Fed Beige Book Shows Consumers Resilient Despite Uncertainty

• Holiday spending was stronger but uneven: higher-income consumers drove discretionary and experiential purchases, while lower- and moderate-income households cut back on nonessential items
• Businesses reported tariff-related cost pressures but limited ability to raise prices, instead focusing on selective increases, promotions, and cost controls to protect margins without dampening demand
• Labor markets remain stable with little net hiring growth, but job-security sentiment among hourly and lower-income workers fell 6.7 points month-over-month, indicating fragile confidence beneath employment headlines

Summary: Fed Beige Book Reveals Uneven Consumer Resilience

The Federal Reserve's Beige Book, released January 14, 2026, shows modest economic growth across eight of twelve districts, but reveals significant disparities in consumer spending power and mounting business pressures.

Key Findings:

Consumer Spending: Holiday spending strengthened across nearly all districts, with ten reporting "somewhat positive" activity. However, growth was concentrated among higher-income households spending on travel, tourism, and experiences, while lower- and moderate-income consumers exhibited increased price sensitivity and spending hesitation on nonessential items.

Business Pressures: Companies reported continued concerns about rising input costs, particularly tariff-related expenses. Rather than aggressive price increases, businesses adopted cautious strategies including selective price adjustments, promotional activity, and enhanced cost controls to avoid dampening consumer demand.

Credit Markets: Banking conditions remained stable to improving, with increased demand for credit cards, home equity loans, and commercial lending. However, both lenders and borrowers demonstrated greater caution, particularly for consumer and small business loans, suggesting credit usage is driven more by financial pressure than confidence.

Labor Market: Seven districts reported flat hiring, limited mainly to replacement positions rather than expansion. Worker mobility decreased, indicating cooling wage momentum. While employment levels hold steady, job security sentiment among hourly and lower-income workers fell 6.7 points month-over-month according to PYMNTS Intelligence data.

Market Implications: The widening divide between affluent and lower-income consumers suggests headline economic figures may mask underlying fragility. Economic momentum in 2026 will likely depend on whether job security, income stability, and price pressures improve sufficiently to broaden consumer participation beyond high earners.