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Atlanta

/beige-book-reports/2024/2024-05-at

"May 29, 2024\nSummary of Economic Activity\nThe economy of the Sixth District grew slowly since the previous report. Labor market tightness eased, and wage growth slowed somewhat. Cost growth continued to moderate, but most nonlabor costs remained elevated. Firms' pricing power was mixed. Widespread concerns about household finances were noted by nonprofits serving low- and middle-income communities. Consumer spending was healthy overall. Tourism remained strong, but softened somewhat. Home sales slowed amid declining home ownership affordability, and existing home inventories increased. Commercial real estate conditions were mixed. Transportation activity varied. Banking conditions were stable, and loan growth was flat, on balance. Energy activity was robust. Agriculture conditions weakened.\nLabor Markets\nOn balance, the pace of hiring grew slightly over the reporting period. Several staffing firms reported that job orders were down. Many contacts noted the supply of available talent continued to improve, and turnover rates declined; some firms described turnover as below pre-pandemic rates. However, pockets of shortages remained across the region, varying widely by position, location, and industry. Several Florida firms said that declining housing affordability hindered the ability to attract talent, and one non-profit noted that more employers were pondering building workforce housing. Some transportation, warehousing, and industrial development contacts said they were considering reducing headcount later this year to align with weaker demand. Others said that they had backfilled most of their open positions so hiring would be slower this year.\nMost contacts indicated wage growth continued to moderate and was in the range of 3.5 percent to 4 percent.\nPrices\nThough the pace of wage growth continued to stabilize, elevated labor costs and rising insurance premiums contributed to higher operating expenses. However, food and transportation costs decreased, on balance. Construction costs were highly volatile, with some contacts noting a wide range of bids on a given project. Firms also noted adjusting inventory levels down due to the high-interest rate environment. Some firms reported holding prices steady in response to increasingly price-sensitive consumers, and some firms sought efficiencies to preserve margins, while others maintained the ability to pass through rising costs. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth decreased in April to 2.6 percent, on average, from 2.8 percent in March; firms' year-ahead inflation expectations for unit cost growth ticked down to 2.3 percent, on average, in April, from 2.4 percent in March.\nCommunity Perspectives\nCareer counselors noted increased competition for available employment opportunities as cost-of-living considerations encouraged more people to re-enter the labor force. Several workforce service providers said that employers adopted more selective hiring processes and extended trial on-boarding periods for prospective employees. Though many workers expressed optimism in their ability to secure employment, contacts shared concerns about the quality of available jobs in terms of flexible hours, paid time off, and compensation sufficient to cover basic expenses. Concerns about household finances remained widespread among nonprofits serving low- and middle-income households. Rising insurance costs were cited as both an immediate financial burden for many individuals and a longer-term threat to economic resiliency as property owners reduced or eliminated coverage due to high costs.\nConsumer Spending and Tourism\nRetailers reported consumer demand was generally healthy, but most expect year-over-year sales growth to be flat. Shoppers were price sensitive and continued to be cautious with discretionary spending. Auto dealerships noted that inventory levels met demand, and manufacturers offered incentives to boost sales.\nTourism and hospitality contacts reported healthy demand for leisure travel, but booking windows were shorter and hotel rates moderated. Contacts noted strong youth sports-related travel, but families opted for short-term rentals with kitchens to forego dining out. Group, international, and business travel continued to improve but were not back to pre-pandemic levels. Hospitality contacts remained optimistic about activity for the summer season.\nConstruction and Real Estate\nDistrict home sales lost momentum in April as higher interest rates and rising home prices led to declining home ownership affordability. Though dampened by the \"mortgage rate lock-in effect,\" existing home inventory levels rose overall. Homebuilders maintained solid market share, although the use of rate buydowns and other incentives were more elevated than expected. Builders indicated less buyer urgency with rising interest rates and increased potential competition from higher existing home inventory levels. Home price appreciation in most District markets was in the single digits, consistent with longer term trends.\nCommercial real estate (CRE) conditions remained mixed. Activity in office (especially in highly urban areas) and multifamily sectors continued to slow. Oversupply in the multifamily and industrial segments weighed on market conditions amid delivery of new construction. Vacancy rates grew. Rising insurance costs impeded activity, particularly in coastal markets. Lenders continue to report tight underwriting standards, making access to loans more challenging. Rising CRE loan maturities in 2024 and beyond remained a source of concern.\nTransportation\nDemand for transportation services varied across industries. Trucking firms characterized volumes as in-line with or slightly below normal seasonal demand. Warehousing contacts indicated demand was modest overall. Railroads saw gains in automotive, chemicals, forest products and minerals freight volumes, as well as growing momentum in intermodal shipments. Inland barge carriers reported strong activity. District ports along the eastern seaboard noted that catastrophic weather events and the potential for an east coast labor strike in the Fall are the greatest risks to their outlook.\nBanking and Finance\nConditions at District financial institutions were stable. Overall loan growth remained relatively flat; however, consumer, industrial, and auto lending continued to contract. Credit conditions continued to normalize to pre-COVID levels with a minor uptick in the allowance for loan and lease losses as a percentage of total loans. Deposit balance growth was flat as compared with the previous report, with some institutions reporting increased reliance on borrowings. Financial institutions reported holding lower balances in cash accounts.\nEnergy\nActivity across most energy sectors remained robust. While liquefied natural gas exports and plant expansions were active, new development was stalled by recent federal permitting limitations, which contacts reported had already slowed some activity. Petrochemical manufacturers reported continued progress in carbon capture and storage projects. Utility companies across the southeast report growing electricity demand in commercial and industrial segments, largely attributed to new and expanded data centers, as well as clean tech manufacturing like electric vehicle battery plants, a trend expected to continue across the southeast.\nAgriculture\nAgricultural conditions weakened slightly. Row crop farmers struggled amid low demand and excess supply, and many do not expect to turn a profit this year. Demand for timber declined, leading some farmers to pause production. Demand for beef was strong, but supply of cattle remained limited; demand for dairy held steady. Poultry producers saw some improvement in revenues from domestic sales, attributed to reduced supply resulting from avian influenza, but foreign restrictions continued to limit exports. Citrus growers reported solid demand and crop yields slightly above expectations.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/2024/2024-05-ch

"May 29, 2024\nSummary of Economic Activity\nEconomic activity in the Seventh District increased slightly overall in April and early May, and contacts generally expected a similar rate of increase over the next year. Employment and construction and real estate activity were up modestly; business and consumer spending rose slightly; nonbusiness contacts saw little change in activity; and manufacturing activity edged down. Prices and wages rose moderately, while financial conditions tightened a bit. Prospects for 2024 farm income increased slightly, though income is still expected to fall below its 2023 level.\nLabor Markets\nEmployment rose modestly over the reporting period and contacts expected growth to continue at that pace over the next 12 months. Some respondents, particularly in manufacturing, continued to report difficulty filling higher-skilled positions, and small business support organizations continued to report their clients were having difficulty filling lower-skilled positions. That said, several contacts reported that hiring was not as hard as it had been, and one financial services contact indicated that worker availability was now comparable to before the pandemic. Wages and benefits costs increased moderately, and there were again several reports of health insurance cost increases. Some contacts said that an updated Labor Department rule raising the minimum salary above which workers are exempt from being paid overtime had the potential to create wage pressures.\nPrices\nPrices rose moderately overall in April and early May and contacts expected a similar rate of increase over the next 12 months. Producer prices moved up moderately. Nonlabor input costs continued to rise, with contacts highlighting increases in energy and equipment costs. That said, there was a slowdown in the pace of cost growth overall. Several manufacturing contacts noted flat, and in some cases decreasing, input costs. Consumer prices rose moderately overall, though one retail sector contact indicated that deflationary price trends continued.\nConsumer Spending\nConsumer spending increased slightly over the reporting period. Nonauto retail sales were softer than usual in April, but this largely reflected sales pulled into March due to the early Easter. Spending on groceries and at restaurants rose, while outlays for items related to spring yardwork were up from a year ago. Discount store sales were also up. Contacts noted flat durable goods spending overall, with activity being dampened by high interest rates. Vehicle sales were unchanged on net. The sales mix remained concentrated in more affordable models such as compact and mid-size SUVs and crossovers. There was a further decline in travel-related spending.\nBusiness Spending\nBusiness spending increased slightly in April and early May. The pace of new capital expenditures ticked up, with contacts highlighting spending on facilities, including new hotels, office, and retail space. Several manufacturers reported that high borrowing costs led them to delay planned expansions or to purchase used equipment rather than new. There was a modest increase in demand for truck transportation services and little change in freight rates. Inventories for consumer goods decreased some and ended the reporting period at more comfortable levels, though auto dealers said inventories were somewhat elevated. Manufacturing inventories were also generally at comfortable levels.\nConstruction and Real Estate\nConstruction and real estate activity increased modestly on balance over the reporting period. Residential construction was up slightly, led by growth in single family homebuilding. The bulk of in-progress multifamily construction projects proceeded without delay, though there were reports of new projects moving slowly because of financing challenges. Residential real estate transactions increased modestly, with growth concentrated in the mid-range segment. Contacts noted that when mid-priced homes come on the market, they often receive multiple bids and sell quickly. Home prices increased modestly, while rents increased slightly. Multifamily rent growth was faster than expected in many areas of the District. Nonresidential construction activity rose modestly, and prices and rents were mostly unchanged. In the retail sector, some malls were being converted to senior living while others saw child activity centers move into vacant spaces. Commercial real estate activity decreased slightly. Contacts noted that greater equity commitments were required to close large deals. Property values continued to trend lower, and rents were mostly unchanged. Vacancy rates moved higher.\nManufacturing\nManufacturing demand decreased slightly in April and early May. Machinery sales were down modestly, with reports of slower demand from the machine tools sector. Orders for fabricated metals decreased slightly and contacts highlighted a drop in sales to the heavy machinery industry. Steel volumes were unchanged on balance, and one contact noted that high interest rates were holding back sales to the construction and renewable energy sectors. Auto industry orders were up slightly overall, though there were multiple reports of slowing demand for electric vehicle parts. Heavy truck sales increased modestly, which was a faster-than-expected rate.\nBanking and Finance\nFinancial conditions tightened slightly on balance over the reporting period. Bond and equity values fell and volatility spiked at the start of the reporting period, but values recovered and volatility had receded by mid-May. Business loan demand was little changed overall, though contacts noted weakness in the trucking and commercial real estate sectors. Interest rates were flat, but terms tightened slightly. Business loan quality was unchanged. Consumer loan demand was stable, while borrowing rates rose slightly and terms tightened some. Consumer loan quality edged down, with one banking contact noting that credit card delinquencies were now above pre-pandemic levels. Another banking contact saw a decline in consumer deposits.\nAgriculture\nIncome expectations for District farmers increased slightly during the reporting period, as prices increased for several agricultural products. Widespread precipitation reduced the intensity of drought in Iowa, but also delayed corn and soybean planting after an early start. Corn, soybean, and wheat prices moved higher. Most livestock prices were up, though egg prices were down. Continuing concerns about the financial impact of avian flu in cattle were offset by additional support from the federal government. Butter and cheese prices rose, with reports of stronger exports. Several contacts noted increased costs for repairs, machinery parts, and fuel. Demand for operating loans was up, in line with lower levels of working capital for farms.\nCommunity Conditions\nCommunity, nonprofit, and small business contacts saw little change in economic activity overall, though activity continued at a solid level. Contacts' concerns shifted away from cyclical or pandemic-related issues to longer run, slow changing ones. State government officials reported solid tax revenues in line with growth in economic activity. Workforce development intermediaries said that employment opportunities, even for those who face barriers to employment, remained robust. Small business intermediaries again observed that hiring and retention of workers, particularly lower skilled ones, was the primary challenge for small businesses. Nonprofit and social service organizations struggled to right-size in response to decreased revenue as COVID-era funding sunsets, even as demand for services remains high. Contacts noted that many low-income tax filers received smaller refunds this year following the end of some COVID-era tax credits.\nFor more information about District economic conditions visit: https://chicagofed.org/cfsec .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/2024/2024-05-da

"May 29, 2024\nSummary of Economic Activity\nEconomic activity in the Eleventh District was flat to up slightly over the reporting period. Some growth was seen in the manufacturing, banking and energy sectors, while activity in nonfinancial services was flat, and declines were seen in retail sales. Home sales remained solid. Employment levels held mostly steady overall, and price and wage growth remained fairly moderate. Outlooks were generally stable to slightly more pessimistic compared with the prior reporting period. Waning consumer demand was an ongoing concern for many businesses, and the continued conflict in the Middle East and further geopolitical tensions across the world were noted as a downside risk.\nLabor Markets\nEmployment levels were fairly flat over the past six weeks overall, according to contacts. Job gains were seen in leisure and hospitality, health care, and nondurable goods manufacturing, while headcounts were stable or down slightly in most other industries. Oil and gas companies said they were backfilling vacancies but not looking to materially expand their workforce. The uncertain economic environment has prompted some hiring reluctance. A few contacts expressed doubt whether they will be able to maintain their existing workforce, with a staffing firm noting they are \"on a cliff's edge\" where they may have to lay people off. There were scattered reports of labor shortages, not concentrated in particular industries other than health care, which contacts said remained significantly understaffed.\nWage growth remained moderate. A staffing services firm noted that wage pressures have eased as workers who have been unemployed longer than expected are more open to negotiation on the wage front. A technology company said wage trends have reverted to the typical average raise of about 3 percent overall.\nPrices\nPrices rose at a modest to moderate pace over the reporting period. A slight ebbing was seen on the manufacturing side, for both materials and finished goods price growth. Multiple manufacturing contacts noted that they were experiencing a strong resistance to price increases, with one saying that customers ask to hold prices to last year's level, which isn't possible given the increases in costs. In services, growth in input prices remained in line with a typical rate while selling price growth slowed to slightly below average. Airlines reported upward cost pressure, partly stemming from elevated maintenance to upkeep older aircraft in the face of supply issues for new aircraft.\nManufacturing\nOverall manufacturing activity grew modestly over the reporting period, with strength led by nondurable goods production. Food and chemical manufacturers noted a rise in demand, and Gulf Coast producers led year-over-year growth in U.S. industrial chemical output. Some weakness continued on the durable goods side, particularly machinery manufacturing. One contact noted that he \"keep[s] thinking we'll hit bottom and either level out or turn up, but we keep pushing those hopes out a month, and another month, and another.\" Manufacturing outlooks worsened slightly on net, weighed down by waning consumer confidence and election uncertainty. Chemical producers also noted a weak Chinese economy as a risk.\nRetail Sales\nRetail sales declined moderately over the past six weeks, with contacts reporting that elevated pricing hampered consumer goods demand. Wholesale activity was a bright spot, while auto dealers noted declining sales amid continued volatility. Overall retail outlooks worsened slightly on net, with contacts citing inflation, high interest rates and instability in the Middle East.\nNonfinancial Services\nService sector activity was mostly flat over the reporting period, with contacts saying economic uncertainty curbed consumer demand. Revenue growth was seen in administrative and support services as well as information services. Health care reported a further deterioration of revenue, and reports from transportation services were mixed. Several transportation firms noted a decline in business, while small parcel carriers reported increased volumes and airlines reported strong, stable revenues. Leisure travel continues to lead airline demand, though business travel is showing signs of growth after plateauing in late 2023. Outlooks remained fairly stable, but contacts cited concern over an economic slowdown, geopolitical tensions, and Federal Reserve policy decisions, particularly a delay in cutting interest rates. High borrowing costs remained a concern for some companies.\nConstruction and Real Estate\nHousing demand remained solid, though there were reports of rising rates impacting sales activity. Incentives such as rate buy downs remained prevalent, and some builders offered selected price discounts to move homes in inventory.\nCommercial real estate market conditions were little changed from the previous reporting period. Apartment leasing growth remained moderate, but there continued to be downward pressure on occupancy and rents due to elevated supply. In the office market, leasing activity stayed subdued and was largely concentrated in class A space. Industrial demand grew moderately, and rents were stable even as vacancy rose. Outlooks were mixed, with some commercial market segments expected to remain challenging in the near to medium term.\nFinancial Services\nLoan volumes grew for the first time in over a year despite credit standards continuing to tighten, and loan pricing continuing to rise. Credit tightening accelerated for commercial and residential mortgages while it decelerated for commercial and industrial loans and consumer loans. Loan nonperformance picked up slightly overall. Bankers' outlooks turned pessimistic: they expect a modest decrease in loan demand six months from now in addition to a deterioration in loan performance and overall business activity. Liquidity and net interest margins top the list of outlook concerns.\nEnergy\nOilfield activity was flat to slightly up over the reporting period. Oil prices are broadly expected to orbit $80 for the remainder of the year, a level well above what's needed to profitably drill new wells for most producers. Even still, contacts expect only modest increases in drilling and completion activity through year-end, which will limit U.S. production growth this year compared to 2023. Natural gas prices are expected to be \"below cost\" for many gas producers over at least the next few months.\nAgriculture\nDrought conditions remained in the western parts of the District, while other parts received ample rainfall, and some flooding was seen in scattered areas. Pastureland was in good condition, as were hay and wheat fields. Soil conditions are quite favorable for row crops this year. Better cotton production is expected this year compared with the past couple of years based on current conditions, though cotton prices have slipped. Most other crop prices rose over the reporting period while cattle prices eased off highs. The spread of avian influenza among dairy cows remains a concern for the supply of milk, though it is not a food safety issue due to the pasteurization process.\nCommunity Perspectives\nAffordability of housing and of quality childcare remained top concerns for lower-income families over the reporting period. Higher mortgage rates, property taxes, and insurance premiums are driving up costs of single-family homes, and a shortage of landlords willing to accept housing vouchers is affecting apartment availability. One contact noted that higher mortgage rates push middle-income homebuyers to the sidelines, diving up demand for rentals and pricing lower-income residents out of the buyer's market. Access to quality, affordable childcare continued to impede workforce participation among women in particular. One contact said that industries with shift work struggle to attract women since the work schedule often doesn't align with childcare hours. Several contacts expressed concern about the winding down of American Rescue Plan Act dollars and whether nonprofits and K-12 schools will be able to sustain certain programs without that funding. Contacts also noted that mental health continues to be a community concern.\nFor more information about District economic conditions visit: https://www.dallasfed.org/research/texas .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2024/2024-05-mi

"May 29, 2024\nSummary of Economic Activity\nThe Ninth District economy grew slightly since the previous report. Employment grew slightly, and labor demand continued to moderate. Price pressures increased moderately, and wage growth was also moderate. Commercial and residential construction improved slightly. Consumer spending also rose slightly, with contacts noting some spending caution among customers. Manufacturing ticked slightly higher. Agricultural conditions remained weak amid some positive developments. Activity among minority- and women-owned business enterprises was slightly positive.\nLabor Markets\nEmployment grew slightly since the last report. Labor demand continued to moderate but remained positive. A monthly survey of District firms found that the share of respondents with job openings remained positive, but a slightly larger share noted staffing cuts. Labor demand in construction remained healthy despite widespread reports of slower activity. Hospitality and tourism firms reported increased hiring of seasonal workers in anticipation of rising spring and summer business. A Montana accounting firm noted that it had \"a lot of unfilled job openings at all levels.\" Employers were also reporting better labor availability. A Minneapolis-St. Paul hotel owner said the facility was sufficiently staffed and applicant quality \"seems to have gotten much better.\" A winery in central Minnesota said that it received \"a lot more applications for part-time [and] seasonal workers this year, which is very encouraging.\" Not everyone had the same experience. A Minnesota manufacturer said, \"I don't expect to fill any of my open jobs. We are increasing our capital expenditures to adapt our processes to smaller headcounts.\"\nWages rose moderately. District employers reported that median wages were generally growing between 2 and 3 percent. However, a monthly pulse survey found that a larger share of businesses reported higher wages compared with results from the previous two months. In separate surveys, construction and hospitality firms both reported that wages were rising overall, but at somewhat slower rates than the previous year.\nPrices\nPrice pressures were unchanged since the last report, as overall prices increased moderately. Most respondents to an April District business conditions survey reported no change to prices charged from a month earlier, while one-third said they increased prices. Input price pressures remained greater, as more than half of firms reported that they increased in April. Reports from contacts across the region indicated that businesses were less able to pass input cost increases to customers, who are feeling stretched budgets. Manufacturing contacts reported that metals prices spiked recently. Retail fuel prices in District states decreased slightly since the previous report.\nWorker Experience\nJob seekers in Minnesota shared that they were hesitant to accept a job offer if schedules were inflexible or pay was insufficient to meet their needs. They also listed training, time for job search, access to transportation, and affordable housing as important in helping them reach their career objectives. A contact in the Minneapolis-St. Paul area commented that students were facing difficulties finding summer internships this year because some employers had a shortage of available supervisors. A contact in the Upper Peninsula of Michigan shared that older workers in the region often feel discouraged to apply for jobs because of the listed requirements. They added that many older workers wanted more schedule flexibility instead of retirement.\nConsumer Spending\nConsumer spending grew slightly since the last report, with contacts noting some spending caution among customers. Hospitality and tourism firms overall reported modestly higher revenues of late. Hotel demand rebounded somewhat from a poor winter, but contacts reported that they were reducing prices to bump up demand. Contacts were also cautious in their outlook for summer business compared with last year. A Minnesota winery and restaurant said it was seeing lower average spending among patrons. \"Guests are being very careful with their money. We see less of our regulars and [more] moderate spending.\" A Montana restaurant and hotel owner was trying to avoid passing further cost increases to customers. \"At some point, they will say, \u2018I am not paying $20 for a hamburger.'\" Vehicle sales have flattened overall. New-vehicle sales were still growing, but dealer incentives returned. A Montana dealer said used vehicles were \"on a big slide\" due to higher interest rates. Airline traffic grew, but more slowly than in previous months.\nConstruction and Real Estate\nConstruction activity improved slightly since the last report. Industry data showed that recent activity increased as the sector moved into the traditionally busier spring season. A larger share of firms also expected increased activity going forward compared with those who expected a decline. However, other metrics were more cautious. Firms overall reported a decline in new projects out for bid for this time of year; project backlogs were also shorter, and cancellations continued to challenge the sector. Firms doing infrastructure work reported more activity and a better outlook; those in residential and commercial reported mixed but improving activity, and industrial firms reported slowing business. Large firms also reported consistently stronger activity than smaller firms.\nCommercial real estate was flat and remained soft overall. Office vacancy in Minneapolis-St. Paul stabilized, but loan renewals were reportedly seeing discounted property appraisals and high loan-to-value ratios. Vacancy rates for industrial space nudged higher, though from low levels. Multifamily property benefited because new construction \"has stopped in its tracks,\" according to a Minnesota source. Residential real estate was strongly higher, as many regions saw sales in April increase from 20 to 40 percent year over year, along with strong increases in new listings.\nManufacturing\nDistrict manufacturing activity increased slightly on balance since the previous report. A regional manufacturing index indicated increased activity in Minnesota and South Dakota in April from a month earlier, while activity decreased in North Dakota. The number of manufacturing contacts who reported increased recent orders was similar to the number who reported decreases. A food producer added staff in expectation of increased sales. In contrast, a producer of construction equipment reported its sales were very weak compared with seasonal norms.\nAgriculture, Energy, and Natural Resources\nAgricultural conditions in the District remained weak amid some positive developments. Lenders responding to an agricultural credit conditions survey overwhelmingly reported decreased farm incomes in the first three months of 2024 relative to a year earlier, with expectations for further declines in the second quarter. However, contacts in the industry reported that some moderation in input costs was expected to benefit producer margins. Recent precipitation alleviated drought conditions in much of the region, and crop planting and progress was generally near average for early spring. However, poor snow cover over the winter negatively impacted the quality of the winter wheat crop in the western parts of the District. District oil and gas exploration activity was unchanged since the previous report.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned business enterprises was slightly positive over recent weeks. More contacts reported increases in sales than those who reported flat or lower activity. Some businesses saw a decline in job openings, and others continued to struggle to find qualified candidates. Profits remained under pressure among contacts due to increased input costs, but some were optimistic that pressure would lessen in the coming weeks.\nFor more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

/beige-book-reports/2024/2024-05-su

"Beige Book: National Summary\nMay 29, 2024\nThis report was prepared at the Federal Reserve Bank of Dallas based on information collected on or before May 20, 2024. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nNational economic activity continued to expand from early April to mid-May; however, conditions varied across industries and Districts. Most Districts reported slight or modest growth, while two noted no change in activity. Retail spending was flat to up slightly, reflecting lower discretionary spending and heightened price sensitivity among consumers. Auto sales were roughly flat, with a few Districts noting that manufacturers were offering incentives to spur sales. Travel and tourism strengthened across much of the country, boosted by increased leisure and business travel, but hospitality contacts were mixed in their outlooks for the summer season. Demand for nonfinancial services rose, and activity in transportation services was mixed, as port and rail activity increased whereas reports of trucking and freight demand varied. Nonprofits and community organizations cited continued solid demand for their services, and manufacturing activity was widely characterized as flat to up, though two Districts cited declines. Tight credit standards and high interest rates continued to constrain lending growth. Housing demand rose modestly, and single-family construction increased, though there were reports of rising rates impacting sales activity. Conditions in the commercial real estate sector softened amid supply concerns, tight credit conditions, and elevated borrowing costs. Energy activity was largely stable, whereas agricultural reports were mixed, as drought conditions eased in some Districts, but farm finances/incomes remained a concern. Overall outlooks grew somewhat more pessimistic amid reports of rising uncertainty and greater downside risks.\nLabor Markets\nEmployment rose at a slight pace overall. Eight Districts reported negligible to modest job gains, and the remaining four Districts reported no changes in employment. A majority of Districts noted better labor availability, though some shortages remained in select industries or areas. Multiple Districts said employee turnover has decreased, and one noted that employers' bargaining power has increased. Hiring plans were mixed\u2014a couple of Districts expect a continuation of modest job gains, while others noted a pullback in hiring expectations amid weaker business demand and reluctance due to the uncertain economic environment. Wage growth remained mostly moderate, though some Districts reported more modest increases. Several Districts reported that wage growth was at pre-pandemic historical averages or was normalizing toward those rates.\nPrices\nPrices increased at a modest pace over the reporting period. Contacts in most Districts noted consumers pushed back against additional price increases, which led to smaller profit margins as input prices rose on average. Retail contacts reported offering discounts to entice customers. Many Districts observed a continued increase in input costs, particularly insurance, while some noted price declines in certain construction materials. Some Districts observed declines in manufacturing raw material costs. Price growth is expected to continue at a modest pace in the near term.\nHighlights by Federal Reserve District\nBoston\nEconomic activity was about flat on balance. Prices increased modestly, and wage growth was slow-to-moderate amid stable employment levels. Real estate activity, for both commercial and residential properties, weakened slightly after showing signs of improvement earlier in the year. The outlook became more uncertain for some contacts but remained cautiously optimistic overall.\nNew York\nOn balance, regional economic activity grew slightly. Labor market conditions remained solid, and labor demand and labor supply continued to come into better balance. Consumer spending picked up slightly after slow sales in the spring. Housing markets remained solid, though low inventory continued to restrain sales. Selling price increases remained modest.\nPhiladelphia\nBusiness activity grew slightly in the current Beige Book period, up from no change last period. Employment edged up slightly, owing to increased demand and supply of labor. Wage and firm price inflation were up modestly. Existing home sales grew slightly, and new-home sales held steady at high levels. Expectations for future growth edged down and were less widespread for nonmanufacturers but remained positive overall.\nCleveland\nDistrict business activity increased slightly but somewhat more slowly than it had in the prior reporting period. Some contacts attributed the slowdown to interest rates staying higher for longer than anticipated. Consumer spending declined modestly, which some manufacturers said dampened demand for their goods. The majority of contacts indicated that wages, input costs, and selling prices continued to stabilize in recent weeks.\nRichmond\nEconomic activity in the region expanded modestly this period. Consumer spending rose moderately, overall, which was driven by individuals with discretionary income as lower income individuals pulled back or traded down to lower priced goods. Import activity increased and the port of Baltimore was able to reopen one channel into the port. Manufacturing and nonfinancial services firms reported no change in demand in recent weeks.\nAtlanta\nThe Sixth District economy grew slightly. Labor markets continued to stabilize; wage pressures eased. Growth of some nonlabor costs slowed. Consumer demand was generally healthy. Tourism remained strong. Commercial real estate conditions were mixed. Transportation activity varied. Loan demand was flat. Energy activity was robust. Agricultural conditions softened.\nChicago\nEconomic activity increased slightly. Employment and construction and real estate activity increased modestly; business and consumer spending rose slightly; nonbusiness contacts saw little change in activity; and manufacturing activity edged down. Prices and wages rose moderately, while financial conditions tightened a bit. Prospects for 2024 farm income increased slightly.\nSt. Louis\nEconomic activity across the Eighth District continued to increase slightly since our previous report. The outlook among contacts was slightly pessimistic, which is weaker than our previous report but better than one year ago.\nMinneapolis\nDistrict economic activity grew slightly. Employment grew but labor demand softened. Wage pressures were present but eased, while prices ticked up. Consumer spending rose but contacts were cautious, and manufacturing rose slightly. Commercial and residential construction improved slightly, and home sales grew strongly. Agricultural conditions remained weak but saw some positive developments.\nKansas City\nThe Tenth District economy expanded at a moderate pace. Household spending rose moderately, driven by increases in hotel stays, outings to restaurants, and auto maintenance. Job gains were modest, yet contacts indicated their employment outlooks were less vulnerable to a deterioration in conditions compared to six months ago. Prices grew slightly with broad reports that strategies regarding price changes were shifting.\nDallas\nEconomic activity was flat to up slightly over the reporting period. Some growth was seen in the manufacturing, banking, and energy sectors, while activity in nonfinancial services was flat, and declines were seen in retail sales. Employment levels held mostly steady overall, according to contacts. Outlooks were generally stable to slightly more pessimistic compared with the prior reporting period.\nSan Francisco\nEconomic activity and employment levels were largely unchanged. Prices, wages, and retail sales grew slightly. Activity in services sectors and residential real estate markets weakened a bit. Commercial real estate activity and financial sector conditions were largely unchanged. Demand for manufactured products picked up slightly, and conditions in agriculture were mixed.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2024/2024-05-cl

