Greenville Chapter August Meeting!
- Overall economic activity remains solid. Despite volatility in some components of GDP, the economy continues to grow, supported by resilient consumer spending and significant investment related to artificial intelligence.
- Consumer spending continues to support the economy, but the strength is uneven. Higher-income households are driving much of the discretionary spending on categories such as travel and clothing, while lower- and middle-income households face greater financial pressure.
- Household finances remain healthy in aggregate. Rising household net worth and generally manageable debt-service levels have helped sustain consumer activity. However, the overall figures may mask challenges facing individual households.
- Wage growth has slowed from its recent highs. Workers are still seeing wage gains, but the pace has moderated as the labor market has cooled.
- AI-related investment is a major source of economic growth. Spending on data centers, technology infrastructure and related equipment remains strong. AI and energy companies have also accounted for much of the recent growth in the S&P 500.
- Inflation remains above the Federal Reserve’s 2% target. Higher energy costs have been an important contributor, while rising producer prices—particularly during the early stages of production—could place additional pressure on consumer prices.
- The labor market is stable but hiring has slowed. The economy is currently operating in a “low-hire, low-fire” environment: employers are generally retaining workers but remain cautious about adding new positions.
- Recent job growth has been concentrated. National employment gains have come primarily from a relatively small number of industries and have been stronger among larger employers.
- Recent college graduates face a particularly challenging job market. Unemployment among new graduates has risen relative to several other education and experience groups.
- South Carolina’s economy is showing broader strength than the nation overall. Job growth is spread across more industries, and durable-goods manufacturing continues to be a notable bright spot.
- South Carolina’s labor supply has performed relatively well. While national labor-force growth has flattened, South Carolina’s trend has been more positive, although it has also recently begun to level off.
- Interest rates remain elevated. The Federal Open Market Committee held the federal funds rate steady at its most recent meeting, while its economic projections shifted upward—suggesting that rates could remain higher for longer than previously anticipated.
What Fifth District Businesses Are Reporting
Feedback gathered by the Richmond Fed from businesses across the region indicated:
- Demand is generally “fine,” although spending patterns differ sharply between higher- and lower-income consumers.
- Many businesses expect to maintain relatively flat staffing levels for the remainder of the year.
- Consumers are sustaining spending by saving less, postponing certain bill payments and choosing short-term repairs instead of larger purchases.
- Transportation, freight and shipping costs remain elevated.
- Businesses increasingly view economic uncertainty as the “new normal” and are moving forward with decisions despite it.
- Some businesses serving other companies and higher-income customers have been able to pass along price increases with relatively little resistance.
Overall Message
The economy remains resilient, but that strength is increasingly uneven. Consumer spending and AI-related investment continue to drive growth, while persistent inflation, elevated interest rates, slower hiring and financial pressure on lower-income households create meaningful risks. South Carolina remains comparatively well positioned, supported by broad employment gains and continued strength in durable manufacturing.
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