US Economy Grows Modestly Amid Inflation Fears

The Federal Reserve's Beige Book survey has reported that the US economy grew modestly since early July, driven by rising orders for military goods and artificial intelligence products in manufacturing. However, consumer spending was limited due to inflation-wary consumers.

The Beige Book, released on September 2, highlighted a moderate increase in inflation in eight districts and a robust gain in one district. The survey also noted that energy prices have surged, with Brent crude oil futures rising 9.1% after fighting resumed between US and Iranian forces last week.

Input price pressures were notably elevated in manufacturing and construction across multiple districts, with widespread reports of price increases for energy, transportation, and raw materials, particularly metals and petrochemicals.

Fed Chair Kevin Warsh has indicated that the central bank would lean towards increasing the federal funds rate if price pressures persist at current levels. However, New York Fed President John Williams said that price shocks from tariffs and the U.S.-Iran war may eventually fade, slowing inflation.