US economy modestly expands as inflation eases and import prices surge

The Federal Reserve’s Beige Book shows that 11 of the 12 districts reported light to moderate economic growth in late May and June, with one district unchanged. Growth was supported by data‑center, machine and defense orders, while higher fuel prices dampened consumer spending in other categories. Prices rose at a moderate pace overall, but inflation outlooks diverged, with some districts citing Middle‑East conflicts and tariff concerns.

Retail sales for June rose 0.2% month‑over‑month, the smallest increase in five months, helped by modest gains in motor‑vehicle, non‑store and sporting‑goods sales. Lower gasoline receipts limited the headline, but underlying demand remained steady.

Import prices unexpectedly increased 0.3% in June, marking the biggest annual rise since August 2022. The jump was driven by higher prices for capital and consumer goods, especially technology products tied to artificial‑intelligence investment, while fuel prices fell.

Business inventories grew modestly in May, raising the inventories‑to‑sales ratio to its lowest level since late 2021, indicating solid domestic demand despite earlier inventory drawdowns. Manufacturing output in June was flat month‑over‑month, with capacity utilization holding steady at 76.1%.

Consumer confidence in July climbed 4.9 points, surpassing expectations, reflecting optimism about the economy despite lingering high short‑term inflation expectations.