"May 29, 2024\nSummary of Economic Activity\nOn balance, the Fourth District economy expanded slightly in recent weeks, somewhat more slowly than it had during the prior reporting period. Moreover, contacts expected slower growth to continue in the months ahead. Contacts often attributed both the slowdown in growth and lowered expectations to diminished hopes for interest rate cuts in the near future. Consumer spending declined modestly, which some manufacturers said dampened demand for their goods. By contrast, nonresidential construction activity picked up, with increased demand for public sector projects. Employment levels increased slightly in recent weeks, with many firms focused on hiring for key positions. On balance, wage and nonlabor input costs increased moderately, and selling prices increased slightly.\nLabor Markets\nOverall, employment increased slightly in recent weeks. Some contacts reported hiring more entry-level and management workers to staff long-term projects, meet higher demand, or facilitate business expansions. One manufacturer said they were hiring now in anticipation of increased demand in the second half of the year. By contrast, some contacts indicated that they had slowed or \"paused\" hiring to control costs amid decreased demand and declining margins. Most contacts expected only modest hiring for their organizations in the near term.\nWage pressures continued to be moderate in recent weeks. Many contacts across industries continued to report that new-hire wages had leveled off and annual wage adjustments had again become the norm. One auto dealer said that wage pressures had eased to the point that they were offering wage adjustments only \"when necessary.\" Nevertheless, many financial services and construction contacts noted strategically raising wages to attract and retain staff with specialized skills.\nPrices\nOn balance, nonlabor input costs continued to increase moderately in recent weeks. However, over half of contacts reported no change in input costs. Some restaurateurs said that food costs were increasing at a slower rate or leveled off after a period of rapid increases, and many contacts in other industries reported that the pace of cost increases continued to slow. Some manufacturers noted that they were starting to negotiate with suppliers to bring down costs, with one stating, \"We have been able to partially roll back some select suppliers' prices after two years of substantial price increases.\" Still, many contacts across sectors continued to report cost increases for most services, including legal, accounting, and insurance services.\nSelling prices continued to increase slightly, though most contacts indicated that they had not changed prices recently. Some firms did not adjust prices because they had previously implemented annual price increases, while others noted that increased competition prevented them from raising prices. One business services contact said that passing along cost increases had become more difficult as customers were more closely managing their costs. Some manufacturing, construction, and retail contacts increased prices selectively, while other retailers reported decreasing prices or offering larger discounts because of decreased demand.\nConsumer Spending\nConsumer spending declined modestly following modest increases during the prior reporting period. While restaurateurs reported stronger demand because of warmer weather, the bulk of retailers reported softer sales. Multiple retailers indicated that customer foot traffic was lower. Reports from auto dealers were mixed, with one reporting higher new vehicle sales because of more manufacturer incentives, while others continued to report slow sales because of high interest rates and vehicle prices. Retailers generally expected consumer spending to remain unchanged in the coming months.\nManufacturing\nOn balance, demand for manufactured goods remained flat during this reporting period. Some manufacturers reported stronger orders related to ongoing federal spending or the construction of data centers. By contrast, others noted lower order volumes because of softer consumer spending or general economic and political uncertainty. For example, reports from primary and fabricated metals producers indicated lower order volumes because their customers faced softer demand or managed inventories cautiously because of uncertainty about how well demand would hold up in the coming quarters. Manufacturers generally expected demand to increase slightly in the coming months.\nReal Estate and Construction\nResidential home sales and construction increased at a modest pace in recent weeks, with one homebuilder indicating that \"We're still writing contracts on houses, but it's not like it was when mortgage rates were lower.\" Contacts expected demand to continue growing at a modest pace in the coming months. Still, as one contact stated, \"It's all going to depend on interest rates. If they go down, business will get better. If rates stay the same, I don't expect any change.\"\nNonresidential construction activity increased moderately in recent weeks. Construction firms experienced an uptick in activity for public projects, and another contact saw more demand related to green energy projects. By contrast, some commercial real estate developers reported that demand continued to be dampened by higher borrowing costs. On balance, contacts expected activity to continue at a moderate pace in the coming months.\nFinancial Services\nOverall, bankers indicated that loan demand increased modestly. One banker reported that, because of elevated interest rates, \"demand for loans remained steady although not robust.\" Looking ahead, bankers expected loan demand to soften somewhat because of interest rate uncertainty. For example, one banker opined that loan demand would not increase further until households and businesses \"get a better feel for the direction of our economy and [see] a cut in interest rates.\" Core deposits were flat, and there was continued movement from traditional savings accounts into higher-interest accounts. Bankers reported that delinquencies were little changed and remained at generally low levels.\nNonfinancial Services\nProfessional and business services contacts reported that demand remained robust as businesses moved forward with technology upgrades and capital projects. Overall, contacts anticipated that demand would increase in the coming months; however, a couple of consultants expected clients to pull back on spending as the upcoming presidential election has increased economic uncertainty. Freight contacts reported that demand increased slightly in recent weeks. One hauler noted that, despite increasing truckload volumes, both contract and spot rates declined. In the months ahead, haulers anticipated that demand would be flat as clients work through inventories.\nCommunity Conditions\nAffordable housing developers said that demand remained high but that community opposition and difficulty accessing financing were slowing housing production and could shut down some projects in the region. One contact reported that rising housing and food costs negated wage gains for many low-wage and entry-level workers. Moreover, increased housing costs contributed to a recent uptick in delinquent utility bill payments, according to some contacts. In addition, a nonprofit contact observed growth in the entrepreneurship space as people sought access to multiple income streams to cover elevated costs.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nMay 29, 2024\nSummary of Economic Activity\nEconomic activity across the Eighth District continued to increase slightly since our previous report. Employment was unchanged and wages increased slightly. Inflation pressures increased moderately due to higher input costs. Consumer spending was unchanged, with signs of weakness at higher price points. Real estate activity cooled slightly. Poor weather conditions slowed progress on District crop planting. Banking conditions remained stable. The outlook among contacts was slightly pessimistic, which is weaker than our previous report but better than one year ago.\nLabor Markets\nEmployment remains unchanged from our previous report. The labor market continues to be tight, with businesses still struggling to find employees. A manufacturing contact in southern Indiana reported not being able to fill open jobs, and an agriculture contact in the Memphis area noted that low labor force participation was a problem. Some signs of labor mismatch also appeared, with a real estate contact in Louisville reporting a struggle to find employees matching their qualifications.\nWages have increased slightly, with growth starting to level off to pre-pandemic rates. A Louisville human resources contact reported wage growth has been increasing at normal rates compared to the past few quarters. Other contacts reported wage increases have strained budgets, with a St. Louis construction contact reporting wage raises have increased costs.\nPrices\nPrices have increased moderately since our previous report. About one-third of District survey respondents reported higher or slightly higher prices since the first quarter. Just over half of contacts reported similar prices, with the remaining contacts reporting lower or slightly lower prices. These responses appear to be driven by increasing input costs, with over three-fourths of respondents reporting higher or slightly higher nonlabor costs and a similar share reporting higher or slightly higher labor costs. Contacts generally expect current cost pressures and pricing strategies to continue into the third quarter.\nConsumer Spending\nConsumer spending was generally unchanged since our previous report. Most retailers and auto dealers reported that overall sales met expectations; however, dollar sales were lower than the same period one year ago. Comments indicated slower growth in discretionary purchases due to smaller household budgets and increased price sensitivity. For example, auto dealers reported a significant decline in demand for high-end vehicles, while demand has increased for lower-priced vehicles. Tourism and hospitality contacts reported that sales were in line with expectations and overall activity is unchanged from the same period one year ago.\nManufacturing\nManufacturing activity was unchanged since our previous report. Manufacturers in the automotive, textile, and food processing industries also reported softer demand from consumers for their products. Firms in Arkansas and Missouri reported slight increases in delivery lead times, production, inventories, and new orders. However, employment has modestly decreased. On average, firms reported they expect slight decreases in employment in the coming quarter. Employee turnover remains high compared to previous years. Though there is a high demand for workers, several firms reported an inability to find people who are willing to work and that employees may voluntarily leave as quickly as one week.\nNonfinancial Services\nActivity in the nonfinancial services sector has weakened modestly since our previous report. The exception to this was the transportation sector, where the outlook has improved, with higher demand and sales exceeding expectations. One Arkansas contact reported unexpectedly high travel demand, and another St. Louis contact had success executing sales strategies. In most other nonfinancial services, the outlook has worsened. A Louisville consulting and management contact reported project delays. This sentiment was echoed by a St. Louis architecture and engineering contact, who reported steady client demand but longer project start and cancellation times, coupled with higher construction costs and higher interest rates. An Indiana health care contact reported a worsening outlook, while an education contact reported low public college enrollment. Overall, multiple contacts cited a worsening outlook due to some combination of higher interest rates, inflation, and political uncertainty.\nReal Estate and Construction\nResidential home sales have declined slightly since our previous report. About half of contacts reported sales did not meet expectations, with particularly weaker sales of higher-end homes. However, median-priced home sales were strong and continually sold for over their asking price. The District experienced a slight increase in home prices as the total inventory of homes for sale remains low across the District.\nCommercial real estate sales leasing activity has slowed since our previous report, and construction has remained stagnant. Contacts indicated that the prospect of higher-than-expected interest earlier this year has kept prospective developers on the sideline. A construction contact reported many have delayed projects due to higher interest rates. However, construction demand for transportation, federal, and lodging projects remains elevated.\nBanking and Finance\nBanking conditions and lending activities have remained stable from our previous report. According to contacts, demand for loans continues to be lower than one year ago, However, the growth of credit card, mortgage, and commercial and industrial loans has risen modestly since the past quarter. Contacts reported that competition for deposits continues to be intense as cash flow remains tight with high interest rates. Contacts provided mixed signals on nonperforming loans, with some banks reporting low credit risk and optimistic projections, while others reported signs of slow payments due to steady consumer spending; yet, they have not seen a significant rise in delinquent loans.\nAgriculture and Natural Resources\nAgriculture conditions have declined slightly since our previous report, with most contacts describing conditions as falling below expectations. District contacts were mixed on inventory, sales, and capital expenditures and noted increased labor costs as an additional stressor. Elevated rainfall and extreme weather events such as tornados continued to disrupt the planting progress for soy, cotton, and corn across all District states, while rice-planting progress remained similar to one year ago. The most-active planting periods have either ended or will end in the next two weeks; however, soy, corn, and cotton were all around 50 percent planted as of mid-May, down from over 90 percent planted at the same time one year ago, and slightly below average over the past few years. District contacts were mixed on inventory, sales, and capital expenditures and noted increased labor costs as an additional stressor.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nMay 29, 2024\nSummary of Economic Activity\nOn balance, economic activity in the Second District grew slightly in the latest reporting period. The labor market remained solid, with ongoing slight employment gains and moderate wage growth. Still, labor demand and labor supply continued to come into better balance. Selling price increases remained modest. Manufacturing activity declined modestly. Consumer spending grew slightly after slow sales in the spring. Tourism activity picked up in New York City. Housing markets remained solid, though low inventory continued to restrain sales. Commercial real estate markets weakened further. Activity in the finance sector declined slightly, with loan demand continuing to fall\u2014though delinquency rates edged lower. Optimism about the outlook became more subdued.\nLabor Markets\nLabor market conditions remained solid. On the whole, employment continued to increase slightly, with gains in leisure and hospitality, personal services, and health and education partially offset by ongoing reductions in information, construction, and manufacturing. A contact at an employment agency in New York City reported a notable uptick in hiring among financial services firms.\nLabor demand and labor supply continued to come into better balance. Still, businesses in the region reported ongoing difficulty finding the workers they need. These shortfalls are particularly acute in the service sector. Firms anticipate solid hiring in the coming months.\nWage growth remained moderate during this reporting period, though contacts from trade, personal services, and construction firms noted sharper wage increases. The increase in New York State's minimum wage earlier this year is being felt by some food service and manufacturing firms.\nPrices\nSelling price increases remained modest, and input price increases remained moderate. Still, the prices of some inputs have risen more rapidly, especially among service firms. Food and beverage businesses point to rapidly rising costs of cocoa and coffee, and contacts reported that obstructions to shipping in the Suez and Panama canals are causing shipping delays and pushing up the cost of freight, putting additional pressure on selling prices. Businesses expect little change in pricing pressures in the months ahead.\nConsumer Spending\nConsumer spending picked up slightly after slow sales in the spring. Spending on goods mostly held steady, while spending on entertainment and recreation ticked up. Auto dealers in upstate New York reported solid but slowing new car sales, as the high cost of credit and some shipping logistics issues have limited sales activity. Interest rates on auto loans have risen noticeably in the past several months, and coupled with higher car prices, new cars have become unaffordable for many. With improved inventory levels, manufacturer and dealer incentives have become somewhat more prevalent. Sales of used cars have been solid, as the price gap between new and used cars has normalized.\nManufacturing and Distribution\nManufacturing activity continued to decline modestly. Shipments were flat, and new orders continued to decline. Transportation and warehousing firms also reported a modest decline in activity, with a contact reporting that third party logistics companies have seen a particularly sharp decline in activity amid a retrenchment in consumer demand for goods. In contrast, wholesalers reported a strong increase in activity. Delivery times shortened, and supply availability was little changed. Still, contacts noted ongoing difficulty obtaining some supplies, including copper, various electronics, and heavy equipment. Manufacturers anticipate modest improvements in business conditions in the coming months.\nServices\nActivity in the service sector increased slightly. Business services and leisure and hospitality continued to grow modestly, but the information sector saw a moderate decline. Service firms remained optimistic about the outlook, particularly those in the health and education sector.\nTourism activity picked up in New York City. An industry expert reported that an unusually spread-out spring holiday calendar brought in a steady stream of international visitors, particularly from Europe and South America. Still, tourism from Asia has not fully recovered to pre-pandemic levels because of reduced flight availability due to more restricted flight patterns, and business travel was more limited during the spring holiday season. Hotel rates held steady but are notably more expensive than pre-pandemic levels. Many visitors are offsetting high hotel expenses with reductions in spending on retail and dining. Broadway show attendance continued to improve. While tickets for some shows were in very high demand, less successful productions have seen low attendance, and five Broadway theatres remain out of use.\nReal Estate and Construction\nHousing markets remained solid, though supply remains extremely constrained in most parts of the District. Although inventory has edged up, it is still too low to satisfy existing demand, and prices have continued to rise. Sellers are hesitant to list because of high prices and limited inventory when looking for a new home. Mortgage lock-in remains a significant factor, and many people are waiting for a modest decline in interest rates to consider listing. Manhattan is an exception, where inventory is near normal levels. Home prices on Long Island have risen significantly, particularly at the higher end of the market, while upstate New York has seen greater demand at the lower end and middle of the market.\nResidential rental markets continued to strengthen, and rents have risen across the District. Vacancy rates remain low, particularly in and around New York City, where rental vacancy rates are near long-term lows.\nCommercial real estate markets weakened further. The industrial market in Northern New Jersey saw significant increases in vacancy rates, with multiple tenants exiting leases and significant deliveries of new space. Activity in the Manhattan office sector edged up slightly after a notable worsening in the first quarter. Strong demand remains for new high-end office buildings, and rents in these buildings have been resilient, but lower quality buildings are seeing slowly declining demand. Rent concessions for office leases are at historic highs. Finance and legal firms continue to seek office space, while tech sector businesses continued to reduce their office footprints during this reporting period. Office markets in upstate New York and the New York City suburbs have remained more resilient. Sales of commercial real estate reached low levels, and were down significantly for office, retail, and multi-family, as the high cost of credit constrained demand and transactions.\nConstruction contacts reported that activity continued to fall following a sharper contraction earlier in the year. Office construction remained at low volumes. Multi-family construction starts remained low across the District. Industrial construction was solid in Northern New Jersey but declined in upstate New York.\nBanking and Finance\nActivity in the broad finance sector weakened slightly this period. On balance, small- to medium-sized banks in the District reported slightly weaker loan demand, particularly for residential and commercial mortgages. Banking contacts indicated that credit standards continued to tighten for business loans and commercial mortgages but held steady for consumer loans and residential mortgages. Deposit rates increased, and loan spreads narrowed. Delinquency rates edged down slightly on business loans, consumer loans, and residential mortgages.\nCommunity Perspectives\nAs the cost of providing services to communities has risen, federal, state, and local governments have responded with an array of grants and subsidies to help defray expenses for communities and populations in need throughout the District. With funds made available from the Infrastructure Investment and Jobs Act, the CHIPS Act, and remaining Covid subsidies, these grants and subsidies have been made to cover expenses for homeowners in disadvantaged areas, victims of natural disasters, and to communities in need of infrastructure improvements for utilities and broadband.\nFor more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nMay 29, 2024\nSummary of Economic Activity\nEconomic activity in the Twelfth District was unchanged on balance during the April through mid-May reporting period. Employment levels were generally flat, and labor was more available. Wages grew slightly, and contacts reported lower goods prices and higher services prices. Retail sales grew slightly. Activity in services sectors weakened a bit, as did activity in residential real estate markets. In contrast, commercial real estate activity was unchanged. Demand for manufactured products picked up slightly. Conditions in the agriculture and resource-related sectors remained mixed. Activity in the financial services sector remained largely unchanged. Communities across the Twelfth District sought services for mental health support as well as housing and food assistance. Looking ahead, contacts expect a modest decline in economic conditions overall.\nLabor Markets\nEmployment levels were generally flat over the reporting period. Reports of low attrition rates continued, and employers preferred to fill only critical positions. One contact described the labor market to be in a \"lock-in\" situation\u2014employers are generally not laying off workers, and workers are not quitting as often as in recent years. Employers across sectors reported receiving more applications for entry-level positions than before. However, they are still finding it difficult to attract experienced engineers as well as electricians and other skilled trades workers including machinists and welders. Several contacts in the hospitality industry reported hiring more foreign-born workers\u2014on permanent and temporary bases\u2014in recent months to address persistent labor shortages.\nReports indicated that wages grew slightly in recent weeks, in line with the prior reporting period. Wage pressures generally eased in many business services, such as consulting and financial services, but several contacts mentioned having to pay a premium to hire experienced workers. In addition, businesses needing workers knowledgeable in generative artificial intelligence technologies reported strong wage pressures and competition.\nPrices\nPrices continued to increase at a slight pace on net. Contacts emphasized the discrepancy between recent movements in goods and services prices. Good prices\u2014such as for food products, lumber, steel, and building materials\u2014fell or were unchanged, while services prices, particularly for insurance and utilities, rose notably. Several contacts in retail trades and leisure and hospitality reported limited ability to pass higher costs onto consumers, particularly in areas which experienced recent increases in state and local minimum wages.\nCommunity Conditions\nConditions in the community support and services sector worsened somewhat in recent weeks. Demand for mental health services, housing assistance, food assistance, and other related services remained high. Contacts across the District reported more difficulties obtaining funding for nonprofit organizations in recent weeks as government agencies, firms, and individuals scaled back support. Faced with these challenges, nonprofit organizations turned to other funding sources such as offering new fee-based services and drawing down endowments. Reports highlighted that small businesses continued to face challenges covering labor and other business expenses, and some opted to reduce operating hours to reduce costs.\nRetail Trade and Services\nRetail sales grew slightly over the reporting period. Consumers continued to buy lower cost items, and they reduced spending on nonessential goods, as sales of big-ticket items and luxury goods reportedly weakened. Retailers reported stable consumer demand for home goods and food and beverages, while sales of pet care products slowed somewhat.\nActivity in the consumer and business services sectors weakened a bit in recent weeks, after growing modestly in the previous reporting period. Demand for business consulting and accounting edged down, while demand for legal services was unchanged. Demand for health-care services remained strong, and supply was at or near capacity. Restaurants across the District reported slower consumer spending, with many customers replacing dining out with eating meals at home. Activity levels in the travel, entertainment, and hospitality industries were unchanged in most regions across the District, and business and leisure travel overall remained below pre-pandemic levels. Seattle tourism recently increased, which reportedly boosted sales for consumer-facing businesses.\nManufacturing\nManufacturing activity picked up slightly. Demand for capital equipment and fabricated metal strengthened. Seasonal maintenance projects and repairs led to a higher volume of new orders, and some previously delayed projects regained momentum and supported higher manufacturing activity. At the same time, a wood products manufacturer in the Pacific Northwest reported a slowdown in production due to a lower timber supply. More broadly, delivery times and availability of materials continued to improve but have not returned to pre-pandemic levels for some products.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors remained mixed. Current yields and past harvest inventories of food products, such as tree fruit, tree nuts, and seafood, remained high over the reporting period. Domestic demand from food services and retail sectors was stable but not sufficient to absorb domestic supply. As a result, prices fell for some agricultural products, such as apples, and exports increased. Harvesting restrictions, softening domestic sales, and slower international demand for lumber weakened logging activity, which resulted in some sawmill closures.\nReal Estate and Construction\nActivity in residential real estate slowed further. Single-family home sales fell amid continued low inventory. Several contacts noted that despite high mortgage rates, demand exceeded the supply of available homes for sale. Construction of single-family homes already in progress, though at a low level, was stable, and single-family housing starts picked up. Multifamily housing starts fell, but construction completions continued to expand the supply of rental units, slightly lowering rents, raising vacancy rates, and increasing leasing incentives. A contact in California noted that a recent change in state regulations has raised construction costs.\nCommercial real estate activity was unchanged on balance. Demand for retail space strengthened, which led to lower vacancies and higher rents in this subsector. Industrial leasing declined slightly, but activity remained robust. Construction of new commercial space was stable. Builders continued to work through a backlog of existing projects, although a contact in Arizona indicated that difficulties obtaining financing curtailed some new construction activity.\nFinancial Institutions\nLending activity was little changed on balance. Most banks continued to report soft demand for loans. Some contacts mentioned that clients deferred borrowing for new projects, while other contacts noticed subtle increases in loan originations, particularly to finance construction projects. Competition for deposits remained elevated as some clients reportedly moved their assets to nonbank alternatives offering higher interest rates. Lending requirements tightened further, and credit quality was strong.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"May 29, 2024\nSummary of Economic Activity\nOn balance, business activity in the Third District was up slightly, after being steady last period. Employment continued to grow at a slight pace, led by hiring among nonmanufacturers. Wage inflation continued at a modest pace, with wage pressures continuing to moderate. Firm price inflation ticked up to a modest pace, despite contacts reporting more pushback against price increases. Activity in staffing and recruitment was reported slightly up this period because of increased demand for labor and more candidates seeking out career opportunities. Sales of existing homes improved slightly, and new listings edged up steadily throughout the period. Average sales prices of homes continued to increase. Expectations for economic growth over the next six months edged down slightly, but there was continued widespread optimism among manufacturers, while expectations for nonmanufacturers moderated and optimism was less widespread.\nLabor Markets\nEmployment grew slightly, unchanged from last period. Based on our April and May surveys, nonmanufacturers reported slight increases in full-time jobs, unchanged from March, and a slight increase in part-time jobs, up from a slight decline. Manufacturing firms continued to report modest declines in employment and overall declines in the average workweek. Meanwhile, the average workweek for nonmanufacturers ticked up.\nStaffing and recruitment contacts reported a slight uptick in activity this period, after being steady last period. Contacts reported a stronger demand for labor, as some manufacturers and firms with seasonal staffing needs ramp up hiring. More candidates are also searching for jobs, as evidenced by increased visits to staffing contacts' offices. Several contacts reported less staff turnover and a wider candidate pool. For instance, one contact reported receiving 400 r\u00e9sum\u00e9s for a finance position within the first day of the vacancy being posted.\nWage inflation remained modest, as wage pressures continued to subside. On a quarterly basis, firms' expectations of the one-year-ahead change in compensation cost per worker fell further to a trimmed mean of 3.3 percent in the second quarter of 2024, down from 3.9 percent in the prior quarter.\nPrices\nOn balance, firm price inflation was modest this period, up from a slight pace in March. Firms reported that increases in prices received for their own goods and services over the past year edged up in the second quarter of 2024 compared with the first quarter. The trimmed mean for reported price changes, based on responses to our quarterly survey, rose to 2.3 percent from 2.0 percent for all firms. Price increases rose to 1.8 percent from 1.2 percent among nonmanufacturers and edged down to 2.8 percent from 2.9 percent for manufacturers.\nLooking ahead one year, the increases that firms anticipate in the prices for their own goods fell further. The trimmed mean for all firms fell to 2.3 percent in the second quarter of 2024, from 2.6 percent in the first quarter of 2024. The expected rate of growth fell from 3.5 percent to 2.4 percent for manufacturers and rose to 2.2 percent from 1.7 percent for nonmanufacturers.\nManufacturing\nOn average, manufacturing activity increased modestly over the April to May period, unchanged from the prior period. The index for new orders rose moderately in April and then declined slightly in May. The shipments index declined and turned slightly negative.\nExpectations among manufacturers for growth over the next six months edged down slightly from March but continued to be widespread. More than 55 percent of the firms expected increases in new orders and in shipments.\nConsumer Spending\nRetailers (nonauto) continued to report slight decreases in sales. In-store visits continued to be flat to down slightly. Contacts reported that consumers continued to spend less on each trip as they continue to adjust to higher prices.\nAuto dealers again reported slightly higher sales of new cars in the current period owing to continued strong consumer demand. Although auto prices have begun to moderate and dealers and manufacturers are offering promotions, affordability remains a concern because of high interest rates. While regulations at the federal level mandate increased sales of electric vehicles, auto contacts are worried about the potential mismatch between the increased supply and the weak demand for electric vehicles even with increased incentives.\nAlthough the start to the year was slow, tourism grew slightly this period, after slowing slightly last period. One contact reported April was a good month for leisure tourism in the Philadelphia area despite some local consumers being more price sensitive and a low number of international visitors. Hotel demand as measured by nights sold and total revenue rose modestly year over year. Corporate and group travel were up slightly but still below pre-pandemic levels.\nNonfinancial Services\nNonmanufacturing activity increased modestly over April and May, following a slight decline last period. The sales/revenues index increased moderately\u2014up from a near-zero reading. The index for new orders was flat on average, after being slightly negative in March.\nFirms' current sentiment improved this period. Nonmanufacturers' perceptions of general activity for the region have improved consistently since March but remained in negative territory in May. At the firm level, nonmanufacturers have reported moderate increases in the general activity index over April and May.\nExpectations among the nonmanufacturers for their own growth over the next six months were modest, significantly down from March and below historical averages.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew moderately during the period (not seasonally adjusted), up from slight growth last period and unchanged from the moderate pace of one year ago.\nDistrict banks reported strong growth in commercial real estate lending and home mortgages. Volumes of home equity lines increased moderately, while consumer lending (other than auto and credit cards) held steady. Auto lending grew modestly, and commercial and industrial lending grew moderately. Credit card volumes fell moderately after modest growth during the same period one year ago.\nBanking contacts continued to report good credit quality, with only minor upticks in delinquencies and charge-offs. An overarching concern among contacts was the high cost of capital that prevented capital expenditures and deterred many of their business clients' investment plans.\nReal Estate and Construction\nExisting home sales continued to grow slightly this period. The inventory of for-sale properties continued to edge up slightly through April\u2014with the spring market bringing a low but constant flow of listings after year-over-year declines last year. Average sales prices continued to grow, and some properties continued to attract multiple offers and above-asking prices.\nWith still lower-than-normal inventory levels of existing homes for sale and strong demand for housing, new-home builders continued to report strong sales. One contact noted that homes are sold out through May 2025, but with demand still strong, the firm reduced its marketing budget to slow that demand.\nIn nonresidential markets, leasing activity and transaction volumes continued a slight decline. One contact noted some strength in logistics and warehousing; however, the office subsector remains subdued.\nNonresidential construction activity remained muted in the current period. While some contacts reported less activity in this subsector, another contact that continued to be busy noted that several public infrastructure projects in planning and design could boost activity in the near term.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/regional-economy .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

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"May 29, 2024\nSummary of Economic Activity\nEconomic activity was about flat on balance, but performance was quite mixed both across and within sectors. Prices increased further at a modest pace, and employment was steady amid slow-to-moderate wage growth. Retail sales softened somewhat, and hospitality activity was stable or up modestly. Manufacturers reported strong revenue growth on average, while staffing firms reported only slight revenue gains. Residential home sales declined moderately compared with year-earlier levels despite some recent seasonal growth in sales. Commercial real estate activity decreased slightly, with new softness in the industrial leasing market, and the possibility of a surge in office foreclosures remained a significant concern. The outlook was cautiously optimistic on average, but selected contacts expressed either greater uncertainty or an uptick in downside risks.\nLabor Markets\nEmployment was unchanged overall, and wages increased at a slow-to-moderate pace. Labor demand weakened somewhat, as job openings fell slightly, and layoffs picked up a bit. A large clothing retailer let go 150 workers by closing a call center, citing the shift towards more automated customer service technologies as the driver. Headcounts were steady or up slightly among manufacturers. Demand fell for legal support roles but remained robust for convention-industry roles. Labor supply improved moderately in the medical sector and for retail and restaurant jobs. Employers enjoyed increased bargaining power relative to one year ago, and sign-on and retention bonuses have mostly reverted back to pre-pandemic levels. Among manufacturers, wages increased moderately on balance, although one contact said that recent wage growth had exceeded its typical pre-2020 levels. Wage pressures eased among retail and hospitality establishments, resulting in modest average wage increases. Hiring plans were muted across sectors, mostly aimed at offsetting retirements and other sources of attrition.\nWorkforce development contacts described new training programs teaching life skills and basic professionalism. One contact described efforts to match students with jobs before they graduated from the program as a way to reduce attrition.\nPrices\nPrices increased at a modest pace on average, and input cost movements were mixed. Restaurateurs reported modest increases across a range of food inputs but held menu prices steady, resulting in a further narrowing of profit margins. Hotel room rates increased from a year earlier at a pace of just under two percent, the slowest in recent years. Among manufacturers, input price pressures moderated, and costs were flat in some cases, but one contact noted that plastics and electronics prices remained elevated. Output prices increased by an above-average margin at one manufacturer, driven by robust demand and modest cost pressures, but otherwise manufacturers' output prices were up only modestly. Plans called for muted price growth on balance moving forward, as there was concern about consumer pushback from significant further price increases. In fact, one large clothing retailer, in response to recent input price declines, planned to enact modest price reductions on selected items in early fall in a bid to boost sales.\nRetail and Tourism\nRetail and tourism sales were slightly weaker overall in recent months, although results were mixed. A clothing retailer experienced softer sales this winter and spring, posting a moderate decline in sales from one year earlier. A discount retailer posted a weaker than expected March and April but pointed to late season snowstorms as the culprit, as recent weeks saw rebounding sales. A Massachusetts restaurant industry contact reported an exceptionally strong Mother's Day but said that sales had otherwise been flat. Hotel occupancy rates in Greater Boston were stable recently, with a year-over-year growth rate of two percent. Restaurants were optimistic for the summer months, and retailers were cautiously optimistic, but contacts in both industries emphasized that consumers remained highly price-conscious, and at least one retailer perceived that consumer spending risks were skewed to the downside.\nManufacturing and Related Services\nManufacturing revenues increased at a moderate pace on average but spanned a range of outcomes. A maker of veterinary care products posted robust sales growth amid strong demand for pet care but lamented that weak labor supply constrained the number of vet clinic visits. A small consumer goods manufacturer experienced remarkable growth in sales, exceeding already high expectations. Others reported flat or modestly lower sales that were nonetheless in line with or above expectations. Capital spending was steady and near-term plans were unchanged. Contacts expected modest to strong sales growth in the coming quarters, even those with relatively weak recent sales. Optimism for the second half of 2024 was driven in some cases by recent momentum in demand for AI-related products and other new technologies.\nStaffing Services\nFirst District staffing firms experienced mixed changes in activity, with revenues increasing slightly on balance. Contacts said that demand for direct hires was down sharply from one year ago, while demand for temporary hires and temporary-to-permanent conversions increased considerably for the same period. Expectations were split, in line with firms' own recent performance, but on balance revenues were expected to increase slightly in the second half of 2024. One contact expected that their recent acquisition of another staffing firm would enable them to expand their presence in New England.\nCommercial Real Estate\nAccording to industry contacts, commercial real estate activity in the First District decreased slightly since April. Industrial leasing activity softened modestly overall but declined sharply in Connecticut. Industrial rents continued to rise, albeit less rapidly than in previous months. In the office market, leasing activity was mostly flat at a subdued pace, vacancy rates edged up further, and rents were flat or down moderately. The retail class experienced stable activity and rents. Investment sales remained mostly frozen as borrowing rates remained high, and lending activity was very limited. Unfavorable borrowing terms also contributed to modest declines in construction activity. Banks continued to extend underperforming office loans in anticipation of eventual declines in interest rates, but contacts remained concerned that a significant uptick in foreclosures was inevitable, especially in the class B market. Contacts expected commercial real estate activity to remain largely static moving forward, or if anything to weaken slightly. The subdued outlook was attributed to uncertainty concerning the timing of rate cuts by the Fed as well as over the outcome of the presidential election.\nResidential Real Estate\nFirst District home sales, considering year-over-year changes, posted mixed results in March and April after increasing in February. Closed residential sales increased at an above-average pace in New Hampshire and Maine in April from a year earlier, in both cases buoyed by increased inventories. In both Rhode Island and Vermont, single-family sales fell moderately over the year, while condominium sales increased either slightly (in Rhode Island) or moderately (in Vermont). Massachusetts posted year-over-year declines in sales in March for all residential property types despite a modest seasonal upswing in sales from the previous month, as activity was held back by declining inventories. Contacts stressed that inventory levels remained very low across the region, leading to ongoing, moderate-to-robust increases in house prices, and realtors expressed support for policies that would make it easier to build accessory dwelling units on existing properties. The outlook was neutral to cautiously optimistic, with a contact in the Boston area encouraged by recent increases in pending sales.\nFor more information about District economic conditions visit: https://www.bostonfed.org/in-the-region.aspx .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2024/2024-05-ri

"May 29, 2024\nSummary of Economic Activity\nThe regional economy grew at a modest rate in recent weeks. Consumer spending on retail, restaurants, and leisure travel increased this period but new vehicle sales were down slightly. Import activity ramped up both from natural growth and from cargo that was diverted from Baltimore. Near the end of the reporting period, the Port of Baltimore was able to open a limited access channel, which would let most container ships traverse into the harbor. Residential real estate activity picked up in recent weeks, as did some commercial real estate leasing; however, very few new commercial construction projects were being started. Labor markets improved but labor supply remained tight. Price growth remained moderate, overall.\nLabor Markets\nEmployment in the Fifth District grew at a moderate pace in the most recent reporting period. Labor availability was mixed. A chartered bus company remained constrained by a lack of quality candidates, but they noted greatly improved conditions and that they were getting close to \"normal.\" A quick-service restaurant reported continued significant staffing challenges in their cafes. Many contacts cited the need for \"quality\" workers. A seasonal outdoor recreational company was not able to recruit some candidates because of a lack of affordable housing in the area. Firms continued to increase wages and offer bonuses to recruit and retain workers.\nPrices\nPrice growth increased slightly in recent weeks, but growth remained at a moderate year-over-rate. According to our most recent surveys, the rate of growth in the prices received by service providers remained elevated at around 4 percent compared to around 2.5 percent for manufacturers. In both sectors, businesses reported that input and labor costs continued to rise, and in some cases, their input costs increased at a faster rate than the prices they received because customers were pushing back on additional price increases. Firms generally expected for growth in prices received to moderate over the next six months.\nManufacturing\nFifth District manufacturing activity was unchanged in the most recent period. Several companies mentioned increased pressure on margins due to global competition. A precision metal fabricator reported all work had halted, and any new work must meet or beat international pricing. A dental implant manufacturer reported increased labor costs and competition from less expensive global competitors resulting in margin pressure. Future market uncertainty has created uneasiness for several contacts. A textile company's clients told them that they were not making big moves or long-term strategic decisions, which has affected the company's ability to plan for the rest of the year.\nPorts and Transportation\nPorts in Virginia and South Carolina reported moderate to strong (up to double-digit) increases in imports beyond the additional volume that they picked up from diverted Baltimore cargo. Exports of certain commodities like textiles and apparel were up, while exports of agricultural goods leveled or decreased. Freight rates decreased, but ocean carriers continued to add surcharges and fees for distance and hazards. The port of Baltimore opened a 45-foot limited access channel that will allow ninety percent of container vessels reentry to the port. Some container lines have waited for this depth clearance before loading new ships, and customers indicated an eagerness to return to Baltimore due to increased costs of getting cargo to the region from other ports.\nRail demand at inland ports was strong this period, continuing this year's record levels. Manufacturers in autos, auto parts, agriculture equipment and tools have favored rail due to lower carbon emissions and supply chain reliability. Trucking volume was up slightly, but spot rates continued to spiral downward due to oversaturation. Some firms noted that they picked up lost contracts because the service provider could not complete the routes as their operating costs exceeded their bid price.\nRetail, Travel, and Tourism\nConsumer spending on retail and travel increased moderately in recent weeks. Retail sales were up, but some retailers reported tighter profit margins due to rising input costs and an inability to pass along all of those costs to customers. On balance, spending on restaurants and leisure travel picked up and was largely driven by consumers with discretionary income. Conversely, low-to-moderate income consumers were reportedly pulling back on spending or trading down in the goods they purchased due to higher costs leading to tighter household budgets. New vehicle sales declined slightly this period.\nReal Estate and Construction\nResidential real estate activity picked up modestly in recent weeks. Total closed sales increased, and more homes came onto the market, which brought the total supply of homes for sale up slightly compared to prior months but remained below the pre-pandemic level of supply. Average sales prices rose modestly, and homes were selling at a slightly faster rate, particularly for low to mid-priced homes. An agent in South Carolina noted that home price escalation was pushing some potential buyers out of the market, but people moving to the area from higher-priced markets were unphased. New construction continued to expand in areas with population growth.\nCommercial real estate activity increased slightly this period. Retail leasing activity picked up and vacancy rates remained low as new inventory was quickly absorbed. Office leasing increased slightly for class A space but declined for class B and C properties, which drove up vacancy rates in those buildings. Leasing and absorption in new multi-family buildings were strong. Construction of existing projects continued but developers from across regions and across sub-markets of commercial real estate noted that very few projects were being green lit as interest rates made it hard for deals to be financially viable amid continued high prices of material and labor.\nBanking and Finance\nFinancial institutions reported that they continued to observe modest softening of loan demand over most loan types, but mainly in their commercial real estate and business loan portfolios. Higher interest rates were mainly noted as the primary driving force in this softening. Deposit levels continued to modestly decline with competition still high for any available balances. Some respondents noted that underwriting on new loan requests remained tight with most institutions decreasing their appetite for new loans. Loan delinquency rates remained stable, but one institution observed a slight decline in credit scores and credit quality for new consumer applicants.\nNonfinancial Services\nNonfinancial service providers continued to report that demand for their services as well as their revenues remained stable. A staffing firm noted that new orders for positions have started to increase from those in the first quarter, but finding qualified and willing-to-work applicants for these positions continued to be a challenge. Higher interest rates were still being noted as a limiting factor for new capital expenditures. Inflation and election year politics were also mentioned as factors impacting business expansion and overall confidence in the economy. Wages and workforce issues continued to be less of a challenge and to show modest stabilization.\nFor more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2024/2024-05-kc

