Fed Beige Book Shows Slight Pickup in Activity Amid K‑Shaped Consumer Landscape — Evening Brief – 01.14.26 

Economic activity picked up modestly across much of the U.S. in recent weeks, marking a noticeable improvement from late 2025, according to the latest Federal Reserve Beige Book. The report, which compiles anecdotal evidence from businesses and community contacts, found that most of the Fed’s 12 districts experienced slight to modest, reversing a period of relative stagnation seen in prior updates. 

The previous Beige Book, released in late November, described economic conditions as showing “little change.” In contrast, the latest report—based on information collected through January 5, 2026—suggests momentum has improved, particularly on the consumer side. 

Consumer spending remained a key support. Most banks cited slight to modest growth in household outlays, helped by the holiday shopping season and stronger demand from higher‑income consumers, particularly for luxury goods, travel, tourism, and experiential services. By contrast, lower‑ and middle‑income households were described as increasingly price‑sensitive and cautious on nonessential purchases, reinforcing a “K‑shaped” pattern in which spending trends diverge sharply by income cohort. 

Business contacts were “mildly optimistic” about the outlook, with most expecting slight to modest growth over the coming months. Eight districts reported activity increasing at a slight or modest pace, three cited no change, and one noted a modest decline. Regionally, Boston, Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, Kansas City, and San Francisco pointed to firmer conditions, while Chicago, Minneapolis, and Dallas saw little change; the New York district continued to experience a modest decline. 

Labor markets appeared close to steady state. Employment was mostly unchanged, with eight districts reporting flat hiring and several noting greater reliance on temporary workers. The report said artificial intelligence is not yet having a large impact on employment, with its more significant effects expected “in the coming years rather than immediately.” 

Inflation pressures remained a concern, particularly from trade policy. Tariff‑ related cost pressures were described as a consistent theme, with some firms that had initially absorbed higher input costs now beginning to pass them through as inventories turn over and margin pressure intensifies. Even so, businesses in retail and restaurants were hesitant to raise prices for especially price‑sensitive customers, highlighting the tension between cost recovery and demand risk.