{"id":240593,"date":"2026-01-16T03:55:16","date_gmt":"2026-01-16T03:55:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/240593\/"},"modified":"2026-01-16T03:55:16","modified_gmt":"2026-01-16T03:55:16","slug":"economy-is-marginally-improving-but-only-because-the-rich-are-splurging-on-luxury-items-and-holidays-the-fed-says","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/240593\/","title":{"rendered":"Economy is marginally improving but only because the rich are splurging on luxury items and holidays, the Fed says"},"content":{"rendered":"\n

At long last, the Fed\u2019s Beige Book<\/a> had some good news for investors and analysts: Economic activity has increased at a \u201cslight to modest pace\u201d in the majority of U.S. Federal Districts, per its January update.<\/p>\n

Eight of the 12 regions in the Reserve System reported growth, while three reported no change and one reported a modest decline<\/a>. \u201cThis marks an improvement over the last three report cycles where a majority of Districts reported little change,\u201d the Beige Book reads.<\/p>\n

The majority of banks also reported increased activity as a result of holiday shopping, the report added, though trends were in keeping with the K-shaped economy, which became so prevalent last year. The K-shaped economy describes the diverging fortunes<\/a> between two sets of consumers: The bottom on a downward trajectory, the top trending upwards.<\/p>\n

As the Beige Book described: \u201cSeveral Districts also noted that spending was stronger among higher-income consumers with increased spending on luxury goods, travel, tourism, and experiential activities. Meanwhile, low to moderate income consumers were seen to be increasingly price sensitive and hesitant to spend on nonessential goods and services.\u201d<\/p>\n

The New York Fed, for example, reported slumping sales for mid-to-lower-end goods while luxury goods \u201ccontinued to sell well.\u201d Likewise, the hospitality sector reported rising demand for higher-priced dining, while the middle segment of eating out remained \u201cchallenging.\u201d Meanwhile, smaller retailers reported sharp declines in activity.<\/p>\n

Elsewhere, the Minneapolis Fed said that while retailers catering to higher-end consumers reported increased sales, those on the lower-end\u2014such as furniture stores which are targeted at middle and lower-end consumers<\/a>\u2014are \u201cgetting pretty beat up.\u201d A Montana restaurant reported wealthier customers are still eating out frequently, while lower-income consumers \u201cdefinitely seem to be pulling back, eating out less, or are more price sensitive.\u201d<\/p>\n

The Beige Book mirrors the analysis last year from Mark Zandi, chief economist at Moody\u2019s. Back in September, Zandi wrote <\/a>how \u201cfor those in the bottom 80% of the income distribution, those making less than approximately $175,000 a year, their spending has simply kept pace with inflation since the pandemic.\u201d Meanwhile, \u201cthe 20% of households that make more have done much better, and those in the top 3.3% of the distribution have done much, much, much better.\u201d<\/p>\n

As such, the prospects of the economy are \u201ctethered\u201d to the income and confidence among the nation\u2019s wealthiest.<\/p>\n

A shift was also observed in the way businesses are handling tariffs, potentially indicating a trickle-through effect on inflation for months to come. Of course, the White House would argue that fears over tariff inflation have been greatly exaggerated, with even the Fed now promising to \u201clook through\u201d a one-time inflationary jump if it occurs.<\/p>\n

But the Beige Book suggested that time may now be nigh, with businesses having exhausted their pre-tariff stockpiles and now have a need to pass the cost increases to consumers. Price-sensitive sectors were considering how to maintain their bottom line in the face of increased outgoings, though they were reportedly wary to further strain the discretionary income of consumers.<\/p>\n

The Federal Reserve Bank of Boston reported that manufacturers were seeing increased costs of raw materials and glass, and as a result, intended to pass on part of the cost to customers this year. \u201cFirms in other industries also planned selective price increases for the coming months,\u201d the note said, \u201cranging from low single digits for pharmaceuticals to 5 to 10% for certain consumer products.\u201d<\/p>\n

However, tariffs are also working in some respects in the way that President Trump intended. The Cleveland Fed reported that some businesses, now that the worst of the volatility seems to have settled, are now managing to barter down prices. In some cases, they were also turning to domestic vendors instead of importing from abroad\u2014befitting for the Oval Office\u2019s \u201cAmerica First\u201d agenda.<\/p>\n

This story was originally featured on Fortune.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"At long last, the Fed\u2019s Beige Book had some good news for investors and analysts: Economic activity has…\n","protected":false},"author":2,"featured_media":240594,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[129491,114,184,85,129492,46,129490,16294,34131,129493],"class_list":{"0":"post-240593","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-beige-book","9":"tag-business","10":"tag-economy","11":"tag-il","12":"tag-income-consumers","13":"tag-israel","14":"tag-luxury-goods","15":"tag-mark-zandi","16":"tag-new-york-fed","17":"tag-u-s-federal-districts"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/240593","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=240593"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/240593\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/240594"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=240593"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=240593"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=240593"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}