"Beige Book Report: Kansas City\nMay 29, 2024\nSummary of Economic Activity\nThe Tenth District economy expanded at a moderate pace, led by rising household consumption and growth in professional business service activity. Moreover, contacts indicated their employment outlooks were less vulnerable to a deterioration in conditions compared to six months ago. Hiring activity and expected job growth were modest, with some acute indications of rising barriers to work among low-wage occupations. Several contacts noted a willingness to accept elevated wage growth over the near-term, as the alternative of lost revenue due to vacant positions would be too costly. Price dynamics were reported to be changing due to a rise in the frequency of price adjustments as well as a greater use of clauses in supplier contracts to reduce the risk of outsized input cost growth. Consumer spending rose moderately. Spending on auto services and parts showed robust growth as households maintained their vehicles that faced lower trade-in values. Commercial real estate activity stabilized across the District, but at low levels. Conditions in agriculture and energy were mixed across segments.\nLabor Markets\nTenth District contacts reported hiring activity expanded slightly over the past month. Businesses indicated their priorities in hiring were generally unchanged, with ongoing focus on recruiting early-career and entry-level workers. Mismatches in between open jobs and workers' skills remained an ongoing concern, and many businesses reported they are devoting significantly more resources to training workers to close skill gaps. Wages continued to grow at a moderate pace. Several contacts noted their current willingness to accept wage growth that is higher than historical norms because the alternative of lost revenue due to vacant positions would be too costly. Looking ahead, manufacturing businesses continued to report expectations that the pace of wage growth will be slightly slower than, or similar to, last year. However, services contacts were more mixed in their expectations of wage growth, with consumer-oriented businesses expressing greater wage pressures.\nPrices\nBusiness contacts reported prices for finished goods and services grew slightly over the last month, with declines in auto prices being a notable exception. Growth in input costs continued to outpace selling prices. Amid difficulties to pass higher materials and input costs onto customers, many contacts reported being willing to change selling prices more frequently compared to last year to protect margins when possible. Contacts also reported implementing several new strategies to alleviate cost pressures arising from suppliers for the coming year. Specifically, many businesses reported they are entering shorter duration contracts with vendors, adding escalation clauses that cap cost growth, or including new clauses to allow for renegotiation upon unanticipated cost changes.\nConsumer Spending\nConsumer spending rose moderately driven by increases in hotel stays, outings to restaurants, and other services. Spending on services and parts for auto repairs grew at a robust rate as households increasingly repaired and maintained their vehicles. Recent declines in auto prices from pandemic-era highs reduced trade-in values for used cars purchased two to three years ago. Those lower trade-in values, combined with the propensity to purchase cars with extended term financing in recent years, meant that many car owners could not exit their loans and instead elected to repair and maintain their current vehicles in lieu of trading in for new cars.\nCommunity Conditions\nThe availability of jobs for low-wage workers was reportedly high, and contacts indicated the entry-level job market is still tilted in job seekers' favor. However, a few noted that some employers were bringing back restrictions on hiring such as background checks and drug testing. High prices of vehicles and rising costs of repairs and auto insurance continue to present barriers to work for low-wage workers. Additionally, contacts noted the preponderance of new jobs locating on the fringes of metro areas has made those jobs more difficult to reach for low-to-moderate income households. Contacts noted the benefits of switching jobs lessened considerably for workers, but the tendency to switch jobs for even marginal wage gains remains elevated.\nManufacturing and Other Business Activity\nBusiness activity expanded at a moderate pace, led by robust growth among both consumer and professional service providers. Manufacturing contacts continued to report moderate and broad-based declines in activity. Compared to 6 months ago, contacts generally reported more optimism about avoiding the need to lay off workers if activity were to meaningfully slow. Instead, more firms reported they would reduce the number of open positions and reduce hours worked if demand were to decline significantly. Slightly more businesses expressed they would likely reduce headcount through natural attrition if conditions were to deteriorate, even as turnover continued to decline. Given current conditions, most employers expected modest job gains over the next six months.\nReal Estate and Construction\nMany aspects of commercial real estate (CRE) activity that were declining for several quarters reportedly stabilized over the past month, albeit at low levels. However, ongoing increases in vacancy rates kept downward pressure on rents. Property sales rose moderately throughout the District with slight increases in transaction prices, though contacts noted more self-funded equity was needed to finance deals. Contacts reported only modest increases in private equity funding being deployed but generally indicated that substantial amounts of equity remained on the sidelines. Bank lending and lending from insurance companies to the CRE sector reportedly declined recently. Despite the reportedly tight financial conditions, District contacts' expectations regarding property valuations improved moderately compared to earlier in the year.\nCommunity and Regional Banking\nLoan demand was mostly unchanged at District banks from the previous month, except for CRE loans, which declined due to higher financing costs. Contacts also noted portfolio credit quality was mostly unchanged and they largely expected similar loan quality in the coming six months. Bankers indicated that less than 10 percent of their CRE borrowers had exercised extensions in the past six months and expect less than 5 percent to require an extension in the coming six months, highlighting contacts' cautious optimism about CRE loans despite elevated interest rates. Deposits were unchanged on net amid short seasonal fluctuations driven by tax payments.\nEnergy\nTenth District oil and gas activity declined slightly over the last month. The number of active rigs fell as oil prices declined, and production in the District's major basins decreased modestly. Coal production in Wyoming also fell moderately over the last month due to a continued decline in price. Contacts indicated capital expenditures to support coal mining were increasingly oriented toward maintaining equipment, rather than expanding capacity. Renewable energy capacity has grown at a moderate pace in the District this year, driven by wind installations in Oklahoma and solar installations in New Mexico. However, District growth in non-wind renewable capacity lags the U.S. and is expected to continue underperforming the national average in coming months.\nAgriculture\nConditions in the Tenth District agricultural economy softened through early May and farm finances tightened slightly. Corn, soybean, and wheat prices increased slightly since April, but remained weak, keeping profit opportunities narrow. Winter wheat conditions in Colorado and Kansas were particularly poor and raised concerns about reduced revenues while growing conditions in Oklahoma and Nebraska were comparatively better. Corn and soybean planting was delayed in some areas of the region, which also raised concerns about future crop conditions. In the livestock sector, cattle prices remained strong and supported profit opportunities for cow/calf producers. District contacts mentioned that financial stress has remained modest, but concerns about further deterioration were growing.\nFor more information about District economic conditions visit: https://www.KansasCityFed.org/research/regional-research .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/2024/2024-04-ny

"Beige Book Report: New York\nApril 17, 2024\nSummary of Economic Activity\nOn balance, economic activity in the Second District held steady in the latest reporting period. Labor market conditions remained solid with labor supply and labor demand coming into better balance. Employment continued to grow slightly, and wage growth remained moderate. The pace of selling price increases remained modest. Manufacturing activity declined modestly. Consumer spending was flat, on the heels of weak sales earlier in the year. Tourism activity in New York City continued to move slowly towards pre-pandemic levels, and the solar eclipse brought an off-season boost to parts of upstate New York. Housing markets continued to strengthen, with the spring selling season picking up beyond the seasonal norm in much of the District. Commercial real estate markets deteriorated noticeably. Activity in the finance sector continued to weaken, with sagging loan demand and rising delinquencies on business loans and commercial mortgages. Nonetheless, businesses generally remained optimistic.\nLabor Markets\nLabor market conditions remained solid. Labor demand and labor supply have come into better balance as conditions continued to normalize. Employment grew slightly, with modest increases in the service sector offset by reductions in the construction and information industries.\nThough businesses continued to hire, there has been a slowdown in hiring among the fastest growing companies, in part due to the high cost of capital curbing expansion plans. Many businesses are hiring more selectively and deciding to make do with less rather than hiring workers who are not a good fit. Manufacturing firms cited ongoing difficulties hiring skilled machinists amid a wave of retirements, but otherwise it has become easier to find qualified workers. Outside of a few smaller businesses shutting down, layoffs remain fairly limited in the region. Businesses anticipate only modest increases in headcounts in the coming months.\nWage growth eased somewhat but remained moderate. Notably, a major payroll firm in the District noted that pay increases received by those switching jobs have returned to normal. Firms do not anticipate significant change in the pace of wage growth in the months ahead.\nPrices\nThe pace of selling price increases remained modest, and the pace of input price increases remained moderate. Still, manufacturing firms pointed to more significant price increases for some raw materials, along with pricing volatility for electronics components. Looking ahead, input price increases are expected to pick up, with some contacts expressing concern about potential shipping route obstructions due to the Key Bridge collapse in Baltimore and obstacles in the Middle East.\nConsumer Spending\nConsumer spending was flat, on the heels of weak sales earlier in 2024. Spending on goods remained sluggish and declined for services such as restaurant meals and entertainment after a sustained period of strength. By contrast, auto dealers in upstate New York pointed to a pickup in auto sales, with solid increases in both new and used vehicle sales. Buyers have enjoyed greater choice with improved inventory levels. Some auto manufacturers have begun subsidizing interest rates\u2014even offering zero percent financing\u2014to help boost sales and manage inventories, and borrowers are turning to leasing amid the high price of new cars.\nManufacturing and Distribution\nManufacturing activity declined modestly, following pronounced weakness in early 2024. Shipments and new orders fell, and some firms have reduced employee hours. In contrast, transportation and distribution firms reported strong business activity. Supply availability continued to improve, and delivery times shortened, though some contacts noted new challenges receiving inputs in a timely manner. Manufacturers generally expect conditions to improve, though optimism has become subdued.\nServices\nOn balance, service sector activity was flat. Though the business services and leisure and hospitality sectors grew modestly, activity in the education & health sector edged down, and activity fell noticeably in the personal services and information sectors. Nonetheless, service firms remained fairly optimistic about the outlook.\nA New York City tourism contact reported that the spring travel season has been slow, and the number of visitors is only slightly above levels seen last spring. Still, business travel and international tourism have both increased, with a notable uptick in visitors from Europe and South America during the Easter holiday week boosting attendance at Broadway shows. Hotel rates in New York City have remained high, in part reflecting a compositional shift towards higher-end rooms as more modest rooms have been set aside as housing for asylum seekers, reducing options for tourists. Visitors seeking the path of totality to observe the solar eclipse provided a sizeable boost to hotel and restaurant establishments in parts of upstate New York.\nReal Estate and Construction\nHousing markets continued to strengthen, with the spring selling season picking up beyond the seasonal norm in much of the District. Though mortgage rate lock-in has continued to limit new listings, inventory edged up. Still, low inventory remains the key factor restraining sales, and strong demand has generally kept sales prices above ask in both upstate New York and the New York City suburbs as bidding wars increased.\nResidential rental markets continued to firm, with rents increasing modestly at high levels. Contacts from across the District noted that many former homeowners have turned to renting because of limited options on the purchase market, augmenting rental demand. Bidding wars on rentals remained common.\nCommercial real estate markets weakened noticeably, with a strong decline in demand for office space. Vacancy rates in Manhattan increased sharply, due in part to a decline in both lease and sublease renewals. While Manhattan saw the brunt of the decline, office markets in Brooklyn, Northern New Jersey, Westchester, and Fairfield also weakened. Although rents were unchanged, rental concessions remained historically high. Office markets in upstate New York, where supply is more limited, remained more steady. The industrial sector also weakened, with continued declines in new leasing. Northern New Jersey, the key market for the New York City metro area, saw a sharp decline in demand. Still, industrial rents have held steady. Multifamily markets held steady, but credit cost and availability remained a challenge. All in all, financial strain among property owners in New York City continued to build as debt service payments rose.\nConstruction contacts reported sharply declining activity. Office construction remained at low volumes. Multi-family construction starts have been low across the District. Industrial construction was solid in Northern New Jersey but declined in upstate New York.\nBanking and Finance\nActivity in the region's broad finance sector continued to weaken in the latest reporting period. On balance, small- to medium-sized banks in the region reported slightly weaker loan demand, particularly for consumer loans and residential mortgages. Banking contacts indicated that credit standards continued to tighten for business loans and commercial mortgages but held steady for consumer loans and residential mortgages. Deposit rates declined slightly, and loan spreads narrowed. While delinquency rates were unchanged for consumer loans and residential mortgages, delinquencies continued to rise for business loans and commercial mortgages.\nCommunity Perspectives\nCommunity leaders noted that non-profit operations have been strained. Inflation has caused the cost of providing services to increase, but there has not been a corresponding increase in funding. Further, many non-profits have endured higher employee turnover and vacancies as many workers have left for more lucrative and less stressful roles in the public and private sectors. With shortfalls in funding and staffing, recipients of social services such as childcare, mental health, housing placement, and senior ambulettes have experienced increasing wait times and service reductions.\nFor more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

/beige-book-reports/2024/2024-04-sf

"Beige Book Report: San Francisco\nApril 17, 2024\nSummary of Economic Activity\nEconomic activity in the Twelfth District continued to grow at a slight pace during the mid-February through March reporting period. Employment levels were little changed, and labor was more available. Wages and prices continued to rise at a slight pace on net. Retail sales were largely unchanged, while activity in the services sectors grew modestly. Demand for manufactured products remained flat on balance, and conditions in the agriculture and resource-related sectors were mixed. Both residential and commercial real estate activity weakened slightly. Activity in the financial services sector remained largely unchanged. Communities across the Twelfth District continued to report housing affordability issues and elevated demand for support services. Looking ahead, contacts expect slightly weaker economic conditions overall.\nLabor Markets\nEmployment continued to rise at a slight pace this reporting period. Employers across the District generally reported holding their head counts steady or increasing it marginally, although some technology, financial industry, and real estate firms reduced the size of their workforce through layoffs and attrition. Some of the layoffs, particularly in the mortgage lending sector, were the result of bank mergers and acquisitions. Hiring was strong in agriculture and for some nonprofit community services but remained muted in the entertainment sector due to lower production volumes. The aviation and hospitality sectors increased their hiring pace because of higher staff turnover. Some firms reported that it was generally easier to fill open positions due to a larger pool of qualified candidates, while others still found it difficult to attract workers for on-site positions, particularly those located in high-cost areas. Many contacts highlighted deploying generative artificial intelligence (GenAI) tools to augment rather than replace workers. Nonetheless, a contact in the Pacific Northwest noted that several technology firms began using GenAI tools to replace some staff working in mid-level positions.\nWages continued to rise at a slight pace, as labor availability continued to improve. Annual pay increases moved closer to historical averages and in line with moderating inflation. Some contacts reported employees' willingness to take a pay cut in exchange for work flexibility and remote work. Wage pressures persisted in agriculture, as larger crop yields expanded the demand for workers.\nPrices\nPrices increased slightly on net for most products and services over the reporting period. Price levels were stable in retail, higher education, and health services and reportedly fell in the agriculture and lodging sectors. Input costs were generally stable, although some reports indicated higher costs for utilities, energy products, electrical supplies, lumber, and insurance. In some instances, the higher costs were passed through to prices, but some firms in food and beverages and consulting services observed resistance to price hikes from their increasingly price-sensitive consumers.\nCommunity Conditions\nDemand for community support and services remained high amid limited funding and strained resources. Households and community members sought assistance as they faced challenges with the cost of housing, utilities, food, and health services. Some contacts reported that government funding partially compensated for a decline in financial support from private-sector grants and individual donors. In some cases, public-sector funding was restricted to address specific issues, such as housing security, which limited their ability to address multiple issues facing community members. Small businesses across the District continued to face high borrowing costs, which limited access to funding and loans.\nRetail Trade and Services\nConsumer spending on retail goods remained largely unchanged. Demand for durable goods was strong, and sales at home improvement stores picked up. However, reports from across the District indicated that consumers have become more price sensitive in recent weeks, particularly for groceries and fresh produce, as they favored discounted products and focused on necessities. The prevalence of hybrid work arrangements continued to limit retail sales in downtown urban areas.\nActivity in the consumer and business services sectors continued to grow modestly in recent weeks. Several contacts highlighted that demand for leisure and hospitality services improved in March following weak activity earlier this year. Business travel was up moderately as more conventions and conferences showed preference for in-person attendance. Restaurant activity was mixed during the reporting period as more consumers exhibited price-sensitive behavior. Demand for janitorial and security services remained robust, while demand for consulting services was muted.\nManufacturing\nManufacturing activity remained flat in recent weeks, on balance. Contacts generally pointed at slightly lower demand for manufacturing products, although capital equipment and heavy machinery demand improved with a stronger orders pipeline. Several manufacturers highlighted ongoing investments in productivity-enhancing technologies, with a focus on GenAI tools. Inventory levels were generally lean and close to historical levels. Nevertheless, an automation equipment manufacturer noted that they have been holding a large order of custom-built industrial robots for a customer that put all automation projects on hold due to elevated costs and inflationary pressures experienced over the past few years.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors were mixed, similar to the previous reporting period. Logging activity rose slightly on account of stronger domestic demand and more limited supply from international producers of lumber and plywood. Seafood stocks and yield crops, such as those of nuts and apples, remained high and exceeded domestic demand, leading producers to export excess supply. Retail and food service demand for agricultural products was flat to down. Transportation and packaging costs were stable to down, and growers noted that recent rainfall, while providing much-needed water for crops, caused flooding and damage. One contact in the Pacific Northwest noted that more growers have utilized temporary foreign worker programs to address domestic labor shortages in hiring for this year's harvest season.\nReal Estate and Construction\nConditions in the residential real estate market softened a bit relative to the prior reporting period. Demand for single-family homes was subdued amid elevated mortgage rates and limited inventory. Demand for multifamily housing softened in recent weeks while supply grew further as more construction projects were completed. As a result, vacancies rose, rents fell, and landlords offered more concessions to renters. Single-family construction activity was slow as construction costs rose somewhat. However, in Hawaii, rebuilding efforts and government-supported projects bolstered construction activity. Materials and components were largely available, though delays persisted for electrical equipment.\nConditions in the commercial real estate market weakened slightly overall. Office leasing activity was weak, in part due to the elevated costs of renovating old spaces to meet prospective tenants' needs. Demand for industrial space eased somewhat but still remained above pre-pandemic levels. Transaction volumes of commercial property sales fell somewhat. Commercial construction was stable overall, though a contact in California observed some slowing due to high financing costs. A contact in the food services sector reported a shift away from construction of new food service establishments towards renovations of existing properties.\nFinancial Institutions\nActivity in the financial services sector remained largely unchanged. Loan demand was weak across business and consumer categories, with the exception of credit cards. Deposit growth was muted during the reporting period, and competition for deposits was strong. Credit and asset quality were reportedly high, although delinquencies for credit cards and auto loans continued to tick up.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

/beige-book-reports/2024/2024-04-su

"Beige Book: National Summary\nApril 17, 2024\nThis report was prepared at the Federal Reserve Bank of Boston based on information collected on or before April 8, 2024. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nOverall economic activity expanded slightly, on balance, since late February. Ten out of twelve Districts experienced either slight or modest economic growth\u2014up from eight in the previous report, while the other two reported no changes in activity. Consumer spending barely increased overall, but reports were quite mixed across Districts and spending categories. Several reports mentioned weakness in discretionary spending, as consumers' price sensitivity remained elevated. Auto spending was buoyed notably in some Districts by improved inventories and dealer incentives, but sales remained sluggish in other Districts. Tourism activity increased modestly, on average, but reports varied widely. Manufacturing activity declined slightly, as only three Districts reported growth in that sector. Contacts reported slight increases in nonfinancial services activity, on average, and bank lending was roughly flat overall. Residential construction increased a little, on average, and home sales strengthened in most Districts. In contrast, nonresidential construction was flat, and commercial real estate leasing fell slightly. The economic outlook among contacts was cautiously optimistic, on balance.\nLabor Markets\nEmployment rose at a slight pace overall, with nine Districts reporting very slow to modest increases, and the remaining three Districts reporting no changes in employment. Most Districts noted increases in labor supply and in the quality of job applicants. Several Districts reported improved retention of employees, and others pointed to staff reductions at some firms. Despite the improvements in labor supply, many Districts described persistent shortages of qualified applicants for certain positions, including machinists, trades workers, and hospitality workers. Wages grew at a moderate pace in eight Districts, with the remaining four noting only slight to modest wage increases. Multiple Districts said that annual wage growth rates had recently returned to their historical averages. On balance, contacts expected that labor demand and supply would remain relatively stable, with modest further job gains and continued moderation of wage growth back to pre-pandemic levels.\nPrices\nPrice increases were modest, on average, running at about the same pace as in the last report. Disruptions in the Red Sea and the collapse of Baltimore's Key Bridge caused some shipping delays but so far did not lead to widespread price increases. Movements in raw materials prices were mixed, but six Districts noted moderate increases in energy prices. Contacts in several Districts reported sharp increases in insurance rates, for both businesses and homeowners. Another frequent comment was that firms' ability to pass cost increases on to consumers had weakened considerably in recent months, resulting in smaller profit margins. Inflation also caused strain at nonprofit entities, resulting in service reductions in some cases. On balance, contacts expected that inflation would hold steady at a slow pace moving forward. At the same time, contacts in a few Districts\u2014mostly manufacturers\u2014perceived upside risks to near-term inflation in both input prices and output prices.\nHighlights by Federal Reserve District\nBoston\nBusiness activity expanded at a modest pace in recent weeks, and prices rose slightly. Employment was flat overall, but one retailer reported significant layoffs. Convention and tourism activity grew at a robust pace. Home sales increased on a year-over-year basis, marking a turnaround. The outlook ranged from cautiously optimistic to bullish.\nNew York\nOn balance, regional economic activity remained flat. Labor market conditions were solid and continued to normalize as labor supply and labor demand came into better balance. Consumer spending was unchanged after a weak first quarter. Housing markets strengthened, with the spring selling season picking up beyond the seasonal norm. The pace of selling price increases remained modest.\nPhiladelphia\nOn balance, business activity was flat in the current Beige Book period\u2014after declining slightly last period. Employment edged up, despite staffing and recruitment efforts slowing to a crawl. Wage and price inflation continue to moderate; however, housing affordability continues to be a concern. Overall, the outlook is positive, as firms remained optimistic about expectations for future growth.\nCleveland\nDistrict business activity increased modestly, as did employment. Firms anticipated greater ease filling open positions, including those that have been particularly challenging, because of increased labor availability. Wage pressures continued to normalize, and some contacts reduced starting wages for new roles. Cost and price pressures changed little.\nRichmond\nThe regional economy grew at slight pace since our previous report. Consumer spending on retail goods was mixed but spending on travel and tourism was up slightly. Fifth District port activity slowed and was impacted by the collapse of the Francis Scott Key Bridge. Employment growth slowed from a moderate to a modest rate in recent weeks, but wages continued to grow moderately. Price growth also remained moderate.\nAtlanta\nThe Sixth District economy grew modestly. Labor markets continued to stabilize; wage pressures eased. Many nonlabor costs moderated. Retail sales were steady, but consumers remained price conscious. Tourism remained robust. Commercial real estate conditions slowed. Transportation activity was mixed. Manufacturing grew slightly. Loan demand was flat. Energy activity improved.\nChicago\nEconomic activity increased slightly. Employment increased modestly; business and consumer spending rose slightly; nonbusiness contacts saw no change in activity; and manufacturing and construction and real estate activity were flat. Prices and wages rose moderately, while financial conditions were stable. Prospects for 2024 farm income were unchanged.\nSt. Louis\nEconomic activity has continued to increase slightly since our previous report. Prices have increased modestly, as contacts are broadly feeling the pressures of increases in both labor and non-labor costs. The outlook was neutral to slightly optimistic, which is generally unchanged from our previous report, but better than one year ago.\nMinneapolis\nDistrict economic activity grew slightly. Employment grew some, but labor demand was softer. Wage pressures were present but continued to ease, while price pressures ticked up. Consumer spending was mostly flat, and manufacturing slowed modestly. Commercial and residential construction improved slightly. Agricultural conditions were steady at low levels.\nKansas City\nThe District economy expanded modestly. Demand for auto loans and residential mortgages rose as borrowing rates declined. Demand for HELOC also increased as a means to consolidate or refinance household debt. Job gains were modest even as worker availability improved slightly.\nDallas\nThe Eleventh District economy expanded modestly. While activity in services and housing grew, manufacturing output, retail sales, and loan demand declined slightly. Employment growth slowed as wages, input costs, and selling prices grew at a moderate pace. Overall, Texas firms noted an uptick in uncertainty.\nSan Francisco\nEconomic activity continued to grow at a slight pace, employment levels were little changed, and prices and wages rose slightly. Retail sales were unchanged, and demand for services grew modestly. Demand for manufactured products changed little, and conditions in agriculture were mixed. Real estate activity was slightly down. Financial sector conditions were largely unchanged.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2024/2024-04-mi

"April 17, 2024\nSummary of Economic Activity\nThe Ninth District economy grew slightly since the previous report. Employment grew slightly, and labor demand was softer. Price pressures increased, while wage pressures were moderate and continued to ease. Business survey respondents reported that demand increased on balance. Commercial and residential construction improved slightly, consumer spending was mostly flat, while manufacturing slowed modestly. Agricultural conditions were steady at low levels. Activity among minority- and women-owned business enterprises was mixed.\nLabor Markets\nEmployment grew slightly since the last report. Recent surveys suggested that hiring sentiment continued to soften modestly but remained positive overall. Staffing contacts reported slower, but variable, demand for workers; demand for entry-level, low-skill jobs had softened in North Dakota, but demand for skilled and professional workers was still healthy. In Montana, job orders from manufacturers were lower. In Michigan's Upper Peninsula, demand for permanent, full-time jobs slowed, but rose for temporary and seasonal positions. A Wisconsin staffing contact said the current job market was more unpredictable than it ever has been, with some businesses slowing while others were \"ramping up out of nowhere.\" Labor availability continued to improve. A Minnesota contact said businesses were \"reporting less ghosting and more applicants following through with the hiring process.\" Traffic was also higher at job fairs and workforce offices.\nWage increases were moderate overall, but were easing compared with previous levels, according to recent surveys. Staffing contacts said wage pressures were easing, but still evident in high-demand jobs. In Montana, trade workers saw strong wage increases in recent contract settlements, while public unions saw 2 to 4 percent raises. A Wisconsin manufacturer said that \"wage competition has moved from a hard boil to a gentle simmer. It's not the factor that it was 12 to 18 months ago.\"\nPrices\nPrices increased moderately since the last report, which was a slight uptick in the pace of growth. While most respondents to a District business conditions survey reported no change to prices charged in March from a month earlier, more than a third said prices increased. Input price pressures remained greater than final price pressures. A professional services firm indicated that it was approaching a limit in its ability to pass on labor cost increases because customers were pushing back on pricing. Retail fuel prices in District states increased briskly since the previous report. Prices received by farmers increased in February from a year earlier for chickpeas, lentils, chickens, eggs, milk, hogs, and cattle; prices decreased from a year earlier for corn, wheat, soybeans, potatoes, canola, and turkeys.\nWorker Experience\nRespondents to a recent survey of workers, most of whom were employed in social services, were overall satisfied with their work schedule flexibility. About one-third expressed dissatisfaction with their pay. Some were advocating for better pay, working toward a promotion, or looking for another job. Most of those looking for jobs were likely to reject an offer if the pay was insufficient to meet their needs. Many respondents reported experiencing notably high prices in groceries, food away from home, rent, fuel, and electricity. As the health care industry continued to add jobs across most of the District, traveling nurses were reportedly becoming less common, but their \"optimism in the job market remains high,\" said a labor contact. They were said to be receiving attractive sign-on bonus offers from nursing homes, a trend that was categorized as unusual for their budgets.\nConsumer Spending\nConsumer spending was flat overall since the last report, with some variability among sectors. Unseasonably warm weather devastated firms catering to winter tourism. Hotel occupancy in February fell significantly across the District for a second consecutive month. Firms serving other retail segments reported better activity. Many South Dakota retailers reported healthy traffic and customer spending in the first quarter, though many individual owners reported challenges. Still, a contact there said, \"the outlook for most seems better than a year ago.\" A contact with a large retail center in Minnesota said that customer traffic was increasing but \"consumers are not spending quite as much per visit.\" Contacts also reported that consumers were trading down on purchases, particularly in groceries. \"Lots of staples and fewer splurges, and more store-brand or generics. Some trading down in apparel as well,\" said one contact. Vehicle sales saw continued growth. One dealership with multiple locations saw recent sales rise by 14 percent over last year. Airline traffic continued to improve, rising across the board in February at District airports year over year, with some increases of 10 percent or more.\nConstruction and Real Estate\nConstruction activity improved since the last report. Construction starts in the District rose over year-ago levels, according to industry data. A majority of contacts also reported increased project activity, and future sentiment was even more optimistic. Local permitting across the District suggested some lumpiness in activity, even in the same state. Residential construction increased overall, though growth was not seen everywhere. Certain markets, like Minneapolis-St. Paul and Sioux Falls saw sizable increases, while other markets were flat. Multifamily activity slowed in many markets; in March, Minneapolis-St. Paul saw just six permitted units.\nCommercial real estate improved slightly. Industrial vacancy rose slightly in the first quarter, but sources suggested that demand remained healthy, particularly in light of an expected slowdown in new construction. The office sector has \"stabilized,\" according to one source; subleasing fell modestly, and workers were gradually returning to the office. Other commercial markets were mostly steady. Residential real estate continued to improve overall from low levels, with many markets seeing increases in monthly year-over-year sales.\nManufacturing\nDistrict manufacturing activity slowed modestly from the previous report. Manufacturing contacts who responded to a monthly District survey indicated that their sales decreased on balance in March from the previous month. A regional manufacturing index indicated decreased activity in Minnesota and North Dakota in March from a month earlier, while activity increased in South Dakota. A metal fabricator reported, \"We are in the midst of the deepest slow-down in my 35 years with our company.\"\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions were stable at low levels. Contacts expected decreased farm incomes in the region for the 2024 growing season. Warm weather along with widespread mild drought conditions led to a mixed outlook heading into spring planting. District oil and gas exploration activity was unchanged since the previous report.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned business enterprises (MWBE) was mixed. An equal share of contacts reported lower, unchanged, or higher sales. More contacts reported increases in employee headcount over the last four weeks than those who reported reductions. Almost half reported strong hiring demand. A Minnesota contact in the construction industry said they were struggling with high turnover, labor availability, applicant qualifications, and training costs. Nonlabor input prices and average selling prices were mostly flat. Similar shares of contacts expected business activity to increase and decrease in the coming weeks. Unseasonably warm temperatures also affected MWBEs whose businesses depend on winter tourism. The owner of a restaurant in Minnesota shared having to close for the season due to the lack of snow.\nFor more information about District economic conditions, visit https://www.minneapolisfed.org/region-and-community .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/2024/2024-04-ph

"April 17, 2024\nSummary of Economic Activity\nBusiness activity in the Third District was steady this period, after a slight decline last period. Employment continued to edge up, with increases in full-time nonmanufacturing jobs offsetting a modest decline in manufacturing jobs. Wage pressures and price inflation continued to moderate, to a still-modest pace for wages and to a still-slight pace for prices. Contacts reported less ability to pass on price increases. Activity in staffing and recruitment was constrained this period, in part because of lower demand for labor. New listings and sales of existing homes improved slightly. Housing affordability remained a concern because home price appreciation and high interest rates persisted. Lower-income households were especially burdened by the high-price, high-rate environment. Expectations for economic growth over the next six months modestly improved, rising among manufacturers and holding steady among other firms.\nLabor Markets\nEmployment continued to edge up in March. Since our February survey, nonmanufacturing firms have reported slight increases in full-time jobs and modest decreases in part-time jobs. Firms in the smaller manufacturing sector continued to report a modest decline in employment. On average, all firms responding to the survey reported little change in the average workweek.\nActivity in staffing and recruitment was muted this period, after a slight increase last period. Staffing contacts have noted less demand for labor, as firms have been choosing to maintain their current labor force. Further, some firms have been more selective in the candidates they choose to hire.\nOverall, wage inflation continued at a modest pace, and firms reported less competitive wage pressures. Among nonmanufacturers, the distribution of reported changes in wage and benefit costs per employee was similar to the distribution in the years before the pandemic. Most firms reported no change, 38 percent reported increases, and 3 percent reported decreases. Our contacts, including several manufacturers, reported that wage pressures continue to moderate across industries and that wage increases are now in the range of 3 to 5 percent.\nPrices\nOn balance, inflation continued at a slight pace. In our March survey, the prices received index for nonmanufacturers rose to a level near its long-run average\u2014associated with a period of modest increases. Over the prior two months, relatively few firms reported increases, and those increases were slight. The prices paid index remained near its long-run average. Some contacts reported being unable to pass on increasing input prices, as customers have become more price sensitive.\nThe prices paid and prices received indexes for manufacturing firms remained below their long-run averages. The manufacturers' prices paid index declined to its lowest reading since May 2020, while the prices received index declined slightly.\nHowever, manufacturers continued to expect prices to increase. The future prices received index rose above its long-run average, while the future prices paid index remained near its average.\nManufacturing\nOverall, manufacturing activity increased modestly during the period, after a slight decline in the prior period. The indexes for new orders and shipments were positive, at levels somewhat below their nonrecession averages.\nExpectations among manufacturers for growth in the next six months were much more widespread in March. Nearly 60 percent of the firms expected increases in new orders and in shipments.\nConsumer Spending\nOn balance, retailers (nonauto) continued to report slight declines in real sales. Despite consistent foot traffic, customers are trading down and purchasing cheaper products during store visits to offset price increases.\nAuto dealers reported slightly higher sales of new cars in the current period and continued strong consumer demand. According to contacts, although the industry's patterns of production, inventory, and sales have nearly normalized following the pandemic, the emerging growth of all-electric vehicles has further disrupted the sector. Affordability continues to be a concern, with high prices and high interest rates, despite promotions from dealers and manufacturers.\nTourism continued to slow slightly from the strong recovery in recent years. Contacts reported having less pricing power and lower demand, despite offering more promotions. Leisure travel continued to fall from high levels, despite a minor uptick in March due to spring break. The recovery continued in business travel.\nNonfinancial Services\nOn balance, nonmanufacturing activity declined slightly, following slight growth in the prior two periods. The sales/revenues index fell to a near-zero reading, from a modest increase, while the index for new orders remained slightly negative. A building equipment contractor reported that customers are deferring projects and ordering minimum quantities because of tighter budgets.\nCurrent sentiment of firms appeared to deteriorate again. The firms' perceptions of general activity for the region fell further into negative territory in March, and the index of general activity at the firm level turned slightly negative. In contrast to manufacturers, expectations among nonmanufacturing firms for their own growth in the next six months changed little and remained well below historical averages.\nFinancial Services\nThe volume of bank lending (excluding credit cards) continued to grow slightly during the period (not seasonally adjusted), unchanged from the last period and down from the moderate pace of one year ago.\nDistrict banks reported moderate growth in commercial real estate lending and modest growth in home mortgages. Volumes of home equity lines held steady, as did consumer lending (other than auto and credit cards). Auto lending edged lower, and commercial and industrial lending fell moderately. Credit card volumes continued to fall back\u2014this time slightly, after significant seasonal declines last period.\nBanks and business clients continued to report stringent lending criteria, which have hampered some business plans. Banking contacts continued to report good credit quality, and delinquencies remained low. However, contacts from many sectors noted that lower-income households are struggling with high prices and high interest rates. Contacts reported upticks in repossessions and delinquencies on auto loans, especially for low-income households.\nReal Estate and Construction\nBrokers reported that existing-home sales edged up slightly but remained at historically low levels. The inventory of for-sale properties improved slightly through February; however, contacts were uncertain whether listings would continue to rise through the spring buying season. Meanwhile, it remains a seller's market, with sales prices continuing to climb. Contacts continued to report multiple offers, cash sales, buyers paying above the asking price, and homes selling quickly, as evidenced by reduced time on the market.\nNew-home builders continued to report steady sales. Builders noted that the ongoing pent-up demand for housing and the historically low inventory of existing homes for sale continued to bolster market demand for new construction. Some builders are constructing more speculative houses\u2014confident that the pent-up market demand will spur buyers when their houses are completed.\nIn nonresidential markets, leasing activity and transaction volumes continued to decline slightly, especially in the office subsector, where investors are waiting for discounts on distressed properties.\nNonresidential construction activity slowed slightly in the current period. One contractor noted some softening in the construction trades recently, and another noted that construction bidding is significantly lower. Many contacts noted that projects have been deferred in anticipation of lower interest rates. Some firms continued to be busy, despite lower backlogs, and have noticed some growth in the planning and engineering phases of public infrastructure projects.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/regional-economy .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2024/2024-04-kc

