US economic activity increased at "a slight to moderate" pace in 10 of the 12 Federal Reserve districts since mid-April, though underlying signs were less encouraging, the Fed's latest Beige Book released Wednesday showed.
Consumer spending remained mixed and increasingly split across income groups, with higher-income households staying resilient, middle-income consumers becoming more cautious, and low-income households showing the most strain, the report said.
Districts reported increased credit-card usage, fewer retail visits, and stronger demand for necessities. Auto demand softened due to affordability and fuel costs, while manufacturing activity rose at a modest to strong pace in nine districts.
Business outlooks pointed to little change over the next six months amid elevated uncertainty. Employment was largely flat across 11 districts, and wage growth remained "modest to moderate." Districts described a "low-hire, low-fire" environment, with workers reluctant to change jobs.
Prices increased at a "moderate to strong" pace overall, driven by energy-related costs tied to the conflict in the Middle East, with spillovers into shipping, packaging, groceries and fertilizer. Firms' ability to pass on higher costs remained mixed, particularly among consumer-facing businesses, the Beige Book said.
The report was compiled by the Kansas City Fed using data collected on or before May 27.