Latest Beige Book shows modest growth and cautious lending

The Fed’s latest Beige Book, released Sept. 2, reported modest economic expansion across most U.S. regions, with inflation stabilizing in eight districts and slowing in three but accelerating to a “robust pace” in the St. Louis District..District reports depict steady consumer spending but also some shifts toward tightening credit. In the Atlanta District, bankers noted much tighter underwriting standards, with credit restrictions affecting small businesses most acutely. The New York District reported slightly tighter credit standards for both business loans and commercial mortgages, alongside creeping delinquency rates across most portfolios. About one-fifth of bankers in the Minneapolis District expect to moderately tighten standards for commercial and agricultural borrowers over the next year to insulate against economic uncertainty. Price growth slowed in three Fed districts and held steady in eight. However, underlying margin pressures persist. Commercial clients, particularly in manufacturing and construction, continue to grapple with elevated input costs. Higher insurance premiums and healthcare costs are also weighing on small-to-medium enterprise profitability.Labor markets showed some signs of cooling. While headcounts rose slightly nationwide, wage pressures largely moderated to historical averages. While general business sentiment remains guardedly positive, sticky inflation, volatile energy prices and geopolitical friction are among the factors driving uncertainty. And Fed policymakers are emphasizing a data-dependent stance along with vigilance on inflation heading into the FOMC meeting Sept. 15-16.