Fed Beige Book Shows Consumers Resilient Despite Uncertainty

Covering economic conditions across the 12 Federal Reserve districts, the report shows that overall activity increased at a slight to moderate pace in eight districts, with outlooks for the months ahead described as mildly optimistic. That optimism, however, is paired with careful adjustment rather than exuberance.

The survey, released Jan. 14, offers a qualitative snapshot of the U.S. economy based on interviews and surveys with business leaders, bankers, community organizations and local economists. The Fed uses it to capture real-time sentiment and on-the-ground conditions that other data may miss, especially turning points in consumer behavior, pricing power and labor demand. The latest edition reflects changes since mid-November into early January, and provides context for how households and firms responded heading into the holiday season.

Holiday Spending Helped

Consumer spending was one of the brighter spots in the report. Nearly all districts cited stronger holiday-related activity, with 10 describing spending as somewhat positive. However, the Beige Book makes clear that this strength was uneven.

Higher-income consumers were frequently cited as drivers of discretionary spending, particularly on travel, tourism and experiential purchases.

In contrast, lower- and moderate-income households were described as increasingly price sensitive and hesitant to spend on nonessential goods and services.

That bifurcation suggests that headline spending figures may mask fragility beneath the surface, with growth concentrated among households with greater financial buffers.

 

Tariff Costs Meet Consumer Resistance

Businesses across multiple districts reported continued concern about rising input costs, including those tied to tariffs. While firms have worked to absorb or offset these pressures through efficiency gains and pricing strategies, many noted limits to how much could be passed along to consumers without dampening demand.

Rather than aggressive price hikes, the Beige Book points to a more cautious approach: selective increases, promotions to sustain volumes and a greater focus on cost control. That dynamic underscores a balancing act between margin protection and consumer sensitivity.

Divide in Consumer Spending Power

The Beige Book repeatedly points to a widening divide between higher-income and lower-income consumers.

While affluent households continued to spend on services and discretionary items, lower-income consumers were more likely to cut back, delay purchases or trade down to cheaper alternatives.

Credit Used Carefully

Banking conditions were generally described as stable to improving, with some districts reporting increased demand for credit cards, home equity loans and commercial lending. At the same time, both lenders and borrowers were characterized as more cautious, particularly for consumer and small business loans.

Credit, in other words, remains a support for spending, but it is being accessed more selectively and often in response to financial pressure rather than confidence-driven expansion.

Job Security Concerns Linger

Labor conditions were mixed. Seven districts reported little to no change in hiring, with job gains largely limited to replacement roles rather than expansion. Several districts also noted fewer workers switching jobs, signaling reduced mobility and cooling wage momentum.

That stability aligns closely with PYMNTS Intelligence findings from the November 2025 Wage to Wallet Index, a collaborative effort with Ingo Payments and WorkWhile, which show that while employment remains intact, perceptions of personal job security have deteriorated sharply among hourly and lower-income workers. PYMNTS Intelligence found that job-security sentiment among labor-economy workers fell 6.7 points month over month, even as overall sentiment edged slightly higher.

Together, the Beige Book and PYMNTS Intelligence data point to an economy where employment is holding, but confidence is fragile. Workers may still have jobs, yet concerns about hours, pay stability and future prospects are shaping spending and credit behavior.

Consumers are still spending, businesses are still investing and labor markets are still functioning. But momentum heading into 2026 will depend less on headline employment figures and more on whether job security, income stability and price pressures ease enough to broaden consumer participation beyond the highest earners.