The Fed’s Take on the Economy: Subdued Activity and Conditions

By SBE Council at 16 July, 2025, 1:54 pm

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by Raymond J. Keating -

Two reports from the Federal Reserve seem to be saying: Hey, things could be worse. Well, of course, that would be technically true about any read on the economy. In this case, though, the point seems to be that the economy isn't as bad as some previous reads might have indicated.

The latest Federal Reserve Beige Book estimates that the economy "increased slightly from late May through early July," with five Districts reporting "slight or modest gains," five pointing to "flat activity," and the other two Districts experiencing "modest declines in activity." That's troubling, but it's added, "That represented an improvement over the previous report, in which half of Districts reported at least slight declines in activity." Well, okay.

In particular areas, nonauto consumer spending "declined in most Districts," with auto sales declining "modestly on average, after consumers had rushed to buy vehicles earlier this year to avoid tariffs." Meanwhile, "manufacturing activity edged lower, and nonfinancial services activity was little changed on average but varied across Districts." In addition, loan volume was up "slightly in most Districts"; construction "slowed somewhat"; agriculture "remained weak"; energy "declined slightly"; and transportation ranked as "mixed."

Overall, this was a generally glum report.

Meanwhile, the Fed's industrial production report noted that total industrial production grew by 0.3 percent in June, after two months of being flat. Within that, while mining declined by 0.3 percent, and was down in two of the past three months, manufacturing output edged forward in June by 0.1 percent. The June index for manufacturing production was down ever so slightly compared to March.

There's a great deal of noise in the economic data these days, and that's likely to continue. This reality was captured by those surveyed for the Beige Book, as it was noted, "Uncertainty remained elevated, contributing to ongoing caution by businesses." For good measure, "The outlook was neutral to slightly pessimistic, as only two Districts expected activity to increase, and others foresaw flat or slightly weaker activity."

As has long been the case with the U.S. economy, the hope remains that a resilient private sector - i.e., entrepreneurs, businesses, investors and workers - continue to press ahead, innovating, investing and growing no matter the headwinds.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of " The Weekly Economist " book series, and 10 Points from Walt Disney on Entrepreneurship .