to 3.75% to 4%. Projections released that day put the median federal funds rate at 4.1% for the end of 2026, above the 4% top of the range in place now. The next decision on the range comes at 2 p.m. Eastern time on October 28, with a press conference at 2:30 p.m.