Federal Reserve Beige Book: Moderate Economic Growth, Data Center and AI Investments Act as Key Pillars of Support

The Federal Reserve’s Beige Book, released Wednesday local time, shows U.S. economic activity has grown moderately over the past two months, with demand for data centers standing out particularly. The Fed described the economic outlook as “positive,” but uncertainties from energy prices and geopolitics have led to divergent confidence levels across industries. In the consumer sector, high-end spending remains solid, but shoppers have become far more price-sensitive. Business contacts in several Fed districts noted that this heightened price sensitivity has limited firms’ ability to pass rising input costs on to end consumers. Meanwhile, prices have risen moderately faster across most Fed districts. On the jobs front, U.S. employment has edged up slightly. Labor demand has been uneven. The report noted that healthy labor demand remains common in manufacturing, construction and some service sectors, while demand has fallen in retail and hospitality. Manufacturing activity expanded across most Fed districts, driven primarily by demand for defense and data center orders. The report’s references to AI and data centers also highlight the prominent role these two investment areas play in current economic activity: AI is mentioned 19 times, while data centers are cited 25 times.