The Federal Reserve observed that the U.S. economy expanded at a modest pace over the past two months, with growth particularly fueled by demand stemming from data centers. According to the Beige Book released on Wednesday, while sentiment varied across industries due to uncertainties related to energy prices and the geopolitical outlook, the overall economic picture remained favorable. The report noted that despite robust high-end consumer spending, shoppers have become increasingly price-conscious, influencing broader spending patterns.

Manufacturing activity increased across most of the Fed's districts, driven largely by orders tied to defense and data center projects. Employment saw a slight overall uptick, with a healthy demand for workers appearing most frequently in manufacturing, construction, and select service sectors. In contrast, hiring demand softened in retail and hospitality, indicating a mixed labor market landscape.

At the same time, price growth accelerated modestly across most regions. The report highlighted that some consumer-facing contacts in a few districts observed heightened price sensitivity among customers, which limited firms' ability to pass on higher input costs. The document referenced artificial intelligence 19 times and data centers 25 times, underscoring the growing importance of these technological drivers in the economic narrative. This report is based on information collected from the 12 regional Federal Reserve banks up to August 24, with the Minneapolis Fed serving as the compiler.