Central bank’s business contacts saw greater economic uncertainty amid inflation and higher interest rates

U.S. economic growth eased this fall with business activity in some parts of the country stalling or declining, the Federal Reserve said in a Wednesday report.

Businesses also expressed greater uncertainty and increased pessimism for the U.S. economy as prices and interest rates continue to rise, according to the central bank’s latest compilation of economic anecdotes from around the country, known as the Beige Book. 

U.S. economic activity was “about flat or up slightly,” compared with a moderate average pace of growth cited in the prior report. The Fed said five districts reported slight or modest gains in activity and the other seven experienced either no change or slight-to-modest declines in activity. 

Improving supply chains and weakening demand lead to a slowing pace of price increases. Consumers also increasingly sought discounts, the report said.

Rising interest rates also weighed on spending, especially for big-ticket items such as cars and homes. Construction and real-estate spending slowed as home prices and sales declined. Consumer spending excluding car purchases was mixed but had slight gains as inflation pushed consumers toward lower-priced goods.

The report included information gathered through Nov. 23. 

Inventories varied by industry, the Chicago Fed said. Retail stocks were higher than usual. New-vehicle inventories rose but remained well below pre-pandemic levels. In manufacturing, firms continued to hold extra “just in case” inventory because of supply-chain concerns.

Travel and tourism businesses reported gains in activity with restaurants and luxury hotels reporting robust demand. New York City tourism remained strong in October and early November as visitors combined weekend trips with remote work and business traveling gradually rebounded. International tourism, especially from Europe, also continued to increase.

Some layoffs were reported in the technology, finance, and real-estate sectors but employment grew modestly in most of the country. Some businesses said they were reluctant to lay off workers because of recent hiring difficulties.

The Philadelphia Fed said wage growth had subsided but remained elevated with wage inflation becoming somewhat less widespread.