The outlook: The Federal Reserve said Wednesday that the U.S. economy grew at a modest pace since mid-May but several of the central bank’s regional districts reported growing signs of slower demand and five noted recession concerns.
The report is a collection of business anecdotes from around the country prepared in time for the Fed’s next meeting on July 26-27.
What happened: Most districts reported that consumer spending moderated as high food and gas prices diminished discretionary income. New auto sales remained sluggish.
Substantial prices increases were reported across all districts. Businesses were able to pass prices to customers, especially the travel and hospitality sector, where firms “were successful in passing through sizable price increases to customers with little or no pushback.”
Most Fed districts reported wage growth despite some improvement in labor availability.
Outlook: The outlook for future GDP growth “was mostly negative,” with business contacts noting expectations of further weakening of demand over the next six to 12 months.
Big picture: The June consumer price data, released earlier Wednesday, showed that inflation is heating up. Many economists see higher odds of recession given the prospect of more aggressive Fed monetary policy tightening. For now, the labor market remains strong.