Consumers grow wary of higher prices, but holiday spending met expectations: Fed

investing.com:

Investing.com — Economic activity was little changed since in recent weeks as consumer spending over the holiday period met expectations across most districts in the U.S. even as consumer grow more sensitive to higher prices at a time when the labor market continues to show signs of cooling, according to the Federal Reserve's Beige Book released Wednesday.

There was «little or no change in economic activity since the prior Beige Book period,» the Fed said in its Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through Jan. 8.

«Consumers delivered some seasonal relief over the holidays by meeting expectations in most Districts, underpinned by increased leisure travel, and a tourism,» it added.

Consumers, however, continue to grow wary of higher prices, the report suggests, forcing retailers to narrow their profit margins and to push back in turn on their suppliers' efforts to raise prices.

Higher interest rates, meanwhile, continued to curb auto sales and real estate deals, but the «prospect of falling interest rates was cited by numerous contacts in various sectors as a source of optimism,» the report said.

Most Districts indicating that «expectations of their firms for future growth were positive, had improved, or both,» the report added, though flagged several concerns that muddies the economic outlook including worries about the office market, weakening overall demand, and the 2024 political cycle.

The strength in the consumer comes even as «nearly all districts» reported more signs of a cooling labor market that helped ease wage pressures. «Firms from many Districts expected wage pressures to ease and wage growth to fall further over the next year,» the report added.