"Beige Book Report: Kansas City\nApril 17, 2024\nSummary of Economic Activity\nThe Tenth District economy expanded slightly over the past month. Job gains were modest and concentrated in service sectors. Employers reported that both wage and non-wage labor costs rose, but more slowly than in past years. Although worker availability continued to improve, employers indicated the performance of new low-skill hires was below their expectations and past experiences. The number of foreign-born workers available for hire rose in the District, yet only a few contacts indicated that a greater number of immigrants translated to more hiring activity. Consumer spending increased modestly, with long-subdued auto sales picking up as borrowing rates moderated. Many contacts noted an increase in demand for home equity lines of credit as a means to cash-out equity and pay off debt. The supply of housing was reported to have increased, slowing the pace of housing price growth. Business activity expanded slightly according to most contacts, with notable gains in productivity reported across sectors. However, high credit costs and staffing issues suppressed hiring and capital reinvestment plans among small, minority- and women-owned businesses. Energy activity continued to decline due to low price expectations. Agricultural bankers reported mild deterioration in farm borrower liquidity and gradual softening in farm loan repayment rates.\nLabor Markets\nOverall hiring activity rose slightly across the District, as moderate job growth among service companies was offset by mild decreases in employment at manufacturing firms. Business contacts reported wide differences in their satisfaction with recent hires across job and skill types. Most contacts reported lower levels of satisfaction and worker performance among new low-skilled hires as compared to higher-skilled workers. The number of foreign-born workers available for hire rose in the District. However, few contacts indicated that immigrant workers were a notable source of new labor supply, as barriers to hiring were difficult to overcome. Non-wage benefit costs grew at a modest pace. Most employers indicated increases in healthcare benefit costs were smaller than in recent years. However, several contacts noted that recent enhancements to non-wage benefits\u2014such as, subsidized childcare, higher contributions to retirement plans, and expanded coverage for healthcare\u2014were \"sticky\" labor expenses, not likely to be reduced. As labor market tightness continued to ease, business contacts reported little willingness to provide mid-year wage increases for employees. Still, wages continued to rise at a moderate pace.\nPrices\nManufacturing businesses reported the price of finished goods grew at a modest pace over the last month. However, contacts reported that price pass-through remains a challenge as the price of raw materials continued to grow at a robust pace. Both manufacturing and services contacts indicated they expect moderate price pressures over the next six months. Several business contacts reported a significant increase in their operating expenses, highlighting notable growth in business insurance costs. Contacts anticipate greater difficulty passing along those operating costs to customers, thus further compressing profit margins.\nConsumer Spending\nConsumer spending increased modestly, but reports were mixed across categories of spending. Retail spending softened slightly, but spending on non-discretionary essential items was reportedly strong. Restaurants indicated spending increased notably from previous declines, but hotel bookings and recreation spending was mostly unchanged. Auto dealers reported a moderate increase in sales following a prolonged period of declines over the past year. Businesses expected slight declines in revenue growth over the next six months due to ongoing price sensitivity among consumers.\nCommunity Conditions\nHigh credit costs and staffing issues suppressed hiring and capital investment plans among small, minority- and women-owned businesses. Despite some broader easing of labor market tightness, the limited availability of workers led to heightened business uncertainty and reduced operating hours among smaller businesses. One contact reported it was not unusual for them to hear of small businesses hiring five people, having three show up on the first day, and only one remaining by the end of the week. There were also reports of increasing small-business owner burnout from trying to make up for staffing and revenue shortages. While many contacts reported businesses have had success in obtaining grants, the help has often been temporary with those businesses either coming back for more assistance or closing after the funding ran out.\nManufacturing and Other Business Activity\nBusiness activity expanded slightly over the last month, with manufacturing contacts reporting a modest contraction, offset by slight expansion reported among service contacts. Businesses across most sectors reported notable gains in productivity in recent quarters, driven by several factors: lower worker turnover, greater utilization of technology, and enhanced worker training efforts. Most manufacturing contacts indicated a continued, or growing, interest in investing in labor-saving or productivity-enhancing technologies. Specifically, manufacturing firms expressed an elevated interest in automating costly labor-intensive skills like welding and metal fabrication. In services, consumer-oriented businesses expressed limited ability to invest in labor-saving technologies. In contrast, contacts in professional business services sectors highlighted the use of artificial intelligence (AI) as a strategy for improving business productivity. Specifically, contacts in the marketing industry reported notable productivity gains for rudimentary time-intensive tasks and technology contacts report AI is replacing entire teams of software engineers, resulting in lower costs and greater profitability.\nReal Estate and Construction\nIn residential real estate, the inventory of single-family homes for sale was significantly higher in most District states. Ongoing construction of multi-family housing also moderately increased the availability of housing. However, contacts indicated development activity for new multi-family housing remains at a multi-year low due to subdued expectations for rent growth that challenge the profitability of new construction. Though growth in housing prices slowed, reports of robust growth in property insurance premiums were widespread. Many contacts noted a modest increase in demand for home equity lines of credit (HELOC) as a means to cash-out equity in order to pay off auto debt, credit card debt, and other non-bank loans.\nCommunity and Regional Banking\nLoan demand at District banks was unchanged from the previous month. While high interest rates muted demand for commercial deals in recent months, residential mortgage demand increased slightly as prospective borrowers have become more accustomed to the prospect of higher interest rates compared to past years. Demand for mortgages was further buoyed by slight declines in mortgage rates in recent months. Credit standards were unchanged across loan types. More contacts expected credit quality to remain stable over the coming six months, but concerns about the performance of maturing commercial real estate deals remained. Bankers reported moderately stronger deposit levels and noted that deposit rates stabilized.\nEnergy\nTenth District energy activity continued to decline slightly. The number of active rigs in the District fell only modestly, but firms do not expect a rebound in drilling activity as near-term price expectations are lower than the price needed for a substantial drilling increase. Revenues, profits, and capital expenditures continued to fall as drilling for oil remains profitable for the average District firm, but drilling for gas is still unprofitable. Despite the subdued outlook for production, firms continued to increase employment to make up for past shortfalls in headcount and expect the number of jobs and employee hours to increase somewhat in the next six months.\nAgriculture\nAgricultural economic conditions in the Tenth District continued to moderate through the end of March. Agricultural bankers reported a mild deterioration in farm borrower liquidity and a gradual softening in farm loan repayment rates. Crop prices were subdued, and some contacts reported slightly higher instances of carryover debt than a year ago. Cattle prices remained strong, however, and provided ongoing support to the sector. Elevated production expenses and high financing costs remained ongoing concerns for all types of operations. Drought was also cited as an issue in some areas of the region. Farm real estate values increased at a slower pace compared to recent months, but valuations were strong despite the moderation in the farm economy.\nFor more information about District economic conditions visit: http://www.KansasCityFed.org/research/regional-research .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2024/2024-04-ri

"April 17, 2024\nSummary of Economic Activity\nThe Fifth District economy grew slightly since our previous report. On balance, consumer spending was flat to up slightly this period. Reports from retailers were mixed as some shops and restaurants reported declines while others, namely furniture and hardware stores, reported increased sales. Spending on travel, on the other hand, picked up as hotel occupancy increased and future bookings were strong. Port activity declined slightly, and the collapse of the Francis Scott Key Bridge led to the shutting down of traffic coming in and out of the Baltimore harbor and main port terminal and the diversion of shipments to other East Coast ports.\nLabor Markets\nEmployment in the Fifth District grew at a modest pace in the most recent reporting period. Contacts continued to report difficulty finding workers but mentioned some improvement. A sandwich shop reported that it was still very difficult to find labor, but the applicant pool was increasing, and they were experiencing less attrition. An office equipment wholesaler reported that \"good\" workers were hard to find, but when they were found, they were hired regardless of there being an open position. There was still difficulty finding workers in the trades. An HVAC company, for example, could not find skilled or trainable workers and was not optimistic about this changing due to a lack of a reliable training sources. Wage growth remained moderate.\nPrices\nPrices continued to grow at a moderate annual rate this reporting cycle. According to our most recent surveys, growth in prices received by service providing firms was little changed as growth has remained around four percent for several months. Growth in prices received by manufacturers remained between two and three percent. Some contacts noted that the higher cost of borrowing as well as higher energy costs have led to increased operating costs. Increasing labor costs, however, were the most cited factor leading to price growth remaining elevated.\nManufacturing\nFifth District manufacturing activity declined modestly in the most recent period. A precision sheet metal manufacturer reported that new orders barely reached a level where they didn't have to cut hours. Several contacts mentioned interest rates negatively affecting their business. For example, a cabinet manufacturer reported that clients could no longer wait for interest rates to drop, so they were cancelling projects. A pump and commercial equipment producer reported a slowdown in sales because their customers delayed capital expenditures until interest rates decline. Other contacts mentioned increased cost pressure from non-production services such as legal, medical, and other insurance services.\nPorts and Transportation\nTotal loaded container volumes at Fifth District ports were down slightly this period. Import volumes increased mainly due to retail restock of consumer goods. Spot rates for Asia to East Coast decreased slightly this period but remained elevated compared to last year. Both imports and exports of rolling stock were down this period. Airfreight volumes remained flat and shipping rates continue to be low due to overcapacity. The March 26th collapse of the Francis Scott Key Bridge led to the temporary closure of the main Baltimore port terminal with an uncertain timeline to reopen the shipping channel. Ships that were due to come into the port were diverted to other East Coast ports. Businesses we talked to said they can manage a short-term disruption but if the effort to reopen the channel takes longer, they then expressed greater concerns about lead times and increased costs.\nTrucking demand continued to increase slightly because of retail restocking but still reflected lower seasonal volumes. In the truckload segment, industry oversaturation pushed rates down, while in the less-than-truckload segment, firms were able to negotiate flat to slight increases in contract rates due to decreased capacity. Driver turnover remained at the industry average and several respondents relied on in-house training programs to augment the labor pipeline. However, positions requiring some specialized skills, such as mechanics, were still difficult to fill. There were no significant backlogs on new equipment and parts availability improved.\nRetail, Travel, and Tourism\nRetail spending was little changed in recent weeks. Several retail and restaurant contacts noted that customer traffic was unseasonably low. One shop owner located in a pedestrian market said that rainy weather, particularly on the weekends, hurt their sales. A furniture store and a hardware store, on the other hand, saw an increase in sales and foot traffic and attributed it to the start of the spring season when the housing market starts to pick up and people start working in and on their yards. Hotel contacts reported only a slight increase in occupancy in recent weeks but expected things to pick up soon as they were seeing strong future bookings for the next several months. An airport reported increased passenger traffic in recent months, particularly for leisure travel.\nReal Estate and Construction\nIn residential real estate, respondents noted that so far it hasn't been a robust spring market; however, there remained pent up demand in the housing sector. Total closed sales dropped month-over-month. Days on market increased slightly but was still below the historic average; housing inventory remained tight. Listing prices were flat, but many homes were still selling above asking price. Single family homes for first time home buyers remained in short supply. Construction cost increases continued to moderate in the Fifth District. Demand for home improvement projects declined considerably from this time last year.\nIn the Fifth District, overall market activity in commercial real estate improved slightly this period. Retail and industrial/flex space leasing remained robust with higher rental rates and low vacancy rates. In the office sector, there was greater leasing activity related to firms looking for more efficient space and moving to suburban locations. However, an increasing number of commercial office buildings were unable to qualify for refinancing this period. Commercial real estate sales slowed, and capital markets activity was negligeable, which resulted in declining commercial real estate values. Commercial contractors cited a lack of qualified candidates to fill positions as well as rising material and labor costs.\nBanking and Finance\nMost financial institutions reported that they are observing a slight increase in loan demand within their business and commercial real estate loan portfolios. One banker noted that this slight increase was due to \"pent up\" demand and businesses were only borrowing for immediate business needs. Deposit levels continued to decline modestly with competition high for any available deposits in the marketplace. Institutions that were once reluctant to have deposit specials began offering these promotions to maintain their balances. Loan delinquency rates remained stable from the last report with no changes noted in customer credit quality.\nNonfinancial Services\nNonfinancial service providers continued to report that demand for their services as well as revenues remained stable. An engineering firm stated that they were issuing an average number of proposals for work, but less were being accepted because clients were hesitant to move on any new projects. A law firm noted that clients' anticipation of lower interest rates later in the year was slowing any new real estate transactions, or other transactions impacted by interest rates, by their clients. Wages and workforce issues were less of a challenge with both continuing to show modest stabilization.\nFor more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/2024/2024-04-at

"April 17, 2024\nSummary of Economic Activity\nEconomic activity in the Sixth District grew modestly. Labor markets eased further, and wage pressures moderated. Many nonlabor cost increases stabilized, while the cost of others, like food and insurance, continued to rise. Consumer spending was steady, but sales of discretionary items slowed. Leisure and business travel remained healthy. District housing inventories grew, and affordability improved somewhat. Commercial real estate activity slowed. Transportation demand remained mixed. Manufacturing grew at a modest pace. Lending was flat, on balance. Activity in the energy sector increased somewhat since the previous report.\nLabor Markets\nOn balance, the pace of hiring grew modestly over the reporting period. A few firms slowed hiring in response to weaker demand and were downsizing through attrition. Most contacts reported that it was easier to fill open roles but there were pockets of shortages noted across the region, varying widely by location and industry. Such shortages had firms focused on workforce training and strategically building pipelines for talent; this was especially true among businesses facing a wave of retirements. Current or expected labor shortages continued to drive the search for efficiencies and cost savings. Most firms reported investing in automation, and several said they were exploring the use of AI to drive efficiencies and free up workers for other tasks.\nMost contacts indicated that wage pressures continued to ease, and wage growth was more closely aligned with historical averages.\nPrices\nMost nonlabor cost increases stabilized, though the stabilization was uneven across inputs. Transportation costs, along with some commodities like lumber and steel, saw prices hold or even decrease. Construction delays, however, added to the final cost of projects. Food prices continued to rise, and increases in insurance premiums were notable. Pricing power was characterized as \"lumpy,\" with some firms maintaining the ability to pass through costs while others, particularly retailers and restaurants, struggled to preserve margins. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth increased in March to 2.8 percent, on average, from 2.6 percent in February; firms' year-ahead inflation expectations for unit cost growth were relatively unchanged in March at 2.4 percent, on average, from 2.3 percent in February.\nConsumer Spending and Tourism\nRetailers continued to report a normalization of consumer demand as compared with pandemic levels; \"flat is the growth in 2024 for retail.\" Contacts noted that consumer demand was generally healthy, but discretionary purchases declined, and sales reflected ongoing price sensitivity by shoppers. Auto dealerships described activity as stabilizing\u2014inventory levels met demand and manufacturers offered incentives to boost sales.\nTourism and hospitality contacts reported that strong spring break travel was in line with expectations. Appetites for cruising increased, with several Florida ports reporting strong passenger counts. Business travel continued to improve. Industry contacts remain optimistic about activity for the balance of the year.\nConstruction and Real Estate\nThough home ownership affordability improved amid lower mortgage rates, home price appreciation increased or stabilized in most markets, consistent with national trends. Rising insurance premiums and HOA fees in coastal markets remained a challenge for homeowners on fixed incomes. While still below historic norms, rising existing home inventory, new subdivision developments, and an increase in spec-home availability in the new home market led to higher inventory levels. Housing inventories in southwest Florida increased at a sharper rate than the rest of the District due to weaker demand and the lingering effects of Hurricane Ian.\nCommercial real estate (CRE) conditions were mixed. Office and multifamily sectors cooled as occupancies declined. Oversupply in the multifamily and industrial sectors weighed on market conditions, as sizable amounts of new construction were delivered. Firms reported that imprecise CRE appraisals were leading to valuation accuracy challenges. Like the rest of the nation, Sixth District markets will contend with rising CRE loan maturities in 2024.\nTransportation\nTransportation activity remained mixed. Railroads reported significant year-over-year increases in intermodal shipments and overall traffic. Third party logistics contacts noted that both demand and shipping rates appeared to have bottomed out following what was characterized as an 18-month freight recession. Cargo volumes at District ports were generally below 2023 levels and are expected to slow further as freight normalizes down from inflated levels in 2022. Freight forwarding companies reported declines in volumes, revenue, and profits as customers worked through \"bloated inventories.\" Some transportation contacts expect conditions to improve in the second half of 2024.\nManufacturing\nManufacturing activity grew modestly since the previous report. Most firms reported stable to slightly growing demand, with some optimism for stronger growth later in the year. Manufacturers of products tied to government and infrastructure projects saw higher demand. However, a few producers of consumer goods reported some softening. The Manufacturing Sector Report of the Atlanta Fed's Business Inflation Expectations Survey showed that for the majority of respondents, demand remained at or below \"normal\" levels but found that sales growth is mostly positive.\nBanking and Finance\nLending at District financial institutions remained relatively flat amid continued contraction in most consumer loan segments. One notable exception was home equity lines of credit, which have steadily increased in originations and utilization. Commercial real estate loan originations, including multifamily, experienced minor upticks since the previous report. The allowance for loan and lease losses continued its slow but steady increase as economic uncertainty drove banks to adjust reserves. Cash balances at financial institutions also increased slightly, consistent with broader industry trends. Large time deposits experienced continued growth but may be showing early signs of flattening as institutions start to lock-in anticipated interest rate cuts by the Federal Reserve. Borrowings declined over the period as banks paid down this more expensive source of funding.\nEnergy\nMost energy contacts described an uptick in activity since the previous report, when weather-induced outages had reduced oil and gas production, refining, and chemical manufacturing capacity. Since then, oil and gas production climbed, a trend that is expected to continue over the medium term as global demand grows. Additionally, refiners reported very strong demand and utilization rates, while chemical manufacturing contacts noted flat to steady demand. Utilities contacts noted continued investment of billions of dollars over the next several years, largely attributed to power infrastructure for emissions reduction, computing capacity, and data center projects across the southeast.\nAgriculture\nAgricultural conditions showed modest improvement in recent weeks. The cattle market saw continued resilience as limited supply kept prices high. Record inventories of milk depressed prices, but demand for dairy was strong and growing. Some increase in demand for poultry led to more optimism in the market, but many producers struggled as significant export restrictions remained in place. There was a modest increase in demand for lumber, and expectations are for steady sales going forward. Florida growers reported high demand for citrus, but some softness in the row crop market.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nApril 17, 2024\nSummary of Economic Activity\nEconomic activity across the Eighth District has continued to increase slightly since our previous report. Labor market conditions were generally unchanged. Inflation pressures increased modestly, although firms continue to note higher costs are compressing profit margins as they are unable or unwilling to increase prices to customers. Reports on consumer spending indicate a modest uptick, with some contacts attributing stronger-than-expected activity to an earlier Easter holiday. The outlook among contacts was neutral to slightly optimistic, which is generally unchanged from our previous report, but better than one year ago.\nLabor Markets\nEmployment has remained unchanged since our previous report. The labor market continues to be tight, particularly in rural areas and in the manufacturing and construction sectors. In contrast, banking and professional services contacts have seen upticks in applicants and less turnover from a year ago. Multiple contacts reported adjusting operating hours to reduce their overall wage bill and/or total headcount.\nWages have risen slightly since our previous report, with most contacts reporting a small increase in labor costs. In rural areas of the District, wage disparities between smaller businesses and national firms are an ongoing challenge as smaller firms are struggling to match the higher wages. For example, a food processing firm increased their labor budget by 6 percent to cover merit-based increases to prevent labor turnover. Large District employers continue to reach contract agreements with unions. A large St. Louis distributor reached a contract agreement with its union employees, and St. Louis school district employees were able to secure the largest wage increase in twenty years. However, a pilot union took steps toward a strike.\nPrices\nPrices have increased modestly since our previous report, as contacts are broadly feeling the pressures of increases in both labor and nonlabor costs. Small business contacts reported profit margins compressing on higher costs and an inability to raise final prices for consumers. A restaurant contact reported that even though food and labor costs have risen recently, final prices have not yet been adjusted. A textiles contact echoed this sentiment, but indicated the firm still lacks pricing power over brands and retailers; so, increases in final prices have not kept up with increases in costs. A retail contact reported that her small business insurance costs have doubled. In a similar vein, an insurance agent reported that homeowners are seeing increases in annual insurance premiums of 20 to 25 percent.\nConsumer Spending\nConsumer spending has risen modestly since our previous report. Restaurant and hospitality contacts have generally seen stronger-than-expected business activity, while automotive and retail contacts have generally reported that sales did not meet expectations. A District restaurant contact noted that consumer spending is increasing marginally as delivery services are boosting sales. A fast-food contact noted customers were showing preferences for specialty products, increasing dollar sales per customer. A St. Louis hotel contact reported that, while overall activity is higher relative to last month, activity in the business travel segment has fallen short of expectations. A small clothing retailer reported strong growth in sales, which they attributed to an earlier Easter holiday. A Little Rock boat retailer stated they are cutting profit margins to sell their products due to a lack of demand and plentiful inventory. A Kentucky auto dealer noted that so far this year both new and used car sales have been low. However, they're optimistic activity will increase in the later spring and summer months on expectation of lower auto loan rates.\nManufacturing\nManufacturing activity has slightly increased since our previous report. Firms in Arkansas and Missouri reported a modest increase in inventories and delivery lead times. Reports of supply chain disruptions increased slightly. One contact noted the Red Sea shipping disruptions have resulted in higher prices, and another firm noted a 2-week delay on a large equipment order due to the bridge collapse in Baltimore. A brewery contact noted that their suppliers have excess capacity and are waiving some fees to attract new business. A food manufacturer reported revenues and volumes were down in the first quarter due to smaller orders from restaurants, but private label grocery store orders remain strong.\nNonfinancial Services\nActivity in the nonfinancial services sector has improved slightly since our previous report. The transportation outlook was largely unchanged. Airports across the District remain optimistic that business and leisure travel will remain strong during the remainder of the year. Smaller trucking firms reported financial challenges stemming from lower prices and volumes, which has made it harder to compete with larger firms. Across the District, healthcare contacts spoke about persistent shortages of medical supplies and drugs. An Arkansas funeral services contact reported fewer traditional funerals and more cremations. They attributed this switch to lower-cost services to a growing number of uninsured or underinsured individuals at time of death.\nReal Estate and Construction\nResidential real estate activity has increased at a moderate pace. Real estate contacts noted signs of an early start to the spring homebuying season. District bankers reported that mortgage loan volumes in February and March were higher than the same period last year. A renovation and remodel contact noted a strong pipeline of projects, although with some shift toward lower-cost improvements.\nCommercial construction activity has been relatively unchanged. An architect in the Little Rock area reported their firm is busier than ever, with projects coming from public funds. In contrast, traditional commercial work has slowed significantly. A construction contact noted demand for transportation, municipal, and lodging projects remains high, while demand for retail and higher education construction projects has slowed. Similarly, an engineering contact noted that so far this year is shaping up to be stronger than expected and the outlook is improving.\nBanking and Finance\nBanking conditions have been generally unchanged since our previous report. Contacts reported little change in deposits, but the market remains competitive. Total loan growth has decreased slightly as banking contacts reported being more selective and focused on maintaining existing relationships. Commercial and industrial loans have decreased. However, the pace of consumer lending growth continues to accelerate. A large retailer noted a considerable uptick in credit card usage, and banking contacts noted customers continue to open new lines of credit. Delinquency rates remain low, but some contacts noted higher delinquencies on auto and small business loans.\nAgriculture and Natural Resources\nDistrict agriculture conditions have remained unchanged since our previous report. Total acres planted as of the end of March are about the same as this time last year. However, contacts in Arkansas said they're closely watching weather over the next few weeks; if conditions remain wet, that will limit future plantings and may force producers to plant later than is ideal. The distribution of crops is expected to shift: The number of acres of corn planted decreased, especially in Arkansas and Mississippi, while plantings of cotton, rice, and soy increased. For corn and cotton, this marks a return to 2022 acreage. Several District contacts reported feeling price pressures due to higher travel costs of bringing in H2A visa labor. Contacts also noted difficulties accessing farming equipment due to high costs and delays, particularly for repairs.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2024/2024-04-bo

"April 17, 2024\nSummary of Economic Activity\nBusiness activity expanded at a modest pace in recent weeks, prices rose slightly, and employment was flat overall. Convention and tourism activity grew at a robust pace, but retail sales increased only modestly. Manufacturers reported slight revenue growth, while software and IT services firms had flat revenues recently despite strong year-over-year growth in sales. Residential home sales increased by moderate margins from a year earlier, the first such increase in over two years. Activity in the commercial real estate sector\u2014including construction\u2014picked up slightly, on balance. The sector's outlook also improved a bit, although the risk of financial distress for large office buildings remained elevated. In other sectors, contacts ranged from cautiously optimistic to bullish concerning the outlook, largely in line with the strength of their own recent results.\nLabor Markets\nEmployment was unchanged overall, but labor market conditions were mixed. One large retailer enacted substantial layoffs in a bid to boost profitability, but no other contacts (in any sector) reported layoffs. Restaurant employment increased modestly on the strength of sustained demand and increased supply. Tourism-related employment in greater Boston was flat as firms struggled to reach desired staffing levels. Employers on Cape Cod also faced challenges filling jobs, as rising housing costs priced more workers out of the Cape. Software and IT employment increased slightly, and manufacturing employment was flat or down slightly where there was attrition. Wages increased at a moderate pace on average. Contacts did not expect major changes in labor market conditions moving forward, although tourism contacts hoped that an upcoming career fair would help attract more workers for the busy summer season.\nPrices\nPrices increased only slightly overall. Retailers reported modest input price increases, and one remarked that recent shipping disruptions overseas had not yet affected its suppliers. Hotel room rates in greater Boston were stable recently, net of seasonal factors, and were up moderately from a year earlier, marking a notably slower pace of growth compared with 2023. Nightly room rates on Cape Cod were flat compared with last year. Software and IT services prices were stable. Manufacturers mostly held prices steady, but some reduced their output prices (either slightly or moderately) in response to declining input prices; those experiencing cost increases, by contrast, reported that they had raised prices moderately. For the most part, the outlook called for slow further price growth moving forward. However, one manufacturing contact, having held prices steady over an extended period, was considering a significant price increase to compensate for accumulated cost pressures.\nRetail and Tourism\nFirst District retail and tourism contacts reported a moderate upswing in sales in the first quarter of 2024 from late 2023, net of seasonal factors. An online retailer boosted its market share and experienced modest revenue growth despite sluggish industrywide performance. Airline passenger traffic through Boston increased at an above-average pace in recent months, with total passengers now exceeding pre-pandemic levels. Domestic travel remained below pre-pandemic levels because of the incomplete recovery of business travel, but growth in international travel more than compensated. Hotel occupancy in greater Boston increased at a strong pace, exceeding seasonal norms, fueled in part by robust convention activity and sporting events. On Cape Cod, retailers and hoteliers said revenues were on par with one year earlier, a modest improvement from the previous report. The outlook for tourism and convention activity in 2024 remained very bullish, and Cape Cod hotel bookings for the remainder of the year looked on track to match those from 2023. In contrast, retailers were only cautiously optimistic.\nManufacturing and Related Services\nManufacturing revenues were about flat on balance, with half of contacts reporting moderate gains in sales over the cycle and the other half experiencing moderate losses. Capital expenditures were mostly unchanged but on balance exceeded typical levels, as two firms were in the process of expanding or upgrading their plants. Contacts were uniformly optimistic for the remainder of 2024, projecting steady to moderately higher sales moving forward; in one case, however, that still meant that total sales in 2024 would fall short of their 2023 levels. The positive forecasts were based largely on firms' own recent demand trends, although one contact cited the prospects of productivity gains from AI and expected cuts in the federal funds rate as additional sources of optimism.\nIT and Software Services\nContacts in IT and software services said that demand and revenues were mostly stable in recent months. On a year-over-year basis, revenues increased by moderate to large margins for all firms. Those latter growth rates were about on par with those of the previous quarter and exceeded expectations in one case. Furthermore, the growth was attributed to factors that had boosted real demand, such as the transition to subscription-based business models. Capital and technology spending was unchanged, and no future changes were anticipated. Contacts expected demand to hold fairly steady at strong levels in the next quarter. One contact noted that the time required to close deals had increased of late, although the implications for their revenues were not yet clear.\nCommercial Real Estate\nCommercial real estate activity in the First District increased slightly on balance since February. Industrial leasing activity slowed a bit due to a lack of inventory, and industrial rents faced slight upward pressure. In the office market, leasing activity held mostly steady at a slow pace, but one Boston contact detected a modest increase in tenant demand; office rents were mostly stable but fell slightly for lower-quality spaces. Leasing activity strengthened modestly for retail properties, with deals concentrated in restaurant- and grocery-anchored centers. Construction activity picked up a bit, primarily in the industrial market but also for retail and hospitality projects. Contacts noted an uptick in refinancing activity for office properties with maturing loans, although borrowers often had to add equity. The investment sales market was nonetheless still \"frozen,\" as investors waited for interest rates to come down, and large banks remained on the side lines. The outlook improved modestly, as contacts expected leasing activity to either hold steady or increase by late 2024, including for small-to-medium sized office buildings. Contacts remained concerned that certain office properties faced elevated foreclosure risks.\nResidential Real Estate\nFor the first time in over two years, residential home sales increased on a year-over-year basis in all First District states that were contacted (Connecticut furnished no data). Closed single-family sales increased at a moderate pace on average (from February 2023 through February 2024), led by robust gains in Vermont, Maine, and Rhode Island. Condominium sales fared even better than single-family sales over the same period, with strong overall growth and very large increases in those same three states. Massachusetts posted only modest increases in home sales, although greater Boston had above-average results within the state. Contacts attributed the stronger sales to a combination of recent declines in mortgage rates and increases in property listings but emphasized that inventories remain well below desired levels. Home prices increased at a strong pace from one year earlier, similar to what was reported last time. Contacts were optimistic for a strong spring buying season, provided the tight inventory situation showed further improvement.\nFor more information about District economic conditions visit: https://www.bostonfed.org/in-the-region.aspx .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2024/2024-04-cl

"April 17, 2024\nSummary of Economic Activity\nOn balance, Fourth District business activity increased modestly over the recent period, and contacts expected similar conditions to persist in the months ahead. Consumer spending firmed, though some retailers reported that discretionary spending remained soft. Demand for manufactured goods was flat, and manufacturers noted softer orders as customers rebalanced inventories. Demand for new homes strengthened, according to homebuilders; meanwhile, existing home sales were constrained by a shortage of inventory. Employment levels increased at a modest rate in recent weeks, the first notable increase in the last six months, and overall wage growth edged up to a moderate pace. Overall, nonlabor cost pressures continued to be moderate, while selling prices increased slightly. Contact reports suggested that both appeared to be stabilizing compared to prior years.\nLabor Markets\nOverall, employment increased at a modest pace in recent weeks after a period of stability. Some construction and manufacturing contacts reported hiring for new projects or planned expansions in 2024, with one manufacturing contact saying, \"Our plan for 2024 is to increase another 30% and we have added two more production lines out of ten to accomplish this.\" However, other manufacturers held staffing levels steady and increased production levels through automation. Contacts across industries continued to note an increase in worker availability, and one agricultural contact said this increase allowed them to hire permanent staff and reduce their dependence on contract workers. Contacts generally anticipated that modest growth in employment will continue in the coming months because they expect further increases in product demand and improved worker availability.\nWage pressures edged up in recent weeks to a moderate level. Many firms continued to report that wage pressures were normalizing, with many retail, construction, and manufacturing contacts saying they were offering only the standard annual cost-of-living adjustment. Moreover, some contacts across industries said they were reducing wages for current job openings, a situation which several attributed to increased worker availability. One restaurateur said, \"we've seen wages stabilize and haven't had to escalate wages to hire good people.\" Still, many financial services and healthcare contacts noted there were targeted wage increases to attract and retain staff who were high performing or senior level or had a specialized skillset.\nPrices\nOn balance, nonlabor input cost pressures continued to increase moderately. However, many contacts across sectors said that some of their costs continued to stabilize and in some cases decreased. Some manufacturers noted that suppliers were adjusting prices less frequently, with one stating, \"Our raw material costs have roughly held flat during first quarter of 2024.\" One contact reported that efficiencies gained by automating processes lowered their per unit production costs. Still, firms across industries reported cost increases for utilities, professional services, health insurance, and property and casualty insurance.\nMeanwhile, selling prices increased slightly, at a pace similar to that of the prior two reporting periods. Many retailers and restaurateurs continued to increase prices only selectively, and the majority held prices steady, with some deferring increases until later in the year. A few freight haulers continued to lower their rates, and one contact said that they are at \"a point where we can barely find any profit in moving freight.\" By contrast, some manufacturers had increased selling prices during annual contract adjustments to cover higher materials costs or recapture some price concessions that were made in 2023.\nConsumer Spending\nConsumer spending increased modestly after decreasing modestly during the prior period. One apparel retailer said that sales had increased by more than the expected seasonal trend, and several other retailers and restaurateurs reported that sales had increased amid warmer weather. Still, some retailers reported that sales of discretionary items remained stagnant, and one large general merchandiser indicated that household budgets were still tight because of persistently high food prices. Reports from auto dealers were mixed. Most dealers continued to report low sales because of high interest rates and vehicle prices. By contrast, a small share of dealers noted that better supply of new vehicles and more manufacturer incentives helped boost sales. On balance, firms expected consumer spending to increase moderately in the near term.\nManufacturing\nOn balance, demand for manufactured goods remained flat in recent weeks. Some manufacturers noted softer orders as their customers rebalanced inventories or because of general economic and political uncertainty. Firms selling to electric vehicle (EV) producers noted lower overall demand as automakers recalibrated for slower than anticipated EV sales. By contrast, firms selling to aerospace companies and for data center construction reported steady demand and orders. Looking forward, manufacturers generally expected activity to increase moderately in the coming months.\nReal Estate and Construction\nDemand for new homes strengthened again in recent weeks as the spring selling season heated up, according to homebuilders. Existing home sales were again constrained by a dearth of inventory. Contacts expect activity to increase further in the coming months, though sales may be muted by limited supply and potential homebuyers' waiting for further mortgage interest rate declines.\nReports from builders indicated that nonresidential construction increased modestly in recent weeks. One contact suggested that industrial and distribution center development was particularly strong, while another suggested that demand had increased because \"[o]rganizations are beginning to truly address expansion plans.\" In commercial real estate, one realtor noted that lower occupancy rates in existing units caused property managers to offer incentives to tenants such as renewing leases without increasing rates. On balance, contacts expected nonresidential construction to increase in the months ahead, albeit at a somewhat slower pace.\nFinancial Services\nOn balance, bankers reported that loan demand increased moderately. One banker attributed an increase in consumer lending to lower interest rates. Another banker said that improved commercial demand was associated with increased optimism surrounding economic conditions, adding that \"companies are ready to move forward with [capital expenditure] needs, expansion and growth opportunities and investments that may have been put on hold based on the uncertainty and rate environment we saw in 2023.\" Bankers generally expected loan demand to increase further amid anticipated rate reductions and less economic uncertainty. Core deposits were flat, and a couple of bankers expected deposit outflows to decrease. Bankers reported that consumer delinquency rates increased slightly but remained close to historically low levels.\nNonfinancial Services\nOverall, professional and business services contacts reported that demand continued to increase as clients moved forward with projects and as economic uncertainty decreased. On balance, contacts expected that demand would continue to increase with improved supply chains, reshoring activity, and stable interest rates. In addition, a couple of consultants mentioned that they planned to launch new service offerings. Freight and transportation activity increased modestly in recent weeks. Looking ahead, freight and transportation contacts anticipated that demand would continue to increase.\nCommunity Conditions\nIn a semiannual survey, two-thirds of District nonprofit service providers reported that low- and moderate-income households experienced a decline in financial well-being in the past six months as higher prices continued to strain budgets. Moreover, nearly three-quarters said that the availability of affordable housing decreased amid rising rents, the loss of units to blight, and insufficient unit supply. Some contacts noted that housing market dynamics were adversely affecting seniors. One mentioned that a senior housing community had a waiting list of 1,500 people. Another suggested that reassessed property values increased property taxes, straining seniors' budgets.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/2024/2024-04-ch

