US Economy Grows Modestly Driven by Data Center Demand

The US economy has shown modest growth since early July. Demand from data centers and defense-related orders supported manufacturing and non-residential construction, but consumers have become more price-sensitive, and inflationary pressures persist. The Federal Reserve (Fed) stated in its August Beige Book that economic activity has increased modestly since early July. Ten out of twelve regions reported slight to moderate growth, and consumer spending saw a slight increase, although consumer price sensitivity has heightened. Auto sales were sluggish due to weakened consumer sentiment, high fuel costs, and rising financing expenses. Manufacturing improved in most regions, driven by demand from defense and data center-related orders. Non-residential construction also increased, while residential construction declined. Employment saw a slight uptick, with strong labor demand in manufacturing, construction, and some service sectors, but it decreased in retail and hospitality. Prices continued to rise, with eight regions reporting average levels of price increases. The report assessed the overall outlook for the coming months positively, although sentiment varied by sector.

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