What does the Beige Book say about consumer spending in the US?

The Beige Book reports a significant spending divide, with higher-income consumers increasing luxury purchases while lower-income consumers become more price-sensitive.

How are businesses reacting to increased tariffs according to the Beige Book?

Businesses are depleting stockpiles and planning to pass on increased tariff costs to consumers, potentially leading to inflation.

Which income groups are driving US economic activity according to the Beige Book?

Economic activity is largely tethered to the income and confidence of the nation's wealthiest households.

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Richest Drive Economy: Beige Book Reveals Spending Divide

15 Jan

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Summary

Higher-income consumers boost luxury spending, while lower-income ones grow price-sensitive.
Retailers for lower-income groups face sharp declines; luxury sectors remain strong.
Businesses prepare to pass tariff costs to consumers as stockpiles deplete.

Richest Drive Economy: Beige Book Reveals Spending Divide

The Federal Reserve's Beige Book indicates a growing chasm in consumer spending patterns. Wealthier households are actively purchasing luxury items and engaging in travel and experiential activities. Conversely, lower and middle-income consumers are demonstrating heightened price sensitivity, scaling back on nonessential goods and services. This economic divergence is evident across various sectors, with mid-to-lower-end retail reporting slumping sales while luxury goods continue to perform well.

Smaller retailers are experiencing sharp declines in business activity, with furniture stores, which cater to middle and lower-income consumers, reporting significant struggles. Restaurants are observing wealthier patrons dining out frequently, while lower-income customers are reducing frequency or becoming more price-conscious. This trend mirrors economic analyses from the past year, which suggested that spending for the majority of households has only kept pace with inflation, while higher-income groups have seen substantial gains.