"April 17, 2024\nSummary of Economic Activity\nEconomic activity in the Seventh District increased slightly overall in late February and March, and contacts generally expected a similar rate of increase over the next year. Employment increased modestly; business and consumer spending rose slightly; nonbusiness contacts saw no change in activity; and manufacturing and construction and real estate activity were flat. Prices and wages rose moderately, while financial conditions were stable. Prospects for 2024 farm income were unchanged, with expectations continuing to be for income to fall below 2023 levels.\nLabor Markets\nEmployment increased modestly over the reporting period and contacts expected a similar rate of increase over the next 12 months. Contacts noted a small rise in hours per worker on balance, with cuts in manufacturing offset by higher workweeks in other sectors. Contacts across sectors indicated labor market conditions continued to cool. Several noted higher numbers of job applications per posting and improved applicant quality. Wages and the cost of benefits both increased moderately. Several contacts noted that wage pressures had eased some.\nPrices\nPrices rose moderately overall in late February and March and contacts expected a similar rate of increase over the next 12 months. Producer prices moved up moderately. Nonlabor input costs continued to rise, with contacts noting higher prices for raw materials and energy. Shipping costs were up on net: While ground freight rates moved down, one contact said ocean freight charges were up some after the collapse of the Francis Scott Key Bridge in Baltimore. Several manufacturers indicated that raising prices had become more difficult in recent months and that their margins had shrunk. Consumer prices were up moderately overall.\nConsumer Spending\nConsumer spending increased slightly over the reporting period. Nonauto retail spending was up a bit, with contacts noting greater sales of laptops and big screen TVs as well as a rise in window and door installations. One contact cautioned, however, that the increase in sales in March could be related to an early Easter rather than growth in underlying demand. Spending on discretionary items was down, while spending at discount stores and membership clubs was up. Leisure and hospitality activity dipped, most notably at hotels, tourist attractions, and airlines. Vehicle sales rose in recent weeks, with larger growth in new cars and light trucks than in the used vehicle market. Consumers gravitated further toward more affordable models, particularly compact and subcompact crossover and sport utility vehicles.\nBusiness Spending\nBusiness spending increased slightly in late February and March. Capital expenditures ticked up with contacts noting purchases of software. One contact said that his firm had substantially cut costs by switching from an external provider of marketing materials to generating materials using AI with no impact on sales. Demand for truck transportation services decreased slightly, contributing to a decline in ground freight rates. Inventories for consumer goods were somewhat elevated. Auto dealers reported higher-than-desired inventories of new vehicles, but lower-than-desired inventories of used vehicles. Manufacturing stocks were slightly above comfortable levels. There were few reports of input shortages, though some contacts noted shortages of electrical components, and a heavy machinery contact said some inputs were in short supply because of reduced shipping volumes through the Suez Canal.\nConstruction and Real Estate\nConstruction and real estate activity was little changed on balance over the reporting period. Residential construction activity was flat. Residential real estate activity increased slightly overall, with growth concentrated in the starter and luxury segments. In Iowa, multiple contacts indicated that the pace of new home sales was notably slower than last year. Home inventories remained low, and prices and rents were up slightly. Realtors continued to hear from prospective buyers that affordability is their top concern. Nonresidential construction activity increased slightly, as some projects were still moving ahead despite high building and financing costs, notably for healthcare facilities and retail renovations. One contact said that quoting for potential new projects was at a healthy level. Commercial real estate activity was unchanged, as were prices and rents. Activity in the office segment was very limited, and contacts noted buyers and sellers were struggling to agree on valuations. In other segments, contacts said asking prices had come down by even more than offer prices, leading to more deals going through. Contacts noted that for the financing of deals to work, buyers were often having to put down large amounts of equity.\nManufacturing\nManufacturing demand was flat on balance in late February and March. Both auto and heavy truck sales were unchanged, and heavy truck contacts expected little or no growth over the next 12 months. Machinery sales were down modestly, with contacts highlighting slower demand for agricultural equipment. Demand for steel was flat on balance. Activity in fabricated metals was also steady, with higher demand from defense offset by lower demand from aerospace.\nBanking and Finance\nOverall, financial conditions were unchanged in late February and March. Bond market values increased slightly, equity markets rose modestly, and volatility edged down. Business loan demand declined modestly. One contact noted that small trucking companies were struggling because of a slowdown in demand and high debt loads following recent fleet expansions. Business loan rates were slightly higher, terms tightened some, and loan quality was unchanged. Consumer loan demand decreased on balance, with one contact noting a slowdown in auto lending. However, there was also a report of higher credit card usage. Consumer rates rose slightly, terms tightened a bit, and quality edged down.\nAgriculture\nProspects for 2024 farm income were little changed overall for crop and livestock producers with contacts continuing to expect incomes in 2024 to fall below 2023 levels. Field work in preparation for planting was well ahead of the usual pace given warmer-than-usual temperatures. Precipitation across the District improved water levels, though some areas remained in drought. Corn and soybean prices increased slightly amid expectations that farmers would plant fewer of these crops than earlier anticipated. Wheat prices were generally lower. Egg prices fell, most dairy prices were down, and hog prices were higher. Cattle prices rose despite a decline toward the end of the period after news of an avian flu outbreak in cattle raised concerns that beef demand would weaken.\nCommunity Conditions\nCommunity, nonprofit, and small business contacts saw little change in economic activity over the reporting period. State government officials reported a slight decrease in sales tax revenues compared with a year ago. Small business intermediaries, including Community Development Finance Institutions, noted increased loan demand and said clients continued to mention that challenges in finding workers were holding back growth. Social service organizations, philanthropies, and municipal leaders said that the end of COVID-era federal government financial support would soon result in budget gaps for state and local governments. For low-income consumers, elevated price levels, particularly housing costs, remained a challenge for household budgets. Efforts to increase the supply of affordable housing continued to run up against high costs for materials and labor.\nFor more information about District economic conditions visit: https://chicagofed.org/cfsec .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/2024/2024-04-da

"April 17, 2024\nSummary of Economic Activity\nThe Eleventh District economy expanded modestly. While activity in services and housing grew, manufacturing output, retail sales, and loan demand declined slightly. Employment growth slowed as wages, input costs, and selling prices grew at a moderate pace. Demand for nonprofit services remained elevated. Overall, Texas firms noted an uptick in uncertainty, particularly among manufacturing firms. Weakening demand and domestic political uncertainty were top outlook concerns.\nLabor Markets\nEmployment growth slowed over the past six weeks Labor availability improved and contacts noted higher retention rates. A few contacts continued to cite difficulty hiring, particularly for positions such as truck drivers and engineers. Staffing firms mentioned that despite a slow-down in hiring, there is an increased preference for permanent employees over temporary or contract workers.\nWage growth was moderate over the past six weeks. Staffing firms noted continued declines in wage pressure, while a technology firm stated that wage increases were now in line with historical averages. A manufacturer mentioned not having to increase wages at all due to plentiful job applicants and higher retention. A Dallas Fed survey of about 350 Texas business executives in March showed that wage growth was 4.9 percent over the past 12 months, on average, and is expected to slow to 3.6 percent over the next 12 months.\nPrices\nPrices rose moderately over the past six weeks. Growth in prices for manufactured goods resumed and raw materials price growth ticked up. Meanwhile, price growth in the service sector held steady at a moderate pace. Auto dealers reported that while increased car inventories placed downward pressure on vehicle prices, they increased inventory costs. Airlines noted input prices rose due to elevated labor costs, fuel prices, and maintenance. Retail motor fuel prices were slightly higher as refineries on the Gulf Coast were coming online again after both unplanned and annual maintenance outages. Manufacturers expect selling price growth to pick up over the next 12 months but remain moderate, while service sector executives expect price growth to moderate further.\nManufacturing\nOverall manufacturing activity declined slightly over the past six weeks. The decline was overwhelmingly due to weakness in durables good production, particularly metals, machinery, and computer and electronics manufacturing. Nondurable goods production increased moderately, driven by food and chemical manufacturing. Chemical plant utilization ticked up, and contacts noted rising new orders, better pricing and margins, and a return of capacity after unplanned winter outages and early spring maintenance. Weakening demand, domestic political uncertainty, and elevated input costs were the top three outlook concerns for the manufacturing sector.\nRetail Sales\nRetail sales declined modestly over the past six weeks. Auto dealers noted higher sales volume but declining margins and increasing inventory. Some contacts including a health store retailer and a nondurable goods wholesaler reported consumers pulling-back in purchases because of higher prices. Meanwhile, another nondurable wholesaler commented that consumers are returning, and sales picked up because consumers have baked-in higher prices into their budgets. Retail outlooks remained pessimistic, weighed down by weakening demand and elevated input costs.\nNonfinancial Services\nService sector activity continued to rise modestly in the reporting period. Revenue growth was led by professional and business services and leisure and hospitality. Airline travel in the District remained strong with continued robust demand for leisure travel and growing demand for business travel. Transportation and warehousing activity declined overall; however, activity at Gulf Coast ports was up, particularly driven by resin exports. Health care reported weakening activity while staffing firms noted an unexpected slowdown in demand, but expect a pick-up in the second quarter, particularly for white-collar jobs. Weakening demand, domestic political uncertainty, and higher labor costs are the top three outlook concerns for the service sector.\nConstruction and Real Estate\nHome sales rose during the reporting period. Some contacts noted that sales so far this year were ahead of plan. Builders' margins strengthened and backlogs increased. Outlooks were positive, though affordability remained a key concern.\nCommercial real estate market conditions were little changed from the previous reporting period. Apartment leasing was moderate, but there continued to be downward pressure on occupancy and rents, and concessions were becoming more widespread. In the office market, leasing activity stayed sluggish, and vacancy was high. Industrial demand was solid, though vacancy continued to rise due to an elevated level of supply. Outlooks were mixed, with some commercial market segments expected to remain challenging either due to weak demand or the sizeable amount of new construction slated for delivery in the near term.\nFinancial Services\nLoan volumes declined after having largely stabilized over the past three months. Credit standards continued to tighten, and loan pricing continued to rise. While the pace of credit tightening picked-up for commercial and industrial loans and commercial mortgages, it slowed for residential mortgages and consumer loans. Overall loan nonperformance rose slightly, with commercial real estate experiencing a significant increase in past-due loans. Bankers' outlooks remained mixed: they expect an increase in loan demand six months from now but a deterioration in loan performance and overall business activity.\nEnergy\nOilfield activity was flat over the reporting period. Contacts expect oil prices to orbit $80 per barrel for the remainder of the year, well above breakeven levels, and oil production growth to slow. Meanwhile, natural gas pricing is expected to remain \"below cost\" barring any severe weather-driven demand. As a result, contacts noted reduced activity and decreased capital investment in natural gas.\nAgriculture\nDrought conditions remained prevalent in West Texas and southern New Mexico, while the rest of the District received ample rainfall over the reporting period. Texas experienced the largest wildfire in state history, burning over a million acres in the Texas Panhandle in late February and early March. Several thousand cattle were lost, and the fire destroyed infrastructure and pastures used for grazing. An illness recently identified as avian influenza has been afflicting chickens and dairy cows in the Texas Panhandle, leading to lower milk production. The extent of the impact to dairy product supply, if any, is unknown at this point, but contacts noted that there is not a food safety issue. More cotton acres are expected this year as prices are relatively strong compared with corn and sorghum prices, which are at three-year lows. Contacts were optimistic about crop production prospects this year. On the livestock side, cattle prices pushed to record highs and beef demand has held up well.\nCommunity Perspectives\nNonprofits reported sustained high demand for services as more individuals discover the resources they offer. While demand for food pantry services was stable at an elevated level, there was an increased demand for assistance with health insurance and basic clothing. Cost-of-living was an ongoing concern, and more people were looking for second jobs to make ends meet. The tax season provided low-income families with a temporary income boost with many planning to spend tax refunds on used cars, household appliances, and cell phones.\nFor more information about District economic conditions visit: https://www.dallasfed.org/research/texas .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"March 6, 2024\nSummary of Economic Activity\nEconomic activity in the Seventh District increased modestly overall in January and early February, and contacts generally expected a small increase in demand over the next year. Employment increased modestly; nonbusiness contacts saw a modest increase in activity; business spending increased slightly; manufacturing activity was flat; and construction and real estate and consumer spending declined slightly. Prices and wages rose moderately, while financial conditions tightened modestly. Prospects for 2024 farm income deteriorated some.\nLabor Markets\nEmployment rose modestly over the reporting period, and contacts expected a similar rate of increase over the next 12 months. Many contacts noted cooling labor market conditions. There were reports of increased job applications per posting, improved applicant quality, job posting removals, and layoffs. A contact that hires spring and summer seasonal workers said hiring for the coming season was easier than last year. Wages rose moderately, with many contacts citing this as the outcome of their annual wage reviews. Benefits costs increased as new insurance rates took effect in the new year. Overall, contacts reported that insurance rates increased at about the same pace as a year ago.\nPrices\nPrices rose moderately overall in January and early February, and contacts expect growth to continue at that pace over the next 12 months. Producer prices moved up moderately. Nonlabor input costs continued to rise, with contacts highlighting increases in raw materials and shipping costs. Several contacts noted that shipping disruptions in the Red Sea had contributed to higher transportation costs. Consumer prices continued to rise moderately, though retail contacts noted that price growth was noticeably slower than six months ago.\nConsumer Spending\nConsumer spending decreased slightly on balance over the reporting period. Contacts noted that sales fell due to unseasonably cold weather in January and that a rebound in early February was not enough to offset the earlier decline. Nonauto sales decreased slightly. Contacts remained cautiously optimistic, though, with several commenting that the underlying positive trend in spending hadn't changed. Some also expected a slight pickup in the number of retail store openings this year compared with 2023. Light vehicle sales were little changed overall, with the mix of sales shifting toward more affordable models. Leisure and hospitality spending was softer. While spending on restaurants and cruises was higher, it was not enough to make up for weaker spending on air travel and hotels.\nBusiness Spending\nBusiness spending increased slightly in January and early February. Capital expenditures were up a bit, with contacts noting renovations or expansions of existing structures. Several contacts said they were holding off on investments because of high interest rates, slower sales growth, or both. Demand for truck transportation services decreased slightly. Inventories were comfortable for most retailers, including auto dealers, where inventories had been below desired levels for an extended period of time. Manufacturing inventories were slightly elevated, and several contacts reported that input shortages were limited or had disappeared entirely.\nConstruction and Real Estate\nConstruction and real estate activity decreased slightly over the reporting period. Residential real estate activity was down moderately, though prices were steady overall. High interest rates and a low supply of existing homes for sale continued to hold back activity. Residential construction was unchanged. A majority of respondents to a homebuilder's survey indicated that January demand met expectations. Cancellation rates for new home construction trended lower. Home renovation contractors reported some decline in backlogs, though overall they remained at a high level. Commercial real estate activity decreased slightly, as demand for large office and multifamily properties declined further. Contacts continued to point to high interest rates as the most important reason holding back potential deals. Nonresidential construction increased slightly. An Indiana contact indicated that the pipeline was still strong for data centers, industrial, and pharmaceutical projects. However, several contacts said it remained difficult to start new projects because of high building costs and tight credit conditions.\nManufacturing\nManufacturing demand was flat on balance in January and early February. Auto production increased slightly, while heavy truck demand decreased modestly. Machinery sales were up modestly overall, partly due to heightened demand from the aerospace sector. That said, a contact in heavy machinery noted a drop in orders, albeit from historically high levels. Demand for steel increased slightly, in part because of a rebound in auto production following the UAW strike. Steel orders for industrial buildings remained strong. Activity in fabricated metals declined slightly, with contacts reporting mixed results across sectors. Chemicals production declined slightly, with lower demand from the construction, mining, and agriculture sectors more than offsetting higher demand from pharmaceuticals.\nBanking and Finance\nFinancial conditions tightened modestly in January and early February. Bond market values were down slightly, while equity markets were up a bit. Volatility was little changed on balance. Business loan demand decreased slightly, with contacts highlighting declines in commercial real estate lending. Business loan rates were stable and terms tightened a little, while loan quality was flat. Consumer loan demand was unchanged overall, though several contacts reported declines in lending for boats and RVs. Consumer loan rates rose slightly, and terms tightened slightly. Consumer loan quality deteriorated some. One contact noted that delinquency rates for auto loans were above pre-pandemic levels, but repossessions were still low.\nAgriculture\nIncome prospects for 2024 continued to deteriorate for Seventh District crop producers, while the outlook for livestock producers improved. Corn prices edged down once again, as low demand and a large 2023 harvest boosted stocks. Soybean and wheat prices were also down some. Fertilizer costs for crop production were down from the fall and well below those of a year ago. Hog, cattle, egg, and dairy prices increased from the previous reporting period. Margins for dairy farmers remained tight as labor costs rose, though lower feed costs helped some.\nCommunity Conditions\nCommunity and nonprofit contacts saw a modest increase in economic activity over the reporting period. State government officials continued to see healthy growth in tax revenues and low demand for unemployment insurance. However, there were signs of a deterioration in prospects for small businesses. Small business development organizations noted that requests for support had shifted away from start-ups and toward existing businesses as some businesses launched during the pandemic struggled with sustainability. Community Development Financial Institutions reported increased demand for working capital loans from businesses finding it difficult to obtain financing from banks. Nonprofits supporting households noted clients were increasingly relying on credit cards and that the financial position some prospective homebuyers had worsened because of the recent resumption of student loan repayments. Social service organizations indicated that despite lower inflation, high price levels for many household items were still an important concern for low-income consumers.\nFor more information about District economic conditions visit: https://chicagofed.org/cfsec .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"March 6, 2024\nSummary of Economic Activity\nThe Sixth District economy grew modestly in recent weeks. Labor markets and wage pressures eased further amid less turnover and a rising pool of applicants. Nonlabor costs continued to moderate overall, but some costs, such as technology and insurance, rose. Low- and moderate-income consumers traded down to less expensive items, taking advantage of extended payment options. Auto sales were mixed. District tourism was strong. Home sales fell to below pre-pandemic levels. Commercial real estate conditions declined. Transportation activity was mixed. Manufacturing slowed somewhat. Overall loan demand weakened. Energy production fell as maintenance and inclement weather cut refining capacity.\nLabor Markets\nHiring was described as steady over the reporting period. Most contacts indicated that labor turnover had eased, and the pool of applicants had increased; however, many indicated that finding workers remained challenging. Several employers noted being more strategic in their hiring, focusing on candidate quality and work experience. Some firms partnered with local educational institutions to customize programs to upskill and prepare workers to fill roles. Firms concentrated on efficiencies and keeping costs in check by automating tasks, leveraging generative AI, and outsourcing professional services. Construction firms remained constrained by worker shortages and invested in labor-saving equipment and process improvements. Some manufacturing firms adjusted staffing down due to lower demand, and others planned to downsize both professional and hourly roles.\nMost firms indicated that overall wage pressure eased somewhat, and wage growth rates were close to or just slightly higher than pre-pandemic.\nPrices\nWhile the pace of most nonlabor input cost increases continued to slow, cost levels remained elevated. Technology, labor, and especially insurance cost increases were the most frequently cited inflationary concerns. Consumers pushed back or traded down from higher-priced items, limiting firms' pricing power and eroding margins. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth decreased in January to 2.7 percent, on average, from 2.9 percent in December; firms' year-ahead inflation expectations for unit cost growth decreased in January to 2.2 percent, on average, from 2.4 percent in December.\nCommunity Perspectives\nThe discontinuation of pandemic-era programs, such as enhanced SNAP and child tax credit programs, emergency rental assistance, and extended Medicaid coverage\u2014compounded by rising prices\u2014continued to weigh heavily on many households. Housing expenses remained an acute burden for both consumers and providers of affordable housing. Consumer-facing business contacts noted that low- and moderate-income consumers shifted spending to less expensive items and sought extended payment options. Social service organizations reported heightened demand for food and housing assistance; most reported sufficient funding to help meet the increased demand for services. Local government and nonprofit representatives reported strong demand for skilled labor, while citing insufficient training as an obstacle for local jobseekers looking for employment in higher-wage occupations.\nConsumer Spending and Tourism\nIn line with previous reports, retailers described consumers as price conscious. Contacts experiencing this trend see it as an ongoing normalization of consumer behaviors. Auto sector contacts reported some softening in demand in the commercial and vehicle rental markets, while new car sales for personal use remain healthy. Overall, contacts are expecting flat to positive growth for 2024.\nDistrict travel and tourism remained resilient on balance. South Florida cruise lines continued to report strong demand. Festivals, sporting events, business conferences, and conventions were well attended, particularly in New Orleans, where contacts reported a solid lineup of events for the second quarter. Looking ahead, contacts are optimistic for the remainder of the year.\nConstruction and Real Estate\nAs mortgage rates retreated from cyclical highs, home ownership affordability improved throughout the District. However, home sales in most major markets ended the year well below seasonal norms and remained significantly behind pre-pandemic levels. Potential buyers locked-in to historically low mortgage rates remained reluctant to move, and migration into the District moderated through 2023, resulting in diminished housing demand. Existing home inventory levels were also suppressed by the \"lock-in effect,\" resulting in flat to moderate price growth in many markets. Demand for newly constructed homes was boosted by the lack of existing homes, and builders saw improved traffic as mortgage rates declined. Contacts indicated higher lot costs as a significant impediment moving forward.\nCommercial real estate (CRE) market conditions slowed. Office markets led the decline amid falling rents, increasing concessions, and weakening occupancies. Most market segments are expected to remain challenging as sizeable amounts of new construction are delivered, especially in the multifamily and industrial segments. Insurance costs continued to rise at atypically elevated rates, especially in coastal markets. Like the nation, Sixth District markets will contend with rising CRE loan maturities in 2024.\nTransportation\nTransportation activity was mixed overall. Ports continued to see strong activity, though down from pandemic highs; trucking firms struggled with significantly reduced volumes; and railroads experienced some stabilization in certain freight markets, including chemicals and forest products, following a significant slowdown in 2023. Current demand for distribution space was characterized as below 2019 levels, with significant softening expected to continue through 2024. Air cargo freight volumes strengthened for the first time since 2022. Inland barge companies reported strong and stable demand. The outlook by transportation contacts is generally favorable even amid geopolitical uncertainty.\nManufacturing\nManufacturing activity slowed slightly in recent weeks but remained healthy overall. Some firms, particularly producers of consumer goods, reported declines in new orders and increased inventory levels. However, those producing goods for the tech industry or government projects saw strong demand. Manufacturers reported that supply chains were healthy in general, although a minority of firms saw some shipping delays of inputs. The Manufacturing Sector Report of the Atlanta Fed's Business Inflation Expectations Survey showed that for the majority of respondents, demand remained at or below \"normal\" levels.\nBanking and Finance\nLending at Sixth District financial institutions flattened since the previous report, given tighter underwriting standards and weaker demand for loans, including commercial real estate, commercial and industrial, and consumer loans. Multifamily is the only portfolio segment that experienced any notable uptick in growth. As noted in the previous report, the high interest rate environment has contributed to earnings concerns. Demand for large time deposits, those in excess of $100,000, was considerable and continued to outpace loan growth, driving margin compression. Reliance on borrowings experienced a recent uptick after a sustained decline over the past year. Additional earnings pressure has resulted from lower fee income in anticipation of credit deterioration.\nEnergy\nEnergy contacts reported that short-term headwinds from heavy refinery maintenance and weather-induced outages, which have cut refining capacity, resulted in crude inventory builds, and are expected to put upward pressure on pricing until refineries come back online. Contacts also noted declining domestic crude oil production in the wake of severe winter storms. More broadly though, ongoing optimism was expressed about growing cleaner energy investment stemming from substantial tax credits offered by the Inflation Reduction Act. Utility contacts reported strong electricity demand across segments over the reporting period.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"March 6, 2024\nSummary of Economic Activity\nOn balance, business activity in the Third District resumed a slight decline\u2014as with most of 2023\u2014following a holiday season uptick. Employment grew slightly overall, with moderate job growth in the broad economy offsetting a modest decline in manufacturing jobs. Wage and price inflation appeared to subside further\u2014to a still-modest pace for wages but to a slight pace for prices. Despite some shipping challenges, supply chain issues were no longer a concern. Labor supply was much improved but still a concern. Contacts continued to note lower consumer spending and rising payment problems among low-income households. Housing costs appear to be a key issue for all households, as higher interest rates have choked off the inventory of for-sale homes. Expectations for economic growth over the next six months remained positive but also remained below historical averages.\nLabor Markets\nEmployment continued to grow at a slight pace, based on our January and February surveys. Since December, nonmanufacturing firms have reported moderate increases in full-time jobs and slight increases in part-time jobs and in the average employee workweek. Manufacturing firms reported a modest decline in employment and little change in the average workweek.\nMany contacts continued to note an increase in job applicants, although often of poor quality. Staffing firms also noted rising order activity, which had been soft for much of last year. A community agency that trains young people in computer skills for entry-level jobs at wages above $17 an hour described the job market as robust.\nFirms reported that wages continued to grow modestly, yet the rate of growth subsided and was just above pre-pandemic levels. On a quarterly basis, firms' expectations of the one-year-ahead change in compensation cost per worker fell to a trimmed mean of 3.9 percent in the first quarter of 2024, from 4.1 percent in the fourth quarter (and from a peak of 5.8 percent in the third quarter of 2022). Expectations averaged 3.2 percent before the pandemic.\nPrices\nOn balance, firms reported that price increases subsided significantly\u2014still at a pace in the modest range, but now more typical of the lower end of the range observed before the pandemic.\nFirms reported that increases in prices received for their own goods and services over the past year fell significantly in the first quarter of 2024 compared with the fourth quarter of 2023. The trimmed mean for reported price changes, as indicated by responses to our quarterly survey questions, fell to 2.0 percent from 3.6 percent for all firms. Price increases fell to 1.3 percent among nonmanufacturers and to 2.9 percent for manufacturers.\nContacts\u2014large and small\u2014were nearly unanimous in claiming an end to supply chain shortages. However, one large manufacturer noted that shipping disruptions in the Red Sea and the Panama Canal would likely add to costs.\nLooking ahead one year, the increases that firms anticipated in the prices for their own goods fell further. The trimmed mean for all firms fell to 2.5 percent in the first quarter of 2024, from 2.7 percent in the fourth quarter of 2023. After reaching a peak of 5.9 percent in the fourth quarter of 2021, expectations are now only slightly above the 2.3 percent quarterly average for 2016 through 2019. The expected rate of growth fell to 1.7 percent for nonmanufacturers and rose to 3.5 percent for manufacturers.\nManufacturing\nOverall, manufacturing activity declined slightly during the period following a moderate decline in the prior period. The index for new orders fell modestly, but the shipments index rose slightly on net.\nExpectations among manufacturers for growth in the next six months waned somewhat in January but returned to a modest level in February\u2014still below historical averages. More than 40 percent of the firms expected increases in new orders and in shipments.\nConsumer Spending\nOn balance, retailers (nonauto) reported a slight decline in real sales after holding steady through the holiday period. These contacts tend to serve lower- and middle-income consumers. While they have noted further belt-tightening and coupon counting, they have not seen higher-income consumers trading down yet.\nAuto dealers reported slightly lower sales of new cars after adjusting somewhat for seasonal trends. Contacts noted that fully electric vehicles are selling slowly and piling up on dealer lots. Other models are selling well. Affordability remains a problem with high prices and high borrowing costs. A law firm's clients have reported increased repossessions as more customers struggle to keep up with payments.\nOverall, tourism continued to slow slightly as various segments normalize following the pandemic. Leisure travel continued to fall from high levels and was further hurt by poor skiing conditions. Business and group travel continued to slowly improve, especially in urban markets.\nNonfinancial Services\nOn balance, nonmanufacturing activity continued to grow slightly. The sales/revenues index continued to suggest a modest pace, while the index for new orders (slightly negative on net) edged closer to zero. A publishing firm noted a widespread decline in advertising dollars. A household moving company noted that weak home sales had driven firms out of business\u2014claiming that conditions \"are the worst they have ever been in my career, which dates back to 1968.\"\nCurrent sentiment of firms appeared to deteriorate again. The index of general activity for the region returned to negative territory, where it has been for 16 of the past 17 months. The index of general activity at the firm level fell to near zero. Nevertheless, expectations among nonmanufacturers for growth in the next six months improved slightly but remained well below historical averages.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew slightly during the period (not seasonally adjusted)\u2014slower than the moderate pace observed last period and the modest pace one year ago.\nDuring the period, District banks reported modest growth in home mortgages, auto loans, and commercial real estate lending. The volume of home equity lines and commercial and industrial loans were essentially flat. Credit card volumes fell significantly as consumers paid down balances that surged during the year-end holiday season. However, other consumer loans rose moderately.\nBanking contacts continued to note generally sound credit quality. Banks and business clients agreed that higher interest rates had lowered demand for loans, while tighter access to credit had lowered the potential supply. Contacts from accounting, banking, law firms, service firms, and community service agencies reported higher delinquencies, defaults, nonpayment by consumers, and use of credit to buy necessities.\nReal Estate and Construction\nBrokers reported that existing-home sales edged lower from levels that were already extremely low. The inventory of for-sale properties remained extremely low as it has since the pandemic began. However, brokers noted that higher interest rates have severely limited new listings over the past year and were responsible for the significantly lower level of closings. Stories have re-emerged of multiple offers, cash sales, and buyers paying well above the asking price.\nNew-home builders continued to report steady sales at relatively strong levels, in part because of the lack of existing for-sale homes. Most expect their pipeline of contracts to keep construction busy through the year.\nIn nonresidential markets, leasing activity and transaction volumes continued to decline slightly. Contacts noted some strength in retail and in warehousing but continued concern for the office market as leases expire and loans come due. One contact from a large law firm noted that its distressed real estate practice is \"back full throttle.\"\nCurrent construction activity appears to have slowed slightly, according to contractors and the firms that supply them. The pipeline for most commercial real estate continues to shrink, while projects hold steady for institutions and expand for preliminary land development and for public infrastructure.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/regional-economy .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

