Economy is marginally improving, says the Fed, but only because rich consumers are splurging on luxury items and holidays | Fortune

"At long last, the Fed's Beige Book had some good news for investors and analysts: Economic activity has increased at a "slight to modest pace" in the majority of U.S. Federal Districts, per its January update. Eight of the 12 regions in the Reserve System reported growth, while three reported no change and one reported a modest decline. "This marks an improvement over the last three report cycles where a majority of Districts reported little change," the Beige Book reads."

"The majority of banks also reported increased activity as a result of holiday shopping, the report added, though trends were in keeping with the K-shaped economy, which became so prevalent last year. The K-shaped economy describes the diverging fortunes between two sets of consumers: The bottom on a downward trajectory, the top trending upwards. As the Beige Book described: "Several Districts also noted that spending was stronger among higher-income consumers with increased spending on luxury goods, travel, tourism, and experiential activities. Meanwhile, low to moderate income consumers were seen to be increasingly price sensitive and hesitant to spend on nonessential goods and services.""

Economic activity expanded at a slight to modest pace in most U.S. Federal Reserve Districts, with eight of 12 districts reporting growth, three reporting no change, and one reporting a modest decline. Banks saw increased activity from holiday shopping, but gains were uneven across income groups. Higher-income consumers increased spending on luxury goods, travel, tourism, and experiences. Low- and moderate-income consumers became more price sensitive and reduced discretionary spending. Luxury retail and higher-end dining reported stronger demand, while mid- and lower-end retailers, middle-tier dining, and smaller retailers faced sharper declines and ongoing challenges.

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