Adriana Kugler notes the challenges in assessing economic activity due to the front-loading of imports. She anticipates a reversal of the import surge soon, which could lead to larger price increases.

Current data suggests there might be moderation in economic growth, but not a considerable slowdown. While core services inflation remains above the pre-pandemic rate, progress on core goods inflation has regressed.

Warn Notices And Layoffs

Warn notices of layoffs and layoff mentions in the Beige Book have increased since the start of the year. Kugler remains cautious about the economic outlook, indicating no immediate plans to reduce rates.

Kugler’s comments about the front-loading of imports point to a temporary bulge in demand, where firms brought in goods earlier than normal. This practice usually distorts near-term trade data, giving a false impression of heightened activity. Once demand returns to usual patterns, and these excess inventories work through the system, consumer prices are likely to climb more sharply, as the buffer of accumulated goods thins. From our view, this should make traders more attentive to upcoming shifts in transport, logistics, and wholesale metrics, which may give a clearer picture of when that reversal could strike.

The broader message is that the economy continues to grow, though more quietly. It’s not stalling. That said, the softness remains patchy. Some areas of service activity are still running hotter than policymakers would like. Core goods, which had shown improvement in previous quarters, have lost that progress—suggesting price pressure in those categories has renewed. This already complicates the medium-term outlook.

Labour Market And Economic Impact

More worrying for us are the early signs of softness in the labour market. The uptick in WARN notices—those legally required alerts for mass layoffs—hints that companies may be tightening belts. When these notices show up consistently across industries and states, particularly in connection with the Beige Book observations, it tells us to look harder at the employment data beyond headline figures. These are not scatterings in the noise; they indicate genuine deliberation among firms. They’re planning future cuts, not reacting to immediate crisis.

It stands out that there’s no pivot in the messaging around rates. Kugler maintains a restrained stance, favouring a wait-and-see approach. This supports the idea that inflation remains sticky in pockets the Fed considers sensitive, especially among services. The absence of talk around easing suggests that efforts to contain inflation will continue for now, leaving traders to weigh not just when policy might change, but whether the economy can grind through tighter conditions without a turn in sentiment.

In the coming weeks, it becomes more important to track how firms comment on forward bookings, especially in sectors with low pricing power. We expect investor focus to shift away from consumer strength toward margins, input costs, and inventory cycles. The anomalies in trade and labour data are unlikely to resolve neatly, increasing the potential for surprises in revision-heavy releases like GDP or PCE.

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