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"March 6, 2024\nSummary of Economic Activity\nEconomic activity increased at a slight pace amid modest employment growth and only minor price increases. Retail sales were about flat on balance, while restaurants had a slower-than-usual January, and hotels reported stable activity. Manufacturers and staffing firms alike reported modest revenue growth. Residential real estate showed signs of positive momentum, as pending home sales increased modestly of late and by significant margins relative to one year earlier. Commercial real estate activity was flat on average. On balance, the outlook was cautiously optimistic, with many contacts expecting activity to increase in the second half of 2024. The exception was the outlook for commercial real estate, which remained relatively weak\u2014especially for the office sector\u2014though it did not worsen any further.\nLabor Markets\nEmployment increased modestly amid mixed hiring activity, and wage growth was moderate on balance. Restaurant employment increased moderately in response to an easier hiring environment and an increased willingness of existing workers to expand their hours. Retail headcounts were stable, except for the shedding of temporary seasonal hires. Manufacturing employment increased slightly overall, as one firm added staff at a modest pace, and others kept headcounts fixed. Wages increased at a moderate (but stable) pace for restaurant and retail workers. Manufacturing wages increased at a somewhat elevated pace, and one firm sought to offset wage pressures with efficiency gains. Wages in the health-care sector were about flat recently. Hiring frictions eased for most contacts in most sectors, but one manufacturer struggled to fill open positions. Staffing industry contacts saw ongoing declines in sign-on and retention bonuses, as well as a trend away from remote work arrangements\u2014all of which pointed to an increase in employer bargaining power. A workforce development contact said that transportation and childcare costs continued to present barriers to employment among candidates for entry-level positions. Looking ahead, hiring plans for the rest of 2024 called for only modest increases in employment, and wage increases were expected to be moderate.\nPrices\nPrices were up slightly on average according to First District contacts. Retailers held sticker prices steady. Restaurant prices were on average flat in early 2024, following a series of above-average menu price increases in 2023. Average daily room rates at Boston area hotels were up three percent on a year-over-year basis, a pace that was down considerably from the first half of 2023. Among manufacturers, more than half held output prices fixed, and others enacted moderate price increases. Most manufacturers reported no changes in their input prices, although some experienced modest declines in the prices of freight and gasoline, and one noted moderate input price increases. The outlook across sectors called for only small output price increases on average as most firms expected pricing pressures to be minimal. One firm nonetheless expected to face further moderate pricing pressure based on ongoing increases in labor costs.\nRetail and Tourism\nRetail and tourism sales were slightly weaker on balance in January, even net of seasonal factors, although results were mixed. A clothing retailer experienced a weaker-than-expected holiday season, posting a moderate decline in sales from one year earlier, with the slowdown attributed in part to the firm's earlier price increases. A discount retailer saw further modest improvements in sales led by increased purchases of basic home supplies. A Massachusetts restaurant industry contact reported an exceptionally weak January\u2014attributed to the growing popularity of \"Dry January\" and other New Year's resolutions\u2014but also noted there was a marked rebound in February to date. Hotel occupancy rates in Greater Boston were stable net of seasonal patterns and maintained a stable year-over-year growth pace of four percent. Restaurants were optimistic for the rest of 2024, and retailers were at least cautiously optimistic. However, contacts in both types of business emphasized that demand would continue to be marked by a high degree of price-consciousness.\nManufacturing and Related Services\nRevenues increased modestly on average among First District manufacturers contacted this round, although demand conditions varied. A consumer-goods maker experienced a stronger-than-expected increase in sales for the holiday season, while a furniture maker had a modest seasonal uptick that nonetheless left sales below their year-earlier levels. One high-technology manufacturer faced declining sales of COVID-related products but maintained steady and modest revenue growth from other sources, while another experienced slightly softer sales because of unexpected weakness in automotive-related demand. Capital expenditures were mixed, increasing slightly on balance. According to contacts, plans for 2024 called for either similar or somewhat higher spending relative to 2023. The outlook was mixed but optimistic on balance, and only one firm expected sales to decline in 2024. A few firms expected the second half of the year to bring stronger demand compared with the first half.\nStaffing Services\nFirst District staffing firms reported modest revenue growth on average. Nonetheless, revenues and profit margins fell slightly for a firm that specializes in staffing to the health-care industry. Temporary and temp-to-hire roles became more common at the expense of direct hires, reversing a pandemic-era trend. Contacts anticipated modest revenue growth on average for the coming quarter.\nCommercial Real Estate\nCommercial real estate activity in the First District was stable in recent weeks. Industrial leasing held steady at a decent pace, and vacancies remained low. In the office market, leasing activity posted a slight uptick in Providence and moved sideways at a slow pace elsewhere, while vacancy rates were unchanged. Retail leasing and vacancy rates were stable, but contacts noted that deals were taking longer to accomplish. Rental rates were mostly flat across property types, excepting a slight decline for Boston-area industrial spaces. No major new construction was reported aside from projects already underway. The outlook was mixed across sectors. Retail activity was expected to hold firm in the near term and possibly improve later in 2024, while industrial activity was seen as softening further. Office market prospects remained weak, as leasing demand was expected to stay tepid, and credit to stay tight, amid ongoing uncertainty over the fate of office loans maturing in 2024. Nonetheless, the office outlook did not worsen since the previous report.\nResidential Real Estate\nFirst District home sales appeared to turn a corner in recent data, as pending sales picked up modestly in January from late 2023 and increased by moderate margins from one year earlier on average. Even though closed sales (for both single-family homes and condos) declined again on a year-over-year basis to January in most New England states, New Hampshire reported moderate increases in closed single-family sales and above-average increases in closed condominium sales from a year earlier. Contacts cited modest declines in mortgage rates since last fall as a likely reason for buyers' increased willingness to enter the market. Although inventory levels remained low, listings increased by modest to significant margins around the First District in recent months, lending increased optimism for sales moving forward. Still, contacts emphasized that the number of units for sale stayed far short of what they considered a balanced market, and that a dearth of inventories had contributed to faster house price growth in 2023 from 2022.\nFor more information about District economic conditions visit: https://www.bostonfed.org/in-the-region.aspx .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nMarch 6, 2024\nSummary of Economic Activity\nAfter a period of sustained weakness, economic activity in the Second District flattened this reporting period. Labor market conditions remained solid as employment grew slightly and wage growth picked up to a moderate pace. The pace of selling price increases remained modest for most services but picked up for manufactured goods. Following a sharp contraction in January, manufacturing activity continued to edge slightly lower. Consumer spending declined modestly after a strong end to last year. Still, tourism activity in New York City was solid and continued to move towards pre-pandemic levels. Housing markets picked up as buyers who were waiting for a reprieve in mortgage rates started to return. Commercial real estate markets mostly held steady despite increasing financial strain among property owners. The finance sector remained sluggish, with ongoing declines in loan demand and rising delinquencies. The outlook improved somewhat.\nLabor Markets\nLabor market conditions remained solid in early 2024. Employment continued to grow slightly as gains in the personal services and leisure and hospitality sectors were partially offset by losses in the business services, information, retail, and finance sectors. Labor demand and labor supply continued to come into better balance, with a range of contacts reporting that while demand has remained solid, it has become less difficult to find qualified workers. Many businesses noted ongoing challenges getting workers to come into the office, though a New York City employment agency indicated that candidates were approaching the negotiating table with more reasonable expectations for in-person days. Though layoffs remained limited, announcements of forthcoming reductions in the region's banking and finance sectors reflected some signs of weakening on the horizon. Still, businesses in most sectors planned to increase headcounts in the coming months.\nWage growth picked up to a moderate pace. While most contacts reported steady wage growth in the new year, the recent increase in New York State's minimum wage has caused some businesses to raise pay more substantially for some employees. Wage growth is expected to moderate over the course of this year as conditions continue to normalize.\nPrices\nThe pace of input price increases picked up to a moderate pace. Contacts noted outsized increases in the prices of raw materials such as cocoa, copper, plastic, and textiles, amid ongoing sharp increases in insurance and freight costs. Pricing pressures have eased for steel, paper, and grains\u2014inputs that saw steep price increases in recent years. The pace of selling price increases remained modest for most services but picked up for manufactured goods. Construction firms continued to report modest selling price declines. Inflationary pressures are expected to moderate in the year ahead.\nConsumer Spending\nConsumer spending declined modestly for both goods and services in early 2024 after a strong end to last year. Retail contacts reported declining sales since the last report. While spending on travel remained strong, contacts noted some retraction in discretionary spending among less affluent customers. Auto dealers in upstate New York indicated sales of new cars slowed noticeably, partially due to unseasonably harsh winter weather, while used car sales remained steady. Inventory has continued to improve, and consumers have increasingly been able to find the vehicles that they want.\nManufacturing and Distribution\nFollowing a sharp contraction in January, manufacturing activity edged slightly lower. Though shipments increased slightly, new orders remained weak and unfilled orders continued to decline. Transportation and distribution firms also reported modestly declining activity. While supply availability continued to improve and delivery times shortened, some contacts reported ongoing difficulty obtaining raw materials. Manufacturers expect economic conditions to improve though optimism remained subdued.\nServices\nOn balance, service sector activity was little changed. While activity increased noticeably in the information sector and edged up in the education and health and leisure and hospitality sectors, activity in the business services sector declined. Service firms have become more optimistic about the outlook.\nA New York City tourism contact reported that activity has been fairly level since the holiday season, with hotel occupancy at typical winter levels. Attendance at Broadway shows has begun to pick up as showtimes have been adjusted to account for shifting preferences, and the spring season has a promising slate of new shows. Business travel has picked up, and trade shows are drawing larger crowds with a renewed interest in conducting business in person. The selection of New York City as a host city for the 2026 FIFA World Cup has boosted optimism in the region's tourism industry.\nReal Estate and Construction\nHousing markets strengthened as the spring selling season got underway a bit earlier than normal. While inventory generally remained exceptionally low, inventory in New York City has begun to normalize. Many buyers who were waiting for a reprieve in mortgage rates have started to return with the intention of refinancing later. Though mortgage rate lock-in continues to limit new listings, particularly in the New York City suburbs, listings have increased in upstate New York as people have continued to leave the area for warmer climates. Still, with such limited inventory, home prices have continued to press higher. Bidding wars were prevalent in the New York City suburbs but have been more limited in upstate New York.\nResidential rental markets firmed after softening in the fall. Though rents held steady during the latest reporting period, bidding wars on rentals have become more frequent, and new leasing activity was strong in New York City. In upstate New York, rents edged down but remained high.\nCommercial real estate markets mostly held steady. New York City office vacancy rates were little changed near historic highs, and rents were flat. A commercial real estate contact noted that proximity to public transportation was a significant attraction to office tenants within Manhattan. Though generally businesses are looking to reduce their floor plans, legal firms have been active in seeking new space. Still, financial strain among property owners in New York City continued to build, with upcoming loan maturities foreshadowing further increases in defaults in the coming year. Office markets outside New York City, where supply is more limited, remained more resilient. Industrial markets edged down as some tenants looked to shed space, though rents remained elevated. Multifamily markets held steady even as operating expenses increased sharply with growing labor and insurance costs.\nConstruction contacts reported that overall activity declined noticeably. Office construction remained subdued. Industrial construction was strong in Northern New Jersey but declined in upstate New York.\nBanking and Finance\nActivity in the region's finance sector remained sluggish. Small- to medium-sized banks in the region reported ongoing declines in loan demand and weaker refinancing activity. Banking contacts also indicated that credit standards tightened, particularly for business loans and commercial mortgages. While deposit rates held steady, loan spreads narrowed, and delinquencies continued to rise.\nCommunity Perspectives\nCommunity leaders expressed concern about crime and public safety. Although violent crime rates have continued to decline over the past year, a rise in hate crimes and ongoing high rates of retail theft have reduced the sense of security in public spaces, such as on public transit and in stores. Retail theft has taken a particular toll on small business owners, who faced increased costs due to loss prevention measures. Legislators have worked to respond to this problem, with proposals including a tax rebate for shop owners to ease the costs of additional security and loss prevention measures.\nFor more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"March 6, 2024\nSummary of Economic Activity\nThe Eleventh District economy expanded modestly, with activity in most sectors holding steady or experiencing slight to modest growth. Employment rose modestly, and wages grew at an average pace. Input costs grew moderately. Selling prices rose at an average rate in the service sector but were flat in manufacturing. Demand for nonprofit services remained solid. Overall, Texas firms were more bullish on demand expectations than last quarter, with more than half expecting demand to increase over the next six months, up from 38 percent in November 2023. Overall outlooks were less pessimistic, although geopolitical instability and heightened domestic policy uncertainty were cited as key headwinds.\nLabor Markets\nEmployment expanded modestly over the past six weeks. Labor availability improved, though contacts continued to cite difficulty in filling certain positions, particularly truck drivers, mechanics, engineers, health care professionals, and machinists. One contact said they were holding on to some workers with suboptimal performance due to a tight labor market.\nWage growth was moderate across most sectors. Staffing firms cited some reprieve in wage pressures. One food manufacturer noted paying above-average wages and offering more flex time to retain staff, while a professional and business services firm said they have been able to retain employees without giving raises by offering them the ability to work remotely.\nPrices\nInput costs rose moderately. Selling prices rose at an average pace in the service sector but prices were flat for manufactured goods. Airfares rose in response to higher costs, and unplanned refinery outages in the Midwest and on the Gulf Coast placed modest upward pressure on fuel prices. Home prices were flat to up. Auto dealers reported lower prices for vehicles, and many energy contacts expect the level of oilfield services prices to ease slightly this year.\nManufacturing\nTexas manufacturing activity stabilized in February after contracting sharply in January. New orders rose after 20 months of decline. Weakness was concentrated in durables, particularly metals manufacturing in part due to competition from imports. Demand for and output of nondurables rose, led by growth in food manufacturing. New orders for basic chemicals and plastics ticked up slightly in January, while petrochemical manufacturers noted sluggish industrial demand, stemming from weakness in demand for construction-related products and aluminum. Utilization rates dipped as refineries along the Gulf Coast experienced unexpected outages during the reporting period. Overall, manufacturing outlooks remained negative, though pessimism waned.\nRetail Sales\nRetail sales somewhat stabilized in February after having weakened notably in January. Durable goods wholesalers and construction-related retailers saw a pickup in demand, while nonstore retailers and auto dealers noted declining sales and higher inventories. Retail outlooks remained pessimistic, though uncertainty in outlooks subsided somewhat.\nNonfinancial Services\nService sector activity rose modestly in February following slight declines in January. Revenue growth was led by transportation and warehousing and health care. Airline travel remained robust, with a continuation of strong leisure demand and a slow return of business travel. There were reports of Panama Canal capacity constraints impacting container volumes at Gulf Coast ports. Professional and business services activity was relatively flat, with weakness ascribed in part to slowing activity in the real estate sector. Staffing firms reported slower-than-expected demand; however, demand for workers in health care, defense and legal services remained solid. Leisure and hospitality exhibited weakness, with one contact saying that their corporate event business was down due to the prevalence of hybrid work. Overall, outlooks in the service sector improved; nonetheless, concerns about geopolitical risks and the upcoming elections remained widespread.\nConstruction and Real Estate\nHome sales rose during the reporting period, and contacts noted that the spring selling season was generally off to a good start. Cancellation rates were down, buyer incentives were less prevalent, and builders said they were raising prices slightly in some markets. Outlooks were positive, although contacts cited economic and political uncertainty, diminished affordability, and tight lending for loans as headwinds.\nActivity in commercial real estate held steady during the reporting period. Apartment leasing was solid, but rents were flat to down as new supply continued to outpace demand. Office leasing remained weak; vacancy rates were elevated, and concessions remained widespread. A few contacts noted that tenants were screening the landlord's credit before leasing up space. Industrial demand was solid and in line with pre-pandemic averages. Outlooks were mixed, with economic uncertainty, high capital costs, and tight credit standards cited as deterrents to launching new projects or attracting investors.\nFinancial Services\nLoan volumes remained stable, with near equal shares of bankers reporting an increase over the past six weeks as a decrease. After six months of declines, residential real estate loan volumes stabilized in the latest period. The pace of credit tightening continued to slow, particularly for commercial real estate and commercial and industrial loans. Loan demand continued to decline. Loan nonperformance and loan pricing rose but at a more moderate pace. Looking ahead, bankers' outlooks are mixed; they expect stronger loan demand six months from now and more tempered declines in loan performance but further deterioration in overall business activity.\nEnergy\nOilfield activity held steady during the reporting period. Oil and gas production ticked up, but only modest increases in production were expected over the next few quarters as firms seek opportunities to consolidate. Overall, contacts expect U.S. oil production growth to slow notably this year.\nAgriculture\nDrought conditions receded further in Texas but remained prevalent in southern New Mexico. Recent rainfall improved pasture conditions, refilled ponds, and boosted crop prospects. Tighter supplies of cattle continued to push up prices, while crop prices moved down over the past six weeks amid increased production expectations. Farmers cited high input costs and weak crop prices as a concern and noted that above-average yields will be needed this year to break even. An increase in cotton acreage could be seen as farmers may favor cotton over grain crops due to a relatively more favorable price.\nCommunity Perspectives\nNonprofits reported continued elevated demand for services, as lower-income households faced increased difficulty in making ends meet. There were also reports of an uptick in white-collar professionals seeking financial assistance. Housing affordability remained a widespread concern, and contacts said in some instances multiple generations were living together in order to pay for housing costs. Contacts said that along the Texas-Mexico border, there was a need for migrant housing beyond the temporary assistance provided by FEMA. Mental health was cited as a growing need among youth.\nFor more information about District economic conditions visit: https://www.dallasfed.org/research/texas .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nMarch 6, 2024\nSummary of Economic Activity\nEconomic activity across the Eighth District has increased slightly since our previous report. Contacts reported that consumer demand slowed beyond seasonal norms and cited consumer price sensitivity and lower levels of disposable income as primary reasons why. While labor markets remain tight overall, an increasing number of firms reported being fully staffed or even overstaffed relative to consumer demand. Price growth has slowed in recent months. Residential real estate activity remained slow relative to seasonal averages. Contacts across a range of industries reported a mixed outlook moving forward, although the outlook has considerably improved since mid-December.\nLabor Markets\nEmployment has remained unchanged since our previous report. The labor market continues to be tight, but reports of adequate supply relative to demand have increased. A retail contact in St. Louis reported some difficulty in finding applicants for open positions, while a banking contact in Memphis had to reduce staff due to overhiring. In Louisville, local business contacts have reported an easing of demand for labor in the manufacturing, retail, and health-care sectors, while noting there are still more openings than workers available.\nContacts reported that growth in hourly compensation in 2023 was about 4.5 percent, which was faster than they anticipated one year ago (3.5 percent); however, they expect growth to moderate to an average of about 3 percent in 2024. An insurance contact in Bowling Green reported wages have risen, which has made it tougher to match qualified candidates to new salaries. A restaurant contact in Little Rock reported that rising costs in wages and labor benefits have slowed growth expectations.\nPrices\nPrices have increased slightly since our previous report. Survey respondents across the District reported that prices increased by an average 2.5 percent during 2023 and expect continued moderation in price increases in 2024. On net, a majority of contacts reported that their ability to increase prices charged to consumers had deteriorated. A manufacturer reported facing increased costs and pushback on price increases. A theater contact similarly reported increasing costs and difficulty in determining if and how to pass those increases on to patrons. A contact in spirits and beverages reported that the firm is still able to pass price changes on to consumers. A car dealer reported that prices were being cut to offset higher interest rates for consumers.\nConsumer Spending\nDistrict general retail, restaurant, and hospitality contacts reported mixed activity, while automotive contacts reported slower activity. January real sales tax collections increased in Arkansas, Western Tennessee, Missouri, and Kentucky relative to December. Missouri saw particularly strong increases in real sales tax collections. Downtown Louisville retail contacts have seen decreases in sales due to continued sluggish foot traffic. An auto dealer in Louisville stated that they've had to scale down their attempt to push electric vehicles onto the market due to low consumer demand. Restaurant contacts in St. Louis and Louisville reported consumer demand weakening beyond expectations, which they attributed to continued price increases. A Northern Mississippi hospitality contact reported that their year-over-year revenue growth fell from 13 percent in the first half of 2023 to 3 percent in the second half, and January saw continued slower growth.\nManufacturing\nManufacturing activity has decreased slightly since our previous report. Firms in Missouri reported a slight increase in inventories and delivery lead times and a moderate decrease in employment. Firms in Arkansas reported moderate decreases in inventories, sales, and employment. A third-party logistics provider across several District states reported full staffing at all seven of its distribution and manufacturing centers for the first time in months. However, other contacts continued to report that finding quality and committed workers remained an ongoing issue. On average, firms reported they expect slight decreases in employment and inventory in the coming quarter.\nNonfinancial Services\nActivity in the nonfinancial services sector has been mixed and has varied across regions and industries. Within transportation, a Little Rock contact reported extremely strong demand for travel, and a St. Louis contact spoke of a slightly improved outlook despite supply chain uncertainty and capacity issues. In contrast, a Memphis contact reported excess inventory and excess shipping capacity.\nA Louisville tourism contact expressed cautious optimism stemming from a strong 2023, and a Little Rock health-care contact expected continued growth based on high rates of migration into the region. Other services firms reported a seasonal January slowdown that was greater than expectations. Overall, sales and sales expectations were split roughly evenly between slightly higher and lower, and the general outlook was similarly mixed between slightly better and slightly worse.\nReal Estate and Construction\nResidential real estate sales have slowed since our previous report. Contacts in Arkansas and Tennessee reported that the low end of the market continues to be strong, while contacts in Missouri and Southern Indiana reported higher-end homes selling better. Rental rates for residential real estate have remained unchanged since our previous report. Multiple contacts reported that demand for office space in downtown areas continues to be sluggish. In Louisville, two large tenants announced plans to vacate their downtown offices. A Memphis contact reported that demand for retail space remains strong.\nContacts across real estate and construction reported that recent increases in insurance costs have led to higher prices and affordability challenges. Two construction contacts reported that lending has slowed and new projects are being shelved. Other construction firms reported a lack of skilled labor reducing their ability to obtain new projects. However, a Northwest Arkansas commercial real estate construction firm reported being booked out through 2025.\nBanking and Finance\nActivity in the financial sector has remained stable since our previous report. A survey of contacts found that, while the demand for loans continues to be lower than a year prior, growth for overall, credit card, and commercial and industrial loans has risen. Mortgage originations remain below seasonal norms due to low housing inventories and high mortgage rates. Competition for deposits persists. Banking contacts reported concerns about loan quality due to economic uncertainty, changes in borrower behavior, and an evolving regulatory landscape. However, contacts have not seen a significant rise in delinquent loans.\nAgriculture and Natural Resources\nDistrict agriculture conditions have remained stable since our previous report. Total winter wheat acreage planted was down about five percent relative to the total planted the year before. Reports indicate the decline was expected and consistent with national planting patterns. A decline in fertilizer costs was offset by increasing fuel and interest costs.\nDistrict contacts were mixed on the impact global commodity markets are having on their operations. While some reported benefitting from tightened export markets due to international shipping disruptions and high demand\u2014particularly for cotton\u2014others reported that declining commodity prices and competition from major exporters such as Brazil had depressed their outlook.\nContacts indicated the ban in early February on specific pesticides commonly used for major District crops and subsequent regulatory changes were sources of uncertainty for future planting and growing decisions. Most District contacts described their outlook as unchanged or worsening.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nMarch 6, 2024\nSummary of Economic Activity\nEconomic activity in the Twelfth District was up slightly during the January to mid-February reporting period. Employment levels rose slightly, and labor was more available. Prices and wages both increased overall but at slower rates. Retail sales were stable, while activity in the services sectors grew modestly. Demand for manufactured products and conditions in the agriculture and resource-related sectors remained unchanged on net. Residential real estate activity rose somewhat, while that for commercial real estate was largely unchanged. Financial sector conditions were little changed. For communities across the District, demand for care and shelter support services remained high. Looking ahead, contacts expect weaker economic conditions overall relative to late 2023, though they expressed a little more optimism than in the previous reporting period.\nLabor Markets\nEmployment levels grew slightly over the reporting period. Contacts in sectors such as real estate and leisure and hospitality reported expanding headcounts in recent weeks. Finance, technology, and business services held employee counts flat or let levels decline with attrition or layoffs. Several employers in health and agriculture reported utilizing automation tools and emerging technology solutions to boost productivity and improve efficiency. Employers generally filled positions with greater ease, though hiring skilled workers across sectors remained difficult. Reports indicated that applicant pools expanded and contained more qualified candidates. Still, some contacts in California noted stiff competition for labor from bigger companies and employers for government projects.\nWages increased slightly over the reporting period. Employers offered wage increases in line with inflation and provided additional benefits to attract and retain workers. Contacts reported that some employers fully absorbed recent increases in health insurance premiums and continued to offer hybrid or fully remote work. One contact in Nevada noted that employees preferred remote work because it allowed them to more easily take a second job.\nPrices\nPrices increased slightly in recent weeks. Nonlabor cost pressures moderated across sectors. For energy, steel, and replacement machinery parts, prices rose at a similar or slower pace relative to the previous reporting period. For other inputs such as wallboard, cement, and food services supplies, price levels were unchanged or slightly lower. Prices for consumer goods and services increased modestly or remained flat overall. However, prices for some grocery items, including staples and produce, fell recently. Limited abilities to pass through elevated costs to customers constrained price increases by those firms in business services and retail sectors.\nCommunity Conditions\nDemand for community support and services remained high. Households and other community members sought support for childcare, rental assistance, affordable housing, food assistance, and mental health services. Nonprofit organizations reported a drop in charitable donations, which further constrained meeting the community's elevated demand for basic needs. Reports highlighted difficulties by small businesses across the District, particularly in rural areas, to access credit. A few contacts in Hawaii mentioned ongoing challenges, such as housing instability, and the long-term impacts facing the communities displaced by last year's wildfires in Maui.\nRetail Trade and Services\nConsumer spending on retail goods was stable at solid levels. Demand for groceries and other basic necessities was strong, but consumers continued to cut down on discretionary spending in response to elevated prices. E-commerce retailers noted muted demand for full price products while promotional offerings boosted online sales. Home centers reported lower sales of wood products. Contacts across the District reported above-average inventories following the holiday season. However, one contact noted that retailers that had previously decided to limit inventory levels to cut costs experienced product shortages and offered fewer new products recently.\nActivity in the consumer and business services sectors grew modestly in recent weeks. Demand for logistics, legal, and consulting services was unchanged. Contacts reported that several consulting firms increased staffing capacity to take on new projects in recent weeks. Demand for health-care services grew further, and the industry remained near capacity. Demand for leisure and hospitality services in most of the District moderated somewhat due to expected seasonal fluctuations. In contrast, Nevada contacts reported that the economic impact of February's NFL Super Bowl LVIII held in Las Vegas exceeded expectations, and that the boost to the local economy was in line with that of the Formula 1 race held in the city last November.\nManufacturing\nDemand for manufactured products was unchanged on net. Demand for capital equipment strengthened as firms in the food and beverages, personal care, and medical industries boosted investments in productivity-enhancing products. Soft construction activity and poor weather dampened demand for wood products. Reports indicated that ongoing shipping disruptions in the Red Sea have not had a notable impact on production and businesses across the Twelfth District. In contrast, a contact in the ocean freight industry reported that severe drought conditions in the Panama Canal boosted traffic at ports across the West Coast. Many container ships heading from Asia opted to dock on the West Coast and use rail to transport cargoes to their destinations across the country instead of using the canal to reach East Coast ports.\nAgriculture and Resource-Related Industries\nConditions in agriculture and resource-related industries were largely comparable to the previous reporting period. Domestic demand for fresh produce was solid, while that for logs remained soft. Demand for forested land with timber resources continued to grow. Despite a strong dollar, international demand for fruits, vegetables, and seafood increased over the reporting period. However, weaker economic activity in China and Japan led to lower exports of logs. Major seafood stocks remained stable. Record crop yields of apples and tree nuts in California and the Pacific Northwest had a dampening effect on wholesale prices.\nReal Estate and Construction\nActivity in the residential real estate market rose somewhat. Residential construction strengthened. Demand for single-family homes picked up slightly, as mortgage rates, though still elevated, moderated a bit in recent weeks. To attract reluctant homebuyers, some home builders began offering variable-rate mortgages at below-market interest rates, which revert to market pricing after a year, at which point buyers are reportedly expecting rates to be lower. The supply of multifamily rental units increased further as more construction projects were recently completed, thereby raising vacancy rates and putting downward pressure on rents. A contact from Hawaii noted that recent construction activity in the state has focused on affordable housing units.\nCommercial real estate activity was largely unchanged from the previous reporting period. Demand for industrial and retail space was strong, but weak office leasing activity continued. Public infrastructure spending continued to boost overall construction activity across the District. Some private-sector commercial projects slowed on account of elevated costs and limited availability of skilled trades subcontractors, such as plumbers and electricians. Challenges persisted in obtaining some materials, particularly electrical equipment.\nFinancial Institutions\nLending activity changed little over the reporting period. Demand for most business and consumer loans was muted, particularly those for commercial real estate. Liquidity in the financial sector was stable overall, and deposit levels normalized in recent weeks. Reports indicated that competition for deposits eased of late as the financial industry observed less \"rate-chasing\" behavior from clients. Credit and asset quality were reportedly high despite some uptick in consumer loan delinquencies.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

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"March 6, 2024\nSummary of Economic Activity\nThe Ninth District economy grew slightly since the previous report. Respondents to a January survey reported a slight increase in sales and orders over the previous month. Employment grew slightly, but overall labor demand softened somewhat. Wage pressures were moderate but continued to ease, and prices rose modestly. Consumer spending and agricultural conditions declined, while commercial real estate activity was flat. Construction, manufacturing, and residential real estate activity increased slightly. Activity among minority- and women-owned businesses declined slightly.\nLabor Markets\nEmployment grew slightly since the last report. Hiring demand remained positive overall but softened somewhat. Demand for full-time, year-round employees fell modestly, particularly among leisure and hospitality firms affected by unseasonal winter conditions. Softer labor conditions were also reported in construction, manufacturing, wholesale, and transportation sectors. More firms cut workers, though this number was still a small fraction compared with those looking for workers. Contacts reported modestly improved labor availability. A Minnesota finance company said, \"It depends on the position. Higher-level positions are hard to find qualified candidates. Lower-level positions are starting to have more applications.\" A large manufacturer in South Dakota reported that slowing demand over the last year cooled its labor needs, but \"finding workers to replace turnover is still moderately difficult.\" Firms were a bit less optimistic about future hiring needs than they were previously, but still positive overall.\nWage pressures were moderate overall but have been easing compared with previous levels. A survey of almost 700 firms found that roughly half reported wage increases of 3 percent or more, with 18 percent seeing increases of more than 5 percent; both measures were moderately lower than those of earlier surveys. Some firms reported wage pressure was easing due to better labor availability, reduced business, an inability to pass higher costs on to customers, and declining reimbursement rates from government health care programs.\nPrices\nPrices increased modestly since the last report. A quarter of respondents to a District business survey reported increasing customer prices in January from a month earlier, while 63 percent reported no change in pricing. Input price pressures remained greater than final prices; 41 percent reported increases in January. Retail fuel prices in District states increased slightly since the last report. Prices received by farmers increased in December from a year earlier for chickpeas, dry edible beans, lentils, chickens, and cattle; prices decreased for corn, wheat, soybeans, hay, sugar beets, potatoes, canola, milk, hogs, turkeys, and eggs.\nWorker Experience\nWorkers highlighted opportunities for career development, income improvement, and schedule flexibility as their top three priorities when looking for a job. The majority were confident that they would find a job in the next three months. Contacts who switched jobs or recently became employed after a period of unemployment said the most challenging part of their job search was finding a job that pays what they need. Most of them got jobs in health care, followed by education and manufacturing. The majority had applied for up to five jobs before being hired. Contacts reported higher prices across most items in recent weeks, mainly in food. \"I wish my twenty-dollar [sandwich] lunch went back to [costing] ten,\" said a Minnesota worker. \"It instead keeps going up.\"\nConsumer Spending\nConsumer spending was down since the last report. Unseasonably warm weather hurt businesses catering to winter activity; firms in retail, accommodation, and entertainment saw lower revenues across the District. Ski hills in Montana and Michigan's Upper Peninsula (U.P.) closed due to lack of snow. January hotel occupancy fell in most District states, including by 12 percent in Montana. An accommodations firm in the U.P. said bookings were 20 percent higher to start the year, but \"most guests cancel due to lack of snow. We are now showing a 25 percent decline. This is having a devastating effect on all local businesses.\" However, contacts reported healthy underlying demand; weather was a confounding factor, but expectations for spring tourism were positive. Consumer spending remained active in some other areas; new-vehicle sales rose 18 percent in January at one large dealership, and sales of powersport vehicles also rose across the District. Contacts noted that some consumers continued to adjust purchasing habits due to high prices. A grocer in southern Minnesota said that customer counts remained strong, but \"customers are starting to pull back on their purchases.\"\nConstruction and Real Estate\nConstruction declined overall since the last report. Firms reported that both active and future projects out for bid were lower. Commercial permitting for new projects in January was widely lower. Single-family development remained soft, with modest but spotty increases in some District markets compared with a year earlier. Multifamily permitting has slowed significantly. Home remodeling activity has also slowed for some firms. A Minnesota contact said that \"consumers quite abruptly stopped spending discretionary income on larger home improvements.\"\nCommercial real estate was flat. Office space continued to see negative absorption due in part to soft employment in office-using sectors. Industrial vacancy rates rose slightly, but slowing speculative development allowed rental rates to rise. Retail vacancy rates were comparatively low, thanks to very slow development of new space and new leasing activity. Residential real estate grew modestly from low levels, with a modest majority of larger markets seeing year-over-year sales growth in January.\nManufacturing\nManufacturing activity increased slightly since the previous report. A regional index of manufacturing conditions indicated expansion in activity in Minnesota, North Dakota, and South Dakota in January relative to a month earlier. However, demand continued to slide. Two-thirds of manufacturing sector respondents to a District business survey reported that January sales fell from a month earlier. A large custom fabricator reported that demand from large customers had slowed, but they were \"not sure if they are reducing inventories to free up cash, or if demand is softer.\" In contrast, several producers of construction materials and electronics reported an uptick in demand.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions declined. Ninth District farm income declined in the last quarter of 2023 relative to a year earlier, according to most lenders responding to an agricultural conditions survey. Capital spending also decreased on balance, while farm household spending continued to increase. Sector contacts reported that current prices for some commodities were below breakeven levels for many producers; however, input costs have moderated somewhat. Oil and gas exploration activity increased slightly since the previous report. District iron ore mines, already near capacity, increased production since the last report.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned business enterprises (MWBE) declined for slightly more contacts than not over the most recent four-week period. Expectations for future activity over the next four weeks edged slightly more positive. Wages among these contacts were mostly unchanged; only one-third said they had recently increased wages. Some reported that benefit costs were still climbing. \"Health insurance jumped yet again for 2024,\" shared a Minnesota contact. Staffing levels and worker demand were mostly flat, and only a slight majority expected labor demand to increase over the coming weeks. Profits were lower on balance, with little change expected in the coming weeks.\nFor more information about District economic conditions, visit https://www.minneapolisfed.org/region-and-community .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

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"March 6, 2024\nSummary of Economic Activity\nOn balance, business activity in the Fourth District increased slightly in recent weeks, and contacts generally expected it to increase modestly in the months ahead. Demand for manufactured goods edged up, but some contacts noted that seasonal patterns and customer demand were less predictable than before the pandemic. Residential construction contacts said that demand increased after mortgage rates fell, while nonresidential construction contacts reported that activity was boosted by demand for manufacturing projects. Retailers reported softer spending in discretionary categories. Overall, firms held staffing levels flat, and some noted increased labor availability, reduced turnover, and easing wage pressures. Nonlabor cost and price pressures remained stable in recent weeks, but they were down from those a year earlier.\nLabor Markets\nOverall, contact reports suggested that employment was flat during the recent reporting period, with the majority of firms indicating that their overall staffing levels had not changed. Several contacts noted that reduced turnover and increased worker availability had allowed them to hire more selectively or replace underperforming workers. For instance, some bankers reported that turnover of frontline staff declined, and they were hiring only for strategic positions. In contrast, several commercial construction firms reported increasing staffing levels to ramp up for new capital projects, and a business services contact noted that their client was \"hiring at a fast pace given the growing interest and demand in AI/data solutions.\" Contacts generally expected slight growth in employment in the coming months.\nWage pressures were largely unchanged in recent weeks and have been relatively stable over the past year. Many firms reported that wage pressures had normalized. Notably, many manufacturing and business services firms returned to offering standard annual cost-of-living adjustments, with several noting that increases were lower than in previous years. Similarly, firms across industries reported holding wages steady as labor availability increased and retention improved. One hospitality contact stated, \"we seem to be retaining our workforce with our current pay level.\" Still, a few firms seeking to attract and retain workers with specialized training continue to report offering larger wage increases than before or adjusting wages more frequently.\nPrices\nNonlabor input cost pressures changed little over the past several reporting periods. Many contacts across sectors continued to report that their costs had stabilized and, in some cases, had softened. Some manufacturers noted that an increased availability of alternate suppliers helped contain costs. One contact said that after two years of suppliers' not accepting new customers, the contact was able to find alternate vendors with more favorable costs relative to the contact's existing suppliers. Yet firms across industries continued to report cost increases, albeit at a slower pace, and some restauranteurs noted a recent uptick in the cost of chicken, beef, and produce.\nPrice pressures were generally unchanged from those of the prior period, though pressures varied by industry. On the one hand, retailers reported being selective about raising prices, and two restauranteurs said they were holding menu prices steady and absorbing any cost increases. On the other hand, many business services firms reported raising their rates based on the market conditions, with one contact stating, \"we've come to understand we can increase fees and remain competitive.\" Some manufacturing and construction contacts raised prices to cover increased materials costs, while others noted decreasing prices when costs fell.\nConsumer Spending\nConsumer spending moderated following a slight increase during the holiday shopping season. Contacts across retail segments reported softer spending in discretionary categories, and one retailer of consumer products noted a \"marked decline in consumer spending.\" Auto dealers continued to report slow sales because of high interest rates and high vehicle prices, though one contact indicated that the supply of new vehicles had improved compared to recent reporting periods. While some contacts hoped that the arrival of spring would boost sales, the balance of retailers expected demand to change little in the coming months.\nManufacturing\nDemand for manufactured goods increased slightly in recent weeks. However, some contacts noted that recent demand and orders had not returned to normal levels after expected end-of-year slowdowns. Some contacts indicated that seasonal patterns and customer demand were less predictable than those prior to the pandemic, and one manufacturer explained that \"erratic [customer] demand\" was \"part of the post-Covid landscape.\" In general, manufacturers expected customer demand to improve slightly in the near term.\nReal Estate and Construction\nResidential construction contacts reported that demand increased as mortgage rates declined. However, real estate agents indicated existing homes sales changed little because inventory remained low. Looking ahead, home builders and real estate contacts anticipated that demand would increase should mortgage rates fall, encouraging some \"customers [who had been] waiting on the sideline\" to move forward with home purchases.\nNonresidential construction activity continued its recent rebound, bolstered in part by strong demand for manufacturing space. Still, one builder expected that \"many large capital projects\" that remained sidelined would move forward if interest rates were to come down. On balance, contacts expected nonresidential construction and real estate activity to be flat in the months ahead.\nFinancial Services\nReports suggested that loan demand stabilized after declining notably throughout 2023. Bankers attributed improved conditions in both commercial and consumer lending to a more stable interest rate environment and strong economic conditions. Two commercial bankers noted that the uptick in activity was a function of increased demand for their clients' goods and services. Looking ahead, bankers expected loan demand to increase because they anticipate interest rate reductions. Indeed, one commercial banker reported that clients' expectations for rate cuts in 2024 led their clients to move forward with capital spending plans. Core deposits remained flat, and two bankers indicated that they were no longer willing to compete with banks on overly aggressive deposit pricing. Bankers reported that delinquency rates were flat for both commercial and consumer loans.\nNonfinancial Services\nProfessional and business services contacts reported that demand increased. An engineer reported that demand for services increased as funds from federal infrastructure programs became available. Looking ahead, contacts anticipated that demand would continue to grow as clients are encouraged by \"continued positive economic data.\" Overall, freight and transportation activity increased slightly since the last reporting period, and haulers expected activity to increase in the coming months.\nCommunity Conditions\nSeveral workforce development contacts reported increased demand for their services over the past few months, with some noting that their client composition included more immigrants and non-English speakers. Most individuals sought training for occupations in health care or to obtain commercial driver's licenses. However, one contact noted that younger workers were gravitating to gig work or other self-employment, even after completing training for other jobs. Contacts noted that federal infrastructure initiatives in Ohio increased employers' demand for training geared toward broadband infrastructure, robotics, cybersecurity, and skilled trades. Several contacts said that access to transportation and quality childcare continued to be barriers for job seekers in obtaining and retaining employment.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2024/2024-03-kc

"Beige Book Report: Kansas City\nMarch 6, 2024\nSummary of Economic Activity\nEconomic activity in the Tenth District was stable over the past month. Job growth was modest. Though wage gains for new hires remained elevated, contacts indicated wage increases were targeted at workers who expanded their scope of responsibilities. Consumer spending stabilized, but contacts noted rising price sensitivity among consumers. Still, consumer prices rose moderately. Reports from commercial real estate (CRE) contacts indicated skepticism around any recent appraisals of property valuation, as they did not want to be in a position of trying to \"catch a falling knife\" early in a CRE downturn. Loan performance was generally stable for CRE deals, but banks' internal stress testing pointed to potential deterioration as CRE loans mature in a higher-rate environment. Despite climbing oil prices, the number of active oil rigs fell to levels observed several months ago, reverting from a recent spike before year-end. Agricultural credit conditions remained sound despite some softening in farm conditions.\nLabor Markets\nHiring activity picked up slightly across the District. Most contacts continued to report tight labor markets, but they also indicated the quality of applicants and recent hires improved recently. As staffing levels improved, businesses in both manufacturing and services sectors continued to modestly reduce average weekly hours and their use of part-time work. Many employers indicated they increased efforts to retrain and promote existing workers. Though wage growth for new hires remained elevated, many contacts continued to indicate wage increases were focused primarily on workers who expanded their capabilities, responsibilities, and productivity.\nPrices\nPrices for industrial goods and business services declined slightly over the last month, but several consumer-oriented contacts reported moderate increases in prices. In particular, prices for core goods, food away from home, and hotels all rose moderately. Business contacts reported higher input costs broadly. Services businesses continued to note rising labor costs, with professional business services indicating more difficulty passing higher costs onto customers.\nConsumer Spending\nAfter declining recently from elevated levels, consumer spending stabilized over the past month. Several contacts noted a recent shift in sales across spending categories due to heightened price sensitivity among consumers. Hotels noted bookings by leisure and small-group \"SMERF\" customers fell, even though business and large event bookings grew robustly. 1 Retail contacts reported pockets of strength in auto part sales and grocery consumption, with spending shifting away from clothing and home electronics. Auto dealers noted sharp declines in EV sales, while demand for other vehicles was steady. Amid the rising price sensitivity of consumers, several contacts indicated their emphasis on protecting price margins over coming months.\nCommunity Conditions\nMore contacts reported difficulties among low-to-moderate income (LMI) households in obtaining and maintaining affordable credit. Contacts noted increased utilization of, and defaults on, credit cards, payday loans, and pay-as-you-go purchasing among LMI households. Defaults on debts for medical services also reportedly rose. The increase in default rates among LMI households has led to a moderate increase in challenges among renters in qualifying for housing leases. Contacts also reported more denials of financing for car purchases among LMI households and a slight increase in vehicle repossession due to delinquency on existing loans.\nManufacturing and Other Business Activity\nBusiness activity across the District grew slightly over the last month, while profitability declined slightly. Service firm activity rebounded moderately from declines earlier in the year. Manufacturing firms reported further declines in production over the last month. However, several manufacturing contacts noted the current weakness is partially driven by customers working through excess inventories, and that longer-term demand for machinery and manufactured products remained stable. Contacts in the logistics, transportation, and packaging sector reported softening demand for shipping, suggesting potential slowing in consumer goods sectors over coming months. Businesses broadly reported resolutions to supply chain issues domestically, with microchips still being an exception. However, many contacts raised concerns over international shipping due to both rising geopolitical tensions and physical disruptions to trade routes through Central America. Manufacturing and services contacts reported declining margins and lower profitability in recent months. Professional service firms reported more pronounced margin compression than manufacturing contacts, consistent with higher labor costs and an inability to pass costs onto customers. Contacts implemented a series of cost-saving strategies to maintain profit margins, including changing suppliers and reducing overtime work. Overall, contacts are more optimistic about margins and profitability, anticipating flat or slight margin expansion over the coming year.\nReal Estate and Construction\nContacts in commercial real estate noted appraisers were facing difficulty assessing property values amid very few property transactions over the past several months. Buyers expressed skepticism around any recent appraisals, not wanting to be in a position of trying to \"catch a falling knife\" early in a CRE downturn. Developers indicated new private development activity has all but ceased, especially for multifamily housing. In some District states, substantial municipal project construction activity offset headwinds to private development, which, combined with projects already under development, supported demand for construction labor.\nCommunity and Regional Banking\nDemand for credit remained stable at District banks across most loan types. However, contacts noted demand for CRE loans weakened amid higher interest rates. While lending standards remained unchanged, bankers were reviewing their CRE portfolios for potential weaknesses as loans come up for renewal, including stress-testing cash flow performance in a higher-rate environment. Loan performance was generally stable for non-criticized CRE deals, yet banks' internal stress testing and portfolio analysis pointed to potential deterioration within these deals as CRE loans mature in a higher-rate environment. Despite expectations for further weakness in CRE, contacts expected overall loan quality for most other loan types to remain unchanged over the next six months. Deposit levels also remained stable as mix migration into higher-yielding accounts persisted.\nEnergy\nTotal oil and gas production declined slightly across the District. Despite climbing oil prices, the number of active oil rigs fell to levels observed three to six months ago, reverting from a recent spike before year-end. Gas rig counts stayed steady as drilling for gas remained unprofitable. The number of drilled and completed wells decreased in Colorado and Wyoming's Niobrara Basin, while they stayed mostly steady in Oklahoma's Anadarko Basin. Accordingly, the number of drilled but uncompleted wells was constant in the Anadarko but fell in the Niobrara, portending a potential for decreased production in coming months. Coal production in Wyoming rebounded somewhat from lower production levels earlier in the year, and coal prices remain slightly higher than pre-pandemic levels.\nAgriculture\nConditions in the Tenth District farm economy softened in February, but agricultural credit conditions remained sound. Crop prices declined moderately over the past month alongside reports of stronger yields and production in the 2023 growing season than was previously estimated. Grain stocks were higher coming into 2024 than a year ago in most Districts states. Although strong yields could support revenues, producers with large shares of the harvested grain currently in storage appeared likely to sell at unfavorable prices. In the livestock sector, cattle prices remained strong alongside reports of additional declines in cattle herds. Farm financial conditions have moderated over the past year, but credit stress and farm loan delinquencies remained low. Looking ahead, contacts continued to cite ongoing risks associated with high expenses, commodity market developments, and high interest costs.\nFor more information about District economic conditions visit: https://www.KansasCityFed.org/research/regional-research .\nFootnote\n1 \"SMERF\" is a hotel industry acronym referring to Social, Military, Educational, Religious and Fraternal group bookings.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2024/2024-03-ri

"March 6, 2024\nSummary of Economic Activity\nEconomic activity in the Fifth District was little changed in recent weeks. Port activity and trucking volumes remained solid, particularly for shipments of consumer goods as retailers looked to replenish inventories. Consumer spending on retail goods softened slightly, however, but contacts believed that adverse weather was the primary reason for the decline in sales and foot traffic. Residential and commercial real estate markets improved somewhat, but financial institutions reported less loan demand this period. Nonfinancial services demand, on the other hand, was unchanged. Employment grew moderately with some employers finding it easier to hire. Price growth was unchanged in recent weeks.\nLabor Markets\nEmployment in the Fifth District grew at a moderate pace in recent weeks. Contacts diverged on labor availability depending on the type of worker needed, with skills and trades-workers more difficult to find. For example, an outdoor goods retailer commented they still struggled to find workers\u2013which they mentioned isn't unusual in retail\u2013but the market was better than in 2021\u20132022. An advertising firm reported a complete one-eighty from last year, and candidates are finding them now and not the other way around. Conversely, an engraver told us that after a very long search, they finally found good help, which felt like finding a needle in the haystack. An aluminum welder reported that due to a lack of skilled workers, they extended lead times and increased prices to cover overtime labor costs.\nPrices\nPrice growth was little changed since our previous report, keeping year-over-year price growth moderately elevated. According to our most recent surveys, growth in prices received by nonmanufacturers remained around four percent while growth in prices received by manufacturers held steady at a rate around 2.5 percent. A few service providers said that labor and input costs continued to rise but they are unable to push further price increases to customers, so margins were being compressed. Firms in both sectors expected price growth to moderate over the next six months.\nManufacturing\nFifth District manufacturing activity softened in the most recent period amid uncertainty about business conditions. An asphalt producer reported that several highway jobs ended in early 2024 with no new jobs to replace them, which will lead to a 10 percent decline in volume. A coffee manufacturer reported challenges getting freight through the Red Sea, impacting production times and future costs. Several contacts reported difficulty getting financing, including a laundry equipment manufacturer that was forced to rely on alternative financing companies with higher interest rates than banks. The lack of qualified labor remains a major issue for most contacts. A lumber company reported a possible reduction in investment in their region due to a lack of suitably skilled workers.\nPorts and Transportation\nAt Fifth District ports, underlying demand was good this period despite disruptions in the Panama and Suez canals impacting schedules. Carriers were doing fewer blank sailings in order to account for issues with the key transit routes. The volume of loaded imports was slightly lower this period, but respondents noted an increase in imports of consumer goods. Loaded export volumes were unchanged. Spot rates increased sharply as carriers were trying to offset higher costs associated with the longer transit times. Empties were flowing well and there was no stack congestion at the ports. Demand for airfreight was flat this period and rates were down due to excess capacity.\nUnderlying trucking demand was good this cycle, but some freight volumes were impacted by winter weather. In the truckload segment, there continued to be excess capacity. In the less-than-truckload segment, firms noted increased demand in the consumer segment as retailers were replenishing their inventories. In the truckload segment, rates were down as customers were pushing to decrease their shipping costs. Transactional rates remained unchanged in the less-than-truckload segment and those trucking companies were able to negotiate modest increases in their contract rates. Respondents stated that drivers were more readily available, but mechanic and some office positions were still difficult to fill this period.\nRetail, Travel, and Tourism\nRetailers reported a slight decline in sales and customer foot traffic in recent weeks. Several contacts mentioned adverse weather conditions kept shoppers from coming out to stores. A few retailers in the home improvement and building supply segment attributed some of their decreased sales to a slow real estate market and higher costs of borrowing to finance home improvement projects. New vehicle sales declined modestly. Hotel and restaurant contacts noted a slight slowdown in activity in recent weeks. One hotel chain manager said that leisure travel was steady but down from its peak, and business travel was still a fraction of what it was compared to pre-pandemic levels. In the Northern Virginia market, where travel had been slow to return, hotel revenues were reportedly up as those hotels were now able to increase room rates amid steady occupancy rates.\nReal Estate and Construction\nIn the Fifth District, residential real estate activity improved slightly this period as there remained pent up demand in the housing sector. Respondents noted an increase in listings and buyer activity. However, the elevated mortgage rate made buyers more tentative on making home purchase decisions. Sales prices have flattened, but there were still multiple offers on many homes. Days on market increased slightly but remained below historic averages. The home construction market was constrained as it was difficult to find land and to receive permitting for new developments. Residential construction costs started to moderate this period.\nOverall market activity in commercial real estate improved slightly this period. In the office sector, there was more leasing activity related to firms upgrading their space and moving away from central business districts. Landlords were offering concessions or incentives to potential office tenants in lieu of higher rents. Retail space in the suburbs remained limited with low vacancy rates and increased rental rates. The rapid rise in interest rates in recent years has resulted in declining commercial real estate values and a dearth of investment sales. The lack of available financing and rising building costs continued to constrain new construction, especially for office and multifamily projects.\nBanking and Finance\nFinancial institutions continued to report a modest softening of demand across all loan types. Higher interest rates and continued uncertainty with the overall economy continued to be the reasons noted for this softening. Deposit levels were beginning to show modest declines, with rates remaining flat and competition for deposits remaining high. Loan delinquency rates have begun showing modest increases, primarily in the unsecured personal and auto portfolios. Credit quality of new borrowers, however, remained stable with no institutions mentioning a change to their underwriting standards based on the current conditions.\nNonfinancial Services\nNonfinancial service providers continued to report that demand for their services as well as revenues remained stable. A design firm stated that election years often have negative impacts on the demand for their services because larger companies become more conservative with their budgets until the election is decided. A law firm also reported that the demand for their services was down, but they are observing more clients gaining optimism and entertaining merger and acquisition offers as well as real estate development opportunities. Wages and workforce were becoming less of a challenge with both showing modest stabilization.\nFor more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

/beige-book-reports/2024/2024-03-su

"Beige Book: National Summary\nMarch 6, 2024\nThis report was prepared at the Federal Reserve Bank of San Francisco based on information collected on or before February 26, 2024. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic activity increased slightly, on balance, since early January, with eight Districts reporting slight to modest growth in activity, three others reporting no change, and one District noting a slight softening. Consumer spending, particularly on retail goods, inched down in recent weeks. Several reports cited heightened price sensitivity by consumers and noted that households continued to trade down and to shift spending away from discretionary goods. Activity in the leisure and hospitality sector varied by District and segment; while air travel was robust overall, demand for restaurants, hotels, and other establishments softened due to elevated prices, as well as to unusual weather conditions in certain regions. Manufacturing activity was largely unchanged, and supply bottlenecks normalized further. Nevertheless, delivery delays for electrical components continued. Ongoing shipping disruptions in the Red Sea and Panama Canal did not generally have a notable impact on businesses during the reporting period, although some contacts reported rising pressures on international shipping costs. Several reports highlighted a pickup in demand for residential real estate in recent weeks, largely owing to some moderation in mortgage rates, but noted that limited inventories hindered actual home sales. Commercial real estate activity was weak, particularly for office space, although there were reports of robust demand for new data centers, industrial and manufacturing spaces, and large infrastructure projects. Loan demand was stable to down, and credit quality was generally healthy despite a few reports of rising delinquencies. The outlook for future economic growth remained generally positive, with contacts noting expectations for stronger demand and less restrictive financial conditions over the next 6 to 12 months.\nLabor Markets\nEmployment rose at a slight to modest pace in most Districts. Overall, labor market tightness eased further, with nearly all Districts highlighting some improvement in labor availability and employee retention. Businesses generally found it easier to fill open positions and to find qualified applicants, although difficulties persisted attracting workers for highly skilled positions, including health-care professionals, engineers, and skilled trades specialists such as welders and mechanics. Wages grew further across Districts, although several reports indicated a slower pace of increase. Employee expectations of pay adjustments were reportedly more in line with historical averages.\nPrices\nPrice pressures persisted during the reporting period, but several Districts reported some degree of moderation in inflation. Contacts highlighted increases in freight costs and several insurance categories, including employer-sponsored health insurance. Nevertheless, businesses found it harder to pass through higher costs to their customers, who became increasingly sensitive to price changes. The cost of many manufacturing and construction inputs, such as steel, cement, paper, and fuel, reportedly fell in recent weeks.\nHighlights by Federal Reserve District\nBoston\nEconomic activity increased at a slow pace, and employment gains were modest. Output prices increased slightly, and wage growth held steady at a moderate pace. Residential realtors expressed growing optimism as both property listings and pending home sales increased. Uncertainty persisted concerning the fate of maturing office property loans, but the outlook for the sector did not worsen.\nNew York\nRegional economic activity flattened after a period of sustained weakness. Labor market conditions remained solid as employment grew slightly and wage growth picked up to a moderate pace. Labor demand and labor supply continued to come into better balance. Consumer spending declined modestly. The pace of selling price increases remained modest.\nPhiladelphia\nBusiness activity resumed a slight decline during the current Beige Book period\u2014as it had for most of 2023. Employment grew slightly, and labor availability improved. Wage and price inflation subsided further, but housing affordability continues to squeeze consumers, especially those in lower-income households. Generally, sentiment improved, but firms remained cautious with subdued expectations for future growth.\nCleveland\nDistrict business activity increased slightly. Some firms noted increased labor availability, reduced turnover, and easing wage pressures. Cost and price pressures changed little. Some manufacturers raised prices to cover higher costs, while some restauranteurs planned to absorb them. Business services firms continued to raise rates based on market conditions.\nRichmond\nThe regional economy saw little growth, overall. Consumer spending softened slightly as poor weather conditions over the last several weeks led to reduced sales. Imports and shipments of consumer goods picked up as retailers replenished inventories. Domestic manufacturing softened, however. Real estate market activity improved slightly. Nonfinancial service demand was unchanged. Employment rose and price growth was unchanged, keeping inflation moderately elevated.\nAtlanta\nEconomic activity was little changed. Labor markets and wage pressures eased. Nonlabor costs moderated, on balance. Consumers remained cost conscious, and higher prices squeezed household budgets. Travel and tourism remained strong. Home sales declined. Commercial real estate conditions slowed. Transportation activity was mixed. Manufacturing slowed somewhat. Overall loan demand declined.\nChicago\nEconomic activity increased modestly. Employment increased modestly; nonbusiness contacts saw a modest increase in activity; business spending increased slightly; manufacturing activity was flat; and construction and real estate and consumer spending declined slightly. Prices and wages rose moderately, while financial conditions tightened modestly. Prospects for 2024 farm income deteriorated some.\nSt. Louis\nEconomic activity has increased slightly since our previous report. Contacts reported that consumer demand slowed beyond seasonal norms. While labor markets remain tight overall, an increasing number of firms reported being fully staffed or overstaffed relative to consumer demand. Price growth has slowed in recent months. Contacts reported a mixed outlook for the coming year, although the outlook has improved since mid-December.\nMinneapolis\nDistrict economic activity was up slightly. Employment grew some, but labor demand softened. Wage pressures continued to moderate, and prices rose modestly. Consumer spending declined slightly, thanks to slow winter tourism. Commercial construction remained slow, but some markets saw single-family activity improve. Manufacturing, mining, and energy activity increased.\nKansas City\nEconomic activity in the Tenth District was stable. Job gains were modest, and wage growth, while elevated, was tied closer to worker performance. Price sensitivity rose among consumers, even as prices rose moderately. Commercial real estate contacts indicated skepticism around recent appraisals of property valuation, not wanting to be in a position of trying to \"catch a falling knife.\"\nDallas\nEconomic activity expanded modestly, with most sectors holding steady or experiencing slight to modest growth. Wage growth was moderate, and input cost and selling price growth was generally at or below average. Texas firms were more bullish on demand expectations than late last year, with more than half of the firms' expecting increases over the next six months. Outlooks overall were less pessimistic.\nSan Francisco\nEconomic activity grew slightly, employment levels rose slightly, and price and wage growth eased. Retail sales were stable, and demand for services grew modestly. Demand for manufactured products changed little, and conditions in agriculture were stable. Real estate activity rose slightly overall. Financial sector conditions were little changed.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/2024/2024-01-sl

"Beige Book Report: St Louis\nJanuary 17, 2024\nSummary of Economic Activity\nEconomic activity has remained unchanged since our previous report. Labor markets remained tight, but contacts reported reduced urgency to hire new workers and stable wage pressures. Prices increased, but the rate of price increases for many firms has slowed over the past few months. Travel and hospitality firms reported strong leisure travel growth during the holiday season and an optimistic outlook for the upcoming year. Rental prices were flat and residential inventory rose slightly. Banking contacts reported slowing loan demand. Agriculture contacts were negatively affected by drought conditions.\nLabor Markets\nEmployment levels have remained unchanged since our previous report. Though labor markets remain tight, reports of easing increased. An Arkansas contact reported weakening of employment conditions across the state, and noted that, while the urgency to hire has slowed, more firms are using internships and apprenticeship programs to upskill workers. Construction sources in St. Louis reported an increase in jobs due to an influx of new projects.\nWages have continued to grow slightly since our previous report. A daycare contact in Northwest Arkansas reported rising wages in competing sectors have led to challenges retaining workers. A logistics contact in Louisville reported wages were up about four percent year-over-year, while a restaurant contact in Little Rock reported wages rising five to seven percent across the industry.\nPrices\nPrices have continued to increase modestly since our previous report. Multiple contacts noted that costs have been rising at a slower rate than they were a year ago, and contacts' ability to pass costs to consumers varied. A daycare contact reported a 10 percent increase in weekly prices charged due to increases in the cost of supplies and utility rates. Some businesses are choosing not to raise prices even though labor and nonlabor input costs continue to increase. A hotel contact reported tighter profit margins due to increased operating costs. Contacts report that prices of some items, like used cars and event ticket prices, decreased.\nConsumer Spending\nDistrict general retail, restaurant, automotive, and hospitality contacts generally reported mixed business activity. To take advantage of the growing popularity of resale and thrifting, a St. Louis retail contact has promoted special seasonal items, participated in pop-up events, and increased marketing efforts to help spur more consumer spending. An Arkansas brewery stated that while the volume of beer sold rose over the previous year, their profits fell. A District auto contact stated that they've seen losses over the fourth quarter due to slower consumer spending. A Little Rock hospitality contact noted that while travel numbers are improving, group business travel does not seem to be making a post-COVID return. A St. Louis airport contact reported strong leisure travel demand during the holiday season and projected a return to 2019 passenger numbers in early 2024.\nManufacturing\nManufacturing activity has slightly decreased since our previous report. Firms in both Arkansas and Missouri reported modest decreases in new orders and inventories. There were slight increases in production and delivery lead times in both states. Finding and retaining workers remains an ongoing issue for manufacturing contacts. On average, firms reported they expect slight increases in production and delivery lead times in the coming quarter.\nNonfinancial Services\nActivity in the nonfinancial services sector has improved slightly since our previous report. Freight traffic increased slightly, and signals in the transportation sector were generally positive. An Arkansas airport contact reported strong enplanement numbers, exceeding the previous 2019 heights. St. Louis public transportation reported high demand, and nearby St. Clair County (Illinois) began construction on connecting two regional commercial airports by light rail. Several industries experienced labor issues. Memphis air traffic mechanics took steps to unionize, citing \"eroding\" pay and pensions, while St. Louis nurses went on strike, demanding better pay and safety.\nReal Estate and Construction\nResidential real estate rental rates have remained unchanged or dropped slightly in the four major District metro areas since our previous report. Inventory for residential real estate in the Memphis, Louisville, and Little Rock metro area was up nine percent on average since the previous year. Year-over-year total homes sold and median sale prices declined in the Memphis and Little Rock metros. In the Louisville metro area, year-over-year total homes sold have increased one percent, and the median sale price has increased six percent. Commercial real estate rental markets continue to be stagnant in the office sector for downtown areas. Contacts reported continued commercial real estate sales in Northwest Arkansas, including two large multi-family units and a couple of retail sales. A large multi-family community is expected to start construction in Northwest Arkansas in early 2024.\nBanking and Finance\nLoan growth has slowed to a modest pace since our previous report, but banking conditions and lending activity have remained healthy. However, commercial and industrial loan growth decreased slightly despite the increase in overall loan volume, and demand for loans continues to be lower than a year prior. There has been an ongoing modest decline in real estate loan growth. Mortgage banker contacts had an optimistic outlook and expected an increase in activity from buyers who have been waiting for interest rates to fall. Total deposit growth increased modestly in the District and was faster than the national rate.\nAgriculture and Natural Resources\nAgriculture conditions have worsened slightly since our previous report, as ongoing droughts continue to effect crop and livestock conditions. Of the District states reporting data through the end of December, the percent of winter wheat rated as fair or better was down only two percent relative to last year. Total wheat acreage in 2023 expanded significantly compared with 2022, returning to 2021 levels.\nConditions in Tennessee, where drought is the most extreme, declined more dramatically; the percent of Tennessee winter wheat rated fair or better fell 22 percentage points during the reporting period, ending at just 76 percent. While drought conditions improved slightly in Tennessee over the reporting period, the extent of moderate to severe drought increased throughout the northern areas of the District at the same time. Cotton and cattle farmers reported feeling the effects; some reported that they had to ship their cattle to other states as a result. In Arkansas, an energy firm announced plans to mine and produce lithium for electric vehicle battery production.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

/beige-book-reports/2024/2024-01-sf

"Beige Book Report: San Francisco\nJanuary 17, 2024\nSummary of Economic Activity\nEconomic activity in the Twelfth District was stable overall during the reporting period from mid-November through December 2023. Labor availability improved, and employment levels rose slightly. Price pressures eased, and wage growth moderated notably. Retail sales grew modestly, while activity in services sectors was mixed. Conditions in the agriculture and resource-related sectors were solid, but demand for manufactured products weakened. Residential real estate activity softened further, while demand for commercial real estate varied by property type. Conditions in the financial sector were largely unchanged. Communities across the Twelfth District continued to report housing affordability issues and elevated demand for support services. Looking ahead, contacts expressed optimism regarding the economic outlook, and most respondents expected a pickup in economic activity in 2024.\nLabor Markets\nLabor availability improved and employment levels rose slightly during the reporting period. Contacts reported a notable uptick in job applications and a drop in employee turnover in recent weeks. Employers generally found it easier to attract and retain workers in retail, financial services, legal services, skilled trades, and professional services. Hiring challenges persisted, however, in health care, aviation, and logistics, and employers still found it difficult to attract experienced engineers, information technology professionals, and mid-level managers. A workforce development agency in Southern California highlighted a recent increase in the level of educational attainment and vocational training among its recruits.\nWage growth moderated notably in recent weeks. Annual pay increases returned to historical averages across sectors and geographies, and several contacts noted that recent pay adjustments were primarily limited to positions affected by changes to local and state minimum wage levels. Starting pay reportedly fell for a wide range of positions in the technology and financial services sectors due to softer overall activity in these sectors. Wage pressures persisted in leisure and hospitality.\nPrices\nOverall price pressures eased in recent weeks, although price levels remained generally elevated. Fewer goods and services saw price increases relative to previous reporting periods, and prices reportedly fell for energy products, construction materials such as wood and cement, manufacturing repair parts, fabricated metal, and plastic resin, as well as for hotel rooms. Still, costs of utilities and several insurance categories, particularly health and property insurance, continued to rise. Prices of grocery products were generally stable, and several contacts expected these prices to drop slightly in coming weeks, in anticipation of input costs moderating.\nCommunity Conditions\nCommunities across the District continued to confront widespread shortages in affordable housing and associated increases in homelessness and housing insecurity. Demand for mental health services and food assistance programs remained elevated. Community service organizations continued to face challenges recruiting and retaining skilled workers. Funding availability was mixed, as some nonprofit organizations struggled to raise money while others benefited from an uptick in financial support from local governments. One contact observed that some nonprofit organizations opted to maintain hybrid or fully remote work arrangements to reduce or eliminate office rental costs.\nRetail Trade and Services\nRetail sales grew modestly over the reporting period. Retailers reported a solid holiday shopping season, which exceeded expectations in some cases. Home centers saw an uptick in demand for wood products, as customers favored home improvement projects over house purchases in a high interest rate environment. Retail businesses in Hawaii continued to report difficulties retaining labor in the aftermath of last summer's wildfire season, when many workers were displaced from their homes.\nActivity in consumer and business services was mixed. Business travel edged up as the number of conferences and group events continued to recover. Demand for restaurant and bar services was steady, while activity in other leisure and hospitality sectors, such as lodging, moderated over the past few weeks. Demand for health-care services grew, and providers reported approaching capacity. Conditions in the legal services sector were mixed according to type of practice, as demand softened for mergers and acquisitions and increased for commercial litigation and loan contract renegotiations.\nManufacturing\nManufacturing activity weakened over the reporting period. New orders were down for fabricated metals, manufactured wood products, and heavy equipment. Several manufacturers in the Pacific Northwest noted that lower construction activity reduced demand for their products, with one contact lowering production accordingly. Supply bottlenecks improved further, although some manufacturers reported recent delivery delays of critical production components, such as electrical equipment, auto parts, and textiles.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors were solid. Contacts reported robust yields and inventories of various products, including seafood and some permanent crops such as tree fruits. The resulting ample supply continued to hold down prices, buoying domestic demand for agricultural food products overall. International demand was strong, and exports for some crops rose. One contact in the Pacific Northwest noted that, while overall demand for logs fell due to slower construction activity, demand for forested land with timber resources continued to grow. Availability of product transportation services and raw materials used in agricultural production improved further, and supply bottlenecks eased. Still, producers mentioned elevated production costs, such as for packaging and labor.\nReal Estate and Construction\nActivity in the residential real estate market continued to soften. Demand for single-family homes was sluggish due to limited inventory, high mortgage rates, and greater interest in rental homes. Construction of single-family homes was solid in some areas, such as Arizona, but reportedly slowed in others, such as Oregon. The supply of multifamily rental units ticked up as more construction projects were completed recently, raising vacancy rates and causing rents to grow more slowly or even fall in some regions. In contrast, recent multifamily starts fell due to elevated construction costs and borrowing constraints.\nConditions in the commercial real estate market were mixed. While demand for retail and industrial space was solid, office leasing activity remained weak. Transaction volumes of commercial property sales were down as sellers' asking prices exceeded what buyers were willing to pay. Construction activity reportedly slowed for private-sector commercial projects due to financing constraints, while construction of government public and infrastructure projects expanded. Challenges obtaining some materials, particularly electrical equipment, persisted.\nFinancial Institutions\nConditions in the financial services sector changed little over the reporting period. Demand for business loans, particularly commercial real estate loans, was subdued. Residential lending activity remained weak. Demand for auto loans and other consumer credit products remained steady. A few contacts noted an uptick in consumer loan delinquencies, but overall credit quality remained high. Demand for deposits remained elevated, and deposit flows were stable. One contact observed some clients moving funds away from liquid accounts into term deposits to lock in higher interest rates for extended periods.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2024/2024-01-ri

"January 17, 2024\nSummary of Economic Activity\nEconomic activity in the Fifth District expanded mildly in recent weeks. Consumer spending on retail goods, travel, and tourism was steady to growing modestly. Spending on other nonfinancial services was reported to have been steady. Residential housing market activity and mortgage lending continued to soften despite some increase in housing inventory. Commercial real estate was unchanged, overall. Manufacturing activity, trade volumes, and trucking volumes were slightly to modestly lower this period. Employment and wages rose moderately amid a tight supply of labor. Price growth continued to moderate but inflation remained somewhat elevated compared to historical rates.\nLabor Markets\nEmployment in the Fifth District grew at a moderate pace in the most recent reporting period. The tight labor market led to continued wage pressure, resulting in several contacts making operational changes. A company that manages parking garages reported likely increases in prices and reductions in services due to all-time high wages. A specialized-software company's spending on salaries increased by 15 percent of total revenue, thus, significantly decreasing margins. As a result of increased wages, this firm expects to cut investment plans in 2024 since they need to continue hiring workers at higher wages to meet customer demand. Other contacts reported expanding their talent pools to find workers. For example, an engineering firm hired engineers with no work experience and spent time training them.\nPrices\nPrice growth continued to slow slightly in recent weeks, but year-over-year inflation remained somewhat elevated. According to our most recent surveys, growth in prices received by service providers fell by about half a percentage point to 3.8 percent. Growth in prices received by manufacturers ticked up slightly but remained moderate, overall, at a rate of 2.8 percent. Looking ahead six months, both manufacturing and non-manufacturing firms expect growth in prices received to continue to moderate.\nManufacturing\nFifth District manufacturing activity slowed somewhat in the most recent reporting period. An HVAC manufacturer reported an unexpected decline in new orders, resulting in the company curtailing expense spending to protect earnings. Contacts in some industries tied to discretionary consumer spending cited declines. A wine producer reported a 30 percent drop in sales as consumer demand dried-up. A dental laboratory reported a 10 percent drop in new orders as remaining yearly funds in FSA accounts were not used for dental work. However, some contacts reported unexpected increases in demand. An automotive fabric manufacturer, whose customers historically pull back on spending in December, experienced an uptick in new orders. Lastly, a paving equipment manufacturer saw a steady increase in demand due to a resilient housing market in their area.\nPorts and Transportation\nTrade volumes were down at Fifth District ports this period; imports were modestly lower year-over-year as wholesalers continued to work down high inventory levels. Loaded exports, however, were up this period. Spot shipping rates to the East Coast increased as carriers were dealing with issues at both the Panama Canal and the Red Sea. Empties were lagging but turn times were normal. Dwell times were fluid and stack occupancy remained low. Demand for airfreight was up slightly this period mostly due to ecommerce for the holiday season. Air cargo rates fell below 2019 levels due to higher capacity.\nTrucking firms reported that freight volumes were slightly lower this period without the usual seasonal uptick. In the truckload segment, the greatest demand for shipping were with food, medical, automotive, and retail. In the less-than-truckload segment, firms noted some weakness in the industrial segment. Freight rates declined due to overcapacity in the system. Respondents stated that drivers were more readily available but there was still some upward wage pressure. Trucking companies stated that there were no significant backlogs on orders of new equipment but occasional issues receiving certain parts. With firms exiting the trucking sector, used equipment was more readily available.\nRetail, Travel, and Tourism\nRetailers reported steady to slightly increasing demand and revenues in recent weeks. One small, local retailer attributed some of their increased sales volume to customers saying that they preferred to support local businesses rather than shopping online. A few retailers said that they were looking to expand their business by opening new locations, but due to high interest rates, they were delaying construction of those sites. Food service and entertainment venues reported no change in demand but declines in revenues and higher costs were not being passed through to customers. Travel and tourism contacts reported steady to increasing sales, hotel occupancy rates, and passenger air travel.\nReal Estate and Construction\nIn the Fifth District, residential real estate activity declined modestly this period due to the usual seasonal slowdown. However, buyer traffic increased this period as prospective purchasers were gearing up for a good spring market amid rising home inventory levels and declining mortgage rates. Home prices increased moderately and there were still multiple offers on desirable homes. Days on market increased slightly but remained below historic averages. Builders indicated that construction costs had moderated but there continued to be a shortage of some building materials and specialty sub-contractor labor. Appraisals were holding up and buyers were not having any difficulty obtaining mortgages.\nOverall market activity in commercial real estate was flat this period. Retail remained strong, especially with fast casual restaurant chains. In the office sector, Class A office space was tightening with more leasing activity related to firms upgrading their space and moving away from central business districts. A lack of available financing continued to constrain new development and refinancing within the broader CRE sector. Construction projects were mainly limited to the industrial and multifamily segments. Contractors noted that due to the high cost of construction there were few new CRE projects and, as such, their backlog of work was shrinking.\nBanking and Finance\nLoan demand continued to modestly soften across all loan types, with residential mortgage lending seeing the biggest slowdown in demand. Respondents were generally in agreement that the higher rate environment and continued economic uncertainty were the primary drivers in this continued downward trend. One institution noted customers were \"sitting on the sidelines\" waiting for more clarity regarding rates and the economy. Deposit balances remained flat with still a great deal of competition for any available funds being shopped amongst institutions. Loan delinquency rates and credit quality metrics remained stable with no movement up or down.\nNonfinancial Services\nNonfinancial service providers continued to report that demand for their services and overall revenues remained stable. One firm noted they saw more of their clients comparing prices when shopping for their services and were entertaining more offers from competitors. This level of competition put pressure on pricing and maintaining current clients. Wages and workforce availability continued to be a challenge with low unemployment rates and employees continuing to ask for wage increases. Uncertainty was still a theme with both the firms surveyed and their clients, which made the industry as whole quite cautious going into the new year.\nFor more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nJanuary 17, 2024\nThis report was prepared at the Federal Reserve Bank of Philadelphia based on information collected on or before January 8, 2024. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nA majority of the twelve Federal Reserve Districts reported little or no change in economic activity since the prior Beige Book period. Of the four Districts that differed, three reported modest growth and one reported a moderate decline. Consumers delivered some seasonal relief over the holidays by meeting expectations in most Districts and by exceeding expectations in three Districts, including in New York, which noted strong holiday spending on apparel, toys, and sporting goods. In addition, seasonal demand lifted airfreight volume from ecommerce in Richmond and credit card lending in Philadelphia. Several Districts noted increased leisure travel, and a tourism contact described New York City as bustling. Contacts from nearly all Districts reported decreases in manufacturing activity. Districts continued to note that high interest rates were limiting auto sales and real estate deals; however, the prospect of falling interest rates was cited by numerous contacts in various sectors as a source of optimism. In contrast, concerns about the office market, weakening overall demand, and the 2024 political cycle were often cited as sources of economic uncertainty. Overall, most Districts indicated that expectations of their firms for future growth were positive, had improved, or both.\nLabor Markets\nSeven Districts described little or no net change in overall employment levels, while the pace of job growth was described as modest to moderate in four Districts. Two Districts continued to note a tight labor market, and several described hiring challenges for firms seeking specialty skills, such as auto mechanics or experienced engineers in the Boston and San Francisco Districts, respectively. However, nearly all Districts cited one or more signs of a cooling labor market, such as larger applicant pools, lower turnover rates, more selective hiring by firms, and easing wage pressures. The pace of wage growth was characterized as moderate in Boston, Richmond, Chicago, and Dallas; as modest in New York and Philadelphia; and as slight in St. Louis. Firms from many Districts expected wage pressures to ease and wage growth to fall further over the next year.\nPrices\nSix Districts noted that their contacts had reported slight or modest price increases, and two noted moderate increases. Five Districts also noted that overall price increases had subsided to some degree from the prior period, while three others indicated no significant shift in price pressures. Firms in most Districts cited examples of steady or falling input prices, especially in the manufacturing and construction sectors, and more discounting by auto dealers. Districts also noted that increased consumer price sensitivity had forced retailers to narrow their profit margins and to push back in turn on their suppliers' efforts to raise prices. Premium increases for property and casualty insurance and for health insurance continue to impact most firms. Three Districts noted that their firms were expecting price increases to ease further over the next year, while four Districts' firms anticipated little change.\nHighlights by Federal Reserve District\nBoston\nEconomic activity was down slightly. Employment was stable, and wage growth was moderate. Manufacturers reported mostly weaker sales but remained cautiously optimistic for 2024. The Boston area experienced strong growth in tourism and convention activity. Home sales stayed in the doldrums, but contacts expressed optimism that the market would rebound in 2024 pending a decline in home mortgage rates.\nNew York\nRegional economic activity declined slightly. Labor market conditions remained solid but continued to cool as the demand for labor softened. Led by a strong holiday season, consumer spending increased moderately. Manufacturing activity contracted sharply. Prices rose modestly. Businesses and households across the District expressed concern about the high cost and reduced availability of credit.\nPhiladelphia\nBusiness activity held steady during the current Beige Book period\u2014after falling for most of 2023. Employment grew slightly, and labor availability improved. Wage and price inflation subsided further, with prices rising at a slight pace as consumers pushed back more on higher prices, especially among lower-income households. Sentiment improved, but firms remained cautious and expectations for economic growth remained subdued.\nCleveland\nDistrict business activity edged up. Employment stabilized, and wage increases returned to more typical levels. Cost and price pressures changed little after easing through much of 2023, though upward price pressure persisted in certain industries. Retailers reported strong sales for discounted items, and consumers became more reliant on \"buy now, pay later\" payment options.\nRichmond\nThe regional economy grew mildly in recent weeks as consumer spending was flat to increasing modestly. Nonfinancial services demand and commercial real estate activity was little changed. Meanwhile, trade and trucking volumes were down modestly and residential housing sales and mortgage lending softened. Employment and wages rose moderately and inflation moderated but remained elevated.\nAtlanta\nEconomic activity grew at a slow pace. Labor markets cooled further, and wage pressures eased. Some nonlabor input costs moderated. Retail sales were mixed. Travel activity remained strong, but spending at hotels declined. Home sales slowed, on balance. Banking conditions were mixed. Transportation activity was sluggish. Energy demand was robust.\nChicago\nEconomic activity in the Seventh District was up modestly. Employment increased moderately; nonbusiness contacts saw a modest increase in activity; consumer spending was up slightly; construction and real estate and business spending were flat; and manufacturing decreased modestly. Prices and wages rose moderately, while financial conditions loosened modestly. Net farm incomes were above average in 2023.\nSt. Louis\nEconomic activity has remained unchanged since our previous report. Labor markets eased, and the rate of price increases for many firms has slowed over the past few months. Travel and hospitality firms reported strong leisure travel growth during the holiday season and an optimistic outlook for the upcoming year. Rental prices were flat and residential inventory rose slightly.\nMinneapolis\nDistrict economic activity was down slightly. Hiring was positive but job postings declined. Wage pressures continued to moderate, approaching pre-pandemic conditions. Price increases were mild, with most firms reporting no change in input or final prices. Holiday sales and traffic were generally strong, but construction and manufacturing activity decreased.\nKansas City\nEconomic activity in the Tenth District declined moderately. Consumer spending fell, even at low-cost quick-serve restaurants. Demand for seasonal employment was low, with few workers converting to full-time. Commercial real estate transactions were suppressed, while CRE loan modification activity was inhibited by lenders' concerns about credit performance and borrower liquidity.\nDallas\nEconomic activity expanded at a modest pace over the reporting period, with most sectors holding steady or experiencing slight growth. Wage growth moderated and input cost and selling price growth held slightly above average overall. Business outlooks were neutral to pessimistic, with contacts citing weakening demand as the primary concern going forward.\nSan Francisco\nEconomic activity was stable overall. Labor availability improved, and wage and price pressures eased. Retail sales grew modestly, and demand for services was mixed. Demand for manufactured products weakened, while conditions in agriculture were solid. Real estate activity varied by property type. Financial sector conditions changed little.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/2024/2024-01-ph

"January 17, 2024\nSummary of Economic Activity\nOn balance, business activity in the Third District held steady during the holiday season after declining steadily for most of 2023. Employment grew slightly overall, although manufacturers reported fewer workers and shorter hours. Wage and price inflation appeared to subside further\u2014to a still-modest pace for wages, but to a slight pace for prices. Contacts noted increased consumer resistance to higher prices. Consumer spending held steady across most segments, although contacts noted an increasing divergence as low-income households spent less yet paid more on credit, while affluent households continued to spend freely. Ongoing concerns centered mainly on global issues and the 2024 election, while sentiment improved with the prospect of falling interest rates. On balance, expectations for economic growth over the next six months remained mostly positive but were below historical averages.\nLabor Markets\nEmployment slowed to a slight pace of growth\u2014following a modest pace in the prior period. In our monthly surveys, nonmanufacturing firms reported modest increases in full-time jobs but no change in part-time employment nor in the average employee workweek. Having fulfilled most of their backlogs, manufacturing firms reported a slight decrease in employment and a modest decline in the average employee workweek.\nSeveral contacts noted increased layoffs of midcareer professionals from finance, tech, and highly leveraged firms in other sectors but observed that most secured new jobs within months. Several contacts, including staffing firms, noted that businesses were becoming more selective when hiring. One staffing firm observed that many businesses overhired during the pandemic, then held steady in 2023\u2014they expect job levels to increase slowly as companies begin to hire again.\nOne firm that had raised wages competitively in recent years noted good talent among its staff and a lower turnover rate than in 2019. In 2024 it will add nonwage benefits, including mental health coverage and an employee stock ownership plan. Nonprofits reported that significant wage increases in 2022 had steadied hiring and retention rates\u2014now wage pressures have lessened, and hiring is easier.\nOverall, wage inflation appeared to continue subsiding but remained at a modest pace. Among nonmanufacturers, the distribution of firms reporting higher (39 percent) and lower (4 percent) wage and benefit costs per employee was typical of the mid-2010s, when modest wage growth prevailed. Most reported no change.\nPrices\nOn balance, price increases appeared to subside to a slight pace of growth after modest growth last period. Our monthly prices paid and prices received indexes declined for nonmanufacturers. Moreover, the prices paid index neared its nonrecession average, and the prices received index fell below average for the fifth time in the past seven months. Several small businesses observed that customers' resistance to higher prices increased further. For some firms, profit margins narrowed as food commodity costs remained volatile.\nMost manufacturing firms noted that their input costs steadied; some fell. The manufacturers' prices paid index rebounded to its average, while the prices received index remained near its average for a fifth consecutive month; over two-thirds of the firms indicated no change.\nMoreover, manufacturers' price expectations have fallen. The future prices received index fell to near its long-run average; the future prices paid index fell to half its average. Both indexes were positive, with over 35 percent of the firms expecting increases in the next six months.\nManufacturing\nOverall, manufacturing activity declined moderately during the period following a slight decline in the prior period. The index for new orders fell sharply, and the shipments index declined for a second month.\nExpectations among manufacturers for growth in the next six months strengthened but remained below historical averages. More than 40 percent of the firms expected increases in new orders and in shipments.\nConsumer Spending\nOn balance, retailers (nonauto) reported little change in real sales through the holiday period\u2014an improvement from the prior period's modest decline. However, online sales appear to have been stronger than in Third District brick-and-mortar retailers. Contacts noted continued pullback in spending from lower-income consumers.\nAuto dealers reported steady sales of new cars following a slight decline in the prior period. Contacts noted that dealers maintained sound profitability but that margins have begun to erode because supply constraints have eased and inventories have risen. One contact reported that dealers were lowering margins to move product off their lots. Another observed that the higher overall price of new cars\u2014especially given the rising mix of electric vehicles\u2014is further bifurcating the new and used car market, with lower-income households unable to afford new cars.\nTourism continued to edge down from still strong levels. Contacts reported slower bookings and less spending by tourists, so some hotels have started to lower rates. However, contacts further observed that as hotel rates are cut, spending at local restaurants and stores has risen. Several contacts noted that warm weather and excessive rain diminished the early ski season.\nNonfinancial Services\nOn balance, nonmanufacturing activity appeared to grow slightly\u2014for the first time since our February 2023 report. The index for new orders was close to zero, while the sales/revenues index increased to a modest pace. One large firm reported robust growth in the entertainment/destination sector.\nMoreover, firms signaled more positive sentiment. The index of general activity for the region returned to positive territory just as the index of general activity at the firm level did in the prior month. Nevertheless, expectations among nonmanufacturers for growth in the next six months remained about the same\u2014well below historical averages.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew moderately during the period (not seasonally adjusted)\u2014faster than the slight pace observed last period but similar to the same period last year.\nDuring the period, District banks reported moderate growth in home mortgages, auto loans, and other consumer loans. The volume of commercial real estate loans, home equity lines, and commercial and industrial loans grew modestly. Credit card volumes surged following no growth during the prior period\u2014typical for the year-end holiday season.\nBanking contacts continued to note generally sound credit quality even as delinquency rates ticked up from very low levels. Banks and business clients agreed that access to credit had tightened. Some small businesses reported higher usage of credit cards by customers, and that their customers noted a greater need to rely on credit cards.\nReal Estate and Construction\nBrokers reported that existing-home sales remained mired at historically low levels through November. Contacts are waiting until after the seasonal lull to see if consumers respond to lower mortgage rates, but overall sentiment improved. Meanwhile, the inventory of for-sale properties remained low, and prices remained high.\nOne new-home builder reported increased traffic during the holidays, another noted an uptick in contract signings in December, and all expressed increased optimism that 2024 would be a stronger construction year, with more closings and more new signed contracts.\nIn nonresidential markets, leasing activity and transaction volumes continued to decline slightly\u2014more so in the office market in which existing tenants continued to downsize their space and upgrade their quality as their leases expired.\nIn contrast, current construction activity held steady, although many contacts expect that the project pipeline will shrink before the end of 2024. New projects are slowly emerging in heavy industry and infrastructure.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/regional-economy .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2024/2024-01-mi

"January 17, 2024\nSummary of Economic Activity\nThe Ninth District economy contracted slightly since the previous report. Respondents to a December survey of business conditions reported declining demand and profits from the previous month. Employment grew modestly, but job openings were flat or lower for most contacts. Wage pressures continued to moderate, while price increases were mild. Consumer spending increased and holiday sales traffic was generally strong, while commercial real estate activity, agricultural conditions, and energy were flat. Construction and manufacturing activity fell, and residential real estate remained subdued. Minority- and women-owned businesses reported decreased activity.\nLabor Markets\nEmployment grew modestly since the last report. Overall hiring was still positive, but job openings were either flat or lower for most contacts. In Montana, the number of brand-new job postings fell notably in December compared with the previous month and year. District staffing contacts also reported that December job openings were generally flat or lower. Bank surveys showed that recent hiring demand slowed but future demand was expected to rise. Indexes of hiring sentiment in Minnesota and the Dakotas were mostly stable; one was modestly expansionary, and the other slightly contractionary. Contacts widely reported that labor supply had improved somewhat; more firms reported being closer to fully staffed and being more selective in hiring. A Montana staffing contact added, \"We are seeing more clients settling in with who they have and not hiring unless the candidate is perfect.\" A Wisconsin staffing contact said that businesses were \"getting more selective on who they hire... [and] contacting us to do confidential recruiting to replace underperforming employees.\"\nWage pressures continued to moderate, nearing pre-pandemic conditions. Staffing contacts in Montana, North Dakota, and Wisconsin said wage pressures were flattening and one-time wage enhancements were falling. A mid-sized Minnesota health care provider gave a wage increase of three percent, its lowest since before the pandemic: \"Wage growth is finally slowing.\"\nPrices\nPrice increases were mild since the last report. A substantial majority of firms responding to a monthly survey indicated no change to the prices they charged to customers in December from a month earlier, though most of the remainder indicated that they increased prices. Input price pressures were slightly greater, but most respondents also reported no change over the month. A regional manufacturing index indicated modest input price increases in December. Retail fuel prices in District states fell to their lowest levels in more than two years. Home heating costs were expected to be significantly lower this winter than last.\nWorker Experience\nUnemployed workers in Montana shared they were mainly focused on pay, benefits, and upward mobility as they searched for jobs. The difficulties they faced gaining employment were mostly due to skills gaps, but they also cited other factors, such as low pay and child care affordability. Employed workers who were looking for different jobs also faced a range of challenges. A single mother working in the nonprofit sector who has been trying to switch jobs for almost a year said that balancing her children's schedules, her own job, and household chores left her with little time to search and apply. A labor contact in the Upper Peninsula of Michigan shared that the exodus of public sector workers to the private sector had slowed. They said that high food prices in the area, particularly for meat, continued to stretch workers' budgets. \"I am hearing our union members talk more about starting to raise chickens and ducks... I am seeing more self-serve egg stands along the road,\" they added.\nConsumer Spending\nConsumer spending rose moderately since the last report. Contacts reported that traffic and spending during the holidays was generally higher. A retail industry contact in Minnesota said this year's holiday season exceeded expectations for many and \"felt very much like a pre-pandemic holiday season.\" A Minnesota mall contact said December traffic was about 15 percent higher than last year, with some days exceeding pre-pandemic levels. Sales at movie theatres, restaurants, and other food retailers were reportedly strong. A South Dakota retail contact noted that traffic was down in many places there, but overall spending was flat or slightly higher. Unseasonably warm weather helped get shoppers out to many stores, but sales of winter gear and equipment were negatively affected. Montana's lodging sector continued to see strong activity, but occupancy and revenue at Minnesota hotels were down slightly. New car and truck sales were higher in December at a District dealer with multiple locations.\nConstruction and Real Estate\nConstruction activity was lower overall since the last report. Among roughly two dozen construction contacts, recent sales were lower and profits have been particularly hard hit. Recent hiring demand has fallen somewhat, but sentiment was modestly more positive for the early part of 2024. Among sectors, firms in infrastructure continued to fare better thanks to federal spending. November and December commercial permitting was generally flat or lower in the District's larger markets compared with a year earlier. Residential building was constrained in many markets, but single-family permitting in Minneapolis-St. Paul saw sustained increases for several months, including December.\nCommercial real estate was flat overall. Vacancy rates for industrial space have ticked higher thanks to significant speculative building in the last year. Office markets remained soft, and reports of tenant concessions were rising. Retail vacancy has improved modestly thanks to stronger foot-traffic trends and lower levels of new construction. Residential real estate remained subdued, with year-over-year sales continuing to decline in November and December.\nManufacturing\nDistrict manufacturing activity decreased moderately since the last report. Preliminary results from a manufacturing survey found a substantial decrease in orders, production, and profits in 2023 from the prior year, though capital investment increased. Expectations for 2024 were mildly optimistic. Manufacturing sector respondents to a monthly survey reported sharply decreased sales in December from a month earlier. In contrast, a regional manufacturing index increased to levels indicating an expansion in activity in Minnesota, North Dakota, and South Dakota in December from a month earlier, though new orders decreased.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions were unchanged since the last report. Contacts across the region gave differing reports about farm incomes. Contacts generally agreed incomes were down substantially from a year ago, though some indicated they were stronger than expected. District oil and gas drilling activity was stable since the previous report, and industry contacts reported that production increased modestly. District iron ore mines continued to operate at capacity.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned business enterprises (MWBE) was lower on balance. Most businesses reported lower sales activity in the recent four-week period. A Minnesota retailer believed that diminished discretionary income among consumers was the main reason behind lower sales. Labor and nonlabor costs as well as final selling prices were slightly higher on balance. Some expected price pressures to extend into next month. \"It is extremely hard to keep up with wage and benefit pressures and competition for good, qualified and experienced therapists in this market,\" commented a health care contact. Profits continued to edge lower among half of MWBEs; a slightly lower share expected profits to remain low over the following weeks.\nFor more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2024/2024-01-kc

"Beige Book Report: Kansas City\nJanuary 17, 2024\nSummary of Economic Activity\nEconomic activity in the Tenth District declined moderately in recent weeks. Consumer spending fell across several categories. Contacts noted sales volumes at low-cost quick-serve restaurants, which had been robust despite pullbacks elsewhere, declined moderately in recent weeks. Community organizations providing food assistance indicated the number of persons seeking aid rose significantly, particularly among working families and seniors. Job gains were modest in the private sector, but several reports suggested other measures of labor demand weakened. For example, the use of seasonal employees was subdued at the end of last year, and businesses were reportedly much less likely to convert seasonal worker to full-time staff than in years past. Expected wage growth was reportedly much lower for the coming year. Despite the recent softening in activity, most contacts expressed a favorable outlook for the next six months. Prices grew slightly on average, but food retail contacts indicated they had no more ability to pass higher prices to customers. Contacts in commercial real estate (CRE) reported very low transaction volumes as potential buyers were waiting for, or pricing to, a bottom, creating large spreads between bids and asks that made price discovery difficult. CRE lenders reported minimal loan modification activity, citing concerns about future credit performance and lack of borrower liquidity.\nLabor Markets\nLabor market conditions in the Tenth District were mostly unchanged on balance due to increased hiring in manufacturing being offset by slight declines in services employment. Despite little change in hiring, contacts reported a notable reduction in labor utilization, reflected in declines in hours worked and reduced hiring of temporary and seasonal employees. Additionally, some retail and delivery businesses reported a shift in their approach to seasonal employment during the holiday season. While some businesses averted hiring of seasonal employees altogether, others noted that their conversion of seasonal employees to permanent employees was down relative to previous years. Business contacts across industries overwhelmingly reported expectations for a substantial deceleration of wage growth in the coming year.\nPrices\nPrices grew slightly over the last month on average, with reports mixed across industries. While manufacturing contacts reported moderate increases prices for finished products, service contacts reported a slight decline in prices, which they attributed to limits on their ability to pass still rising input and labor costs onto their customers. Food retailers were reportedly much less willing to accept higher input prices from distributors. In particular, grocers pushed back on their suppliers, citing concerns about their ability to pass cost increases onto customers.\nConsumer Spending\nConsumer spending fell moderately over the past month across several categories. Contacts at restaurants and other food service companies continued to report a decline in the number of customers served. Furthermore, they emphasized declines in sales volumes extended to quick-serve restaurants recently, which had previously seen strong demand even as spending at more expensive dining options was falling in recent months. Both new and used auto sales fell modestly. Spending on other large ticket items like home appliances and retail furniture also fell.\nCommunity Conditions\nFood insecurity reportedly worsened across most of the Tenth District as food assistance organizations reported substantial increases in the number of persons served compared to the same time last year. Most organizations said they were serving more working families and seniors. While high food prices continued to be an issue, organizations noted that the burdens of other cost-of-living increases significantly contributed to growing food insecurity. Nearly all organizations reported declining donations leading some to cut back their services, such as offering families assistance once every sixty days rather than every thirty days.\nManufacturing and Other Business Activity\nBusiness activity within the District declined modestly over the last month. Manufacturing activity contracted slightly, driven by weak orders and slowing production. However, sales at service companies declined more severely. Sales of durable goods declined robustly, due to high financing costs and an unwillingness for consumers to spend on bigger ticket items. Consumer discretionary businesses also saw substantial declines, as consumers were reportedly less willing to spend on non-essentials like leisure, travel, and eating at restaurants. Despite the recent softening in activity, the majority of contacts within both manufacturing and services sectors expressed a favorable outlook, with expected demand to be as high, or greater, over the next six months as compared to the past year.\nReal Estate and Construction\nContacts indicated transaction activity for commercial properties was suppressed in recent weeks. Potential buyers of many office properties, and some multifamily properties, were reportedly waiting for a bottom as loans are set to be repriced over the medium term. Those buyers not waiting on the sidelines were reportedly pricing to a bottom among distressed sellers, resulting in large spreads between bid prices and ask prices that made price discovery difficult in most markets. Some contacts suggested that transaction activity may pick up slightly in coming months as appetites for restructuring loans may increase after year end. Yet, falling rents and rising insurance costs adversely affecting net operating incomes remained widely cited concerns inhibiting loan restructuring when desired.\nCommunity and Regional Banking\nLoan demand weakened modestly across a range of loan types amid the backdrop of elevated interest rates and continued economic uncertainty. CRE demand was particularly weak due to rising borrowing costs and cash flow pressures. Coupled with this reduced demand for credit, contacts noted that loan quality worsened compared to this same period a year ago, driven largely by various consumer loan segments and commercial real estate deals. Bankers stated their credit standards remained unchanged and noted minimal modification activity for existing CRE borrowers. Concerns around future credit performance and lack of borrower liquidity were perceived as key barriers for future modifications in CRE deals over the near term. Deposit levels remained stable despite seasonal balance fluctuations and continued migration from noninterest-bearing accounts to higher-yielding products.\nEnergy\nAfter declining significantly in recent months, rig counts rebounded somewhat over the past month alongside a recent rise in oil and gas prices. District firms' drilling activity and profits fell, and are expected to increase only slightly in the next six months as near-term price expectations are below the price needed for a substantial increase in drilling activity. Despite this, employment levels rose somewhat, and firms expect either steady or slightly increasing employment in 2024. Capital expenditures remain steady with mixed expectations heading into the new year, even as most firms expect steady or increasing input prices and reduced access to credit.\nAgriculture\nAgricultural economic conditions in the Tenth District were steady through December, but softening farm income and credit conditions remained a concern. Crop prices were stable over the past month, ending 2023 considerably lower than a year ago. Profits narrowed the past year alongside the moderation in prices, particularly in areas where yields were impacted by drought. Corn and soybean yields increased slightly from last year in Nebraska and parts of Kansas but remained below the five-year average in all District states. Despite some recent volatility, cattle prices were strong alongside low inventories and supported profitability for cow/calf producers. Many District contacts cited ongoing pressure from elevated production costs and higher interest rates as major factors for the outlook of the farm economy in 2024.\nFor more information about District economic conditions visit: https://www.KansasCityFed.org/research/regional-research .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"January 17, 2024\nSummary of Economic Activity\nThe Eleventh District economy expanded at a modest pace over the reporting period, with most sectors holding steady or experiencing slight growth. Job growth picked up in the service sector. Wage growth moderated but high labor costs remained a key concern for many businesses. Overall input cost and selling price growth held slightly above average. Demand for nonprofit services remained elevated, and housing affordability and daycare access continued as key issues. Business outlooks were neutral to pessimistic, with contacts citing weakening demand as the primary concern going forward. Heading into an election year, U.S. political uncertainty was also noted by many firms.\nLabor Markets\nEmployment expanded modestly over the past six weeks, with services job growth picking up while manufacturing job growth abated. In a Dallas Fed survey of 365 business executives, around half reported still being understaffed. While labor availability has improved, many firms noted a mismatch between the skills and experience they desire and those of the job candidates. Some firms noted they were overstaffed, particularly in financial services and manufacturing, though very few were laying off workers. One contact said he considered layoffs but held off because he expects a rebound in business, and rehiring is difficult.\nWage growth was moderate across most sectors but remained slightly elevated in energy. Higher labor costs remained a top outlook concern for many businesses, particularly in education and health services and the leisure and hospitality industry. An urgent care center said wages and salaries were at a dangerously elevated level that is not sustainable in the long term. A December Dallas Fed survey showed that Texas businesses expect wage growth in 2024 to be 4.3 percent, on average, down from 5.6 percent in 2023.\nPrices\nInput cost growth remained slightly elevated overall, though energy firms continued to note strong rises in exploration and production costs while manufacturing raw materials price growth remained subdued. Selling price growth picked up a bit in the service sector but prices remained fairly flat for manufactured goods. District firms reported declining margins on net, with a manufacturer noting that maintaining a reasonable profit margin was elusive in 2023, with costs rising faster than they were able to raise prices. This sentiment was echoed by retail and services firms as well. Overall, contacts said they raised prices by 3.9 percent last year, on average, and expect to push through price increases this year on the order of 3.5 percent amid increased consumer price sensitivity.\nManufacturing\nTexas manufacturing activity was flat in December after contracting in November. Year-end weakness came largely from durables, particularly metals manufacturing. Manufacturers generally reported continued declines in demand, though chemical producers noted a stabilization as the unprecedented year-long global destocking cycle may have finally run its course. New orders for oil and gas machinery and equipment continued at a modest pace. Overall, manufacturing outlooks worsened slightly. More than a third of contacts cited uncertainty heading into an election year as a primary outlook concern, second only to weakening demand.\nRetail Sales\nRetail sales largely stabilized in December after a few months of declines. Auto dealers noted stronger sales and increased inventories, though they expressed concern over high interest rates. High interest rates also remained a top concern for wholesalers and construction-related retailers. Retail outlooks worsened overall, and uncertainty increased notably.\nNonfinancial Services\nService sector activity increased modestly in December after contracting slightly in November. Year-end strength was led by revenue growth in health care and leisure and hospitality. Professional and business services exhibited weakness, with some contacts saying new business is down and backlogs have shrunk. Revenue declines continued in transportation services, and contacts said air cargo volumes over the reporting period fell short of expectations. Passenger air travel was a bright spot, however, with record traffic and revenues over the Thanksgiving holiday and expectations for a strong finish to the fourth quarter. Overall, outlooks in the service sector were stable heading into 2024. Weakening demand remained the top concern, followed by higher labor costs and elevated inflation. Numerous contacts also cited U.S. political uncertainty, with one saying it \"weighs heavily on business leaders' minds right now.\"\nConstruction and Real Estate\nHousing demand improved slightly, as the recent decline in mortgage rates buoyed home sales. Buyer incentives remained prevalent, however, and outlooks stayed cautious with contacts citing economic uncertainty, diminished affordability, and tighter credit standards for construction and development loans as headwinds.\nActivity in commercial real estate was little changed. Apartment leasing picked up slightly though rents remained flat. Office leasing remained weak; vacancy rates were elevated, and concessions remained widespread. Industrial vacancy rates rose as new supply continued to outpace demand. Macroeconomic uncertainty, high capital costs, and reduced appetite to lend continued to deter investment sales and construction starts across property types.\nFinancial Services\nLoan volumes stabilized over the past six weeks after declines, and the pace of credit tightening decelerated. Loan demand continued to decline, though at the slowest pace since the end of 2022. Loan nonperformance rose again, still largely driven by consumer loans. Loan pricing continued to increase but at a slower rate. Bankers reported that core deposit volumes increased over the reporting period, following several months of decreases. Although bankers remain pessimistic and expect future business activity and loan demand to decline, the slowdown is anticipated to be milder than prior expectations.\nEnergy\nOil and gas activity was essentially flat over the past six weeks. Exploration and production firms continued to report increases in oil and natural gas production, while support services firms continued to report declines in business activity and equipment utilization. The increase in mergers and acquisitions seen in 2023 continued put a lid on growth in oilfield activity and is expected to extend into 2024. Production growth this year is expected to be driven by higher productivity more so than from drilling more wells. Several firms noted elevated uncertainty, citing mounting downside risks to the global demand outlook.\nAgriculture\nDrought conditions continued to recede, and contacts noted generally good soil moisture and an expectation for better crop production prospects this year with El Ni\u00f1o conditions forecasted through the spring. Agricultural prices were down across the board over the past six weeks. While cattle prices remained higher than a year ago, some grain prices have pulled back to two or three-year lows. Contacts noted that farmers will need strong crop yields this year to make the budget work with high production costs and relatively low grain and cotton prices.\nCommunity Perspectives\nDemand for nonprofit services remained elevated. Housing affordability continued to be a top concern, with higher rent outpacing income among many renters, and higher mortgage rates making home ownership less attainable. Nonprofits noted that families are also struggling with the costs of healthcare, food, utilities, and transportation. Access to affordable childcare remained a key barrier to parents' participation in education and the workforce although some contacts noted that more work schedule flexibility has been helpful. Contacts said that childcare subsidies, while helpful, are not immediately available and come with limitations. An executive at a workforce development board said she has never seen so much interest in solving childcare issues, particularly among employers.\nFor more information about District economic conditions visit: https://www.dallasfed.org/research/texas .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

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"January 17, 2024\nSummary of Economic Activity\nOn balance, reports from contacts suggested that business activity in the Fourth District had increased slightly in recent weeks. Contacts generally expected business activity to increase slightly in the months ahead. Consumer spending increased slightly. General merchandisers said sales were strong for discounted items, and customers increased usage of \"buy now, pay later\" payment options. Manufacturers reported a recent increase in demand, and backlogs for 2024 were solid. Residential construction and real estate contacts said that activity was soft, while nonresidential construction activity had reportedly rebounded since the prior period. On balance, staffing levels were stable, and many firms returned to offering \"more typical\" annual wage increases. After easing throughout 2023, nonlabor cost and price pressures changed little in recent weeks; however, there was some indication of upward price pressure in certain industries.\nLabor Markets\nOn balance, contacts reported that employment was flat to slightly down during the recent reporting period. Many firms across industries said they were maintaining headcount or hiring only to replace departing workers or underperforming staff. Some firms reduced staff to \"right size\" in the face of lower demand, while others restructured by replacing select roles with automation or rotating staff among multiple locations. Contacts generally expected little change in employment in the coming months.\nWage pressures were largely unchanged in recent weeks and many firms returned to offering more typical annual increases than in the past few years. For example, one manufacturer said employees would receive an average three percent adjustment this year compared to four percent to six percent increases in the previous year. Some retail firms opted not to increase wages but offered year-end bonuses or increased paid time off. While broad wage pressures eased over the past year, they remained elevated for select workers with specialized skills such as lawyers, accountants, and auto repair technicians.\nPