Economic Growth Driven by Manufacturing and Tech, but Energy Costs Weigh on Consumers

The Federal Reserve's August Beige Book reports economic output grew slightly to moderately across ten of its twelve regional districts, driven by demand in manufacturing and tech. However, rising energy costs, inflation, and global conflicts weigh on consumers.

Manufacturing activity rebounded in multiple regions due to significant orders linked to national defense, artificial intelligence, and new data center developments. Data center construction is a primary engine of regional expansion in districts like Cleveland, Atlanta, and Chicago.

Rising prices in eight districts are primarily driven by non-labor input costs, energy surcharges, and insurance costs. Affluent consumers continue to spend on luxury goods, high-end travel, and dining, while mid- to lower-income households trade down to value retailers or reduce discretionary spending due to rising daily costs.