Households Face Rising Financial Pressure, 'Beige Book' Finds

Key Takeaways

• The rising cost of living is forcing households across the country into desperate measures, including taking out payday loans and skipping meals.
• The trend is affecting retailers, who say customers are trading down to cheaper brands.
• The Federal Reserve’s “Beige Book” report suggested the economy is growing more “K-shaped,” with wealthier households doing better while those at the bottom of the income ladder struggle more.

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More Americans are collecting scrap metal, selling their clothes, skipping meals, and hunting for bargains to make ends meet.

The Fed’s “Beige Book” report published Wednesday suggested the economy is growing more “K-shaped.” The collection of anecdotal information from around the country collected in February showed wealthier households benefitting from a booming stock market while the rising cost of living squeezes people with lower and moderate incomes.

What This Means For The Economy

The report suggests many households are getting more frugal, which could undermine consumer spending, the main engine of U.S. economic growth in the months ahead.

The economy has stayed afloat amid a series of shocks, including tariffs, an immigration crackdown and government shutdowns. However, persistently high inflation combined with a lackluster job market is taking a toll on lower-income households, who are increasingly struggling to pay the bills, according to the Fed’s contacts in regions across the nation.

The Beige Book isn’t based on hard data, but Fed officials and other experts use it to spot economic trends. Nearly every Fed district included in the Beige Book reported rising distress in its respective areas.

In Boston, more people used food banks.

“Contacts reported low- and moderate-income communities faced continued pressures from high costs of food, rent, and energy, including home heating,” the report said. “Increased reliance on food pantries, first reported last October, persisted in recent months, with especially acute needs in November with the temporary suspension of federal SNAP funds.”

Community organizations in Cleveland noted the trend, too.

“Nonprofits reported that clients’ financial stress worsened over the past three months because of elevated food, utility, and housing costs coupled with reduced social support services,” the report said. “In response, contacts said some clients stopped paying bills, skipped meals, or delayed medical care. One contact noted seeing more employed individuals requesting food, rent, and utility assistance, and another noticed more seniors seeking employment to make ends meet.”

In Atlanta, people turned to desperate measures.

“Individuals reported employing a variety of strategies for navigating tight household budgets, including selling clothes online, scrapping metal, tapping savings, utilizing buy now/pay later offerings, eliminating dining out, using coupons, and buying in bulk,” the report said.

Related Education

Understanding the Beige Book: Economic Insights from the Federal Reserve

K-Shaped Recovery: Definition, K-Curve Chart Example, and Causes

Retailers noticed the pattern as well. In New York, “a major retailer reported that sales revenues surpassed last year’s levels but were driven by elevated selling prices due to the cost pass-through from tariffs; sales gains remained concentrated among higher-income consumers, who nonetheless remained price-conscious and shopped across multiple outlets to find value.”

Other businesses said they had avoided passing cost increases on to customers, narrowing their profit margins, because their clients couldn’t tolerate higher costs.

The report also repeated themes from previous reports, including businesses passing the cost of tariffs to customers to varying degrees, and customers at different income levels becoming more cost-conscious and seeking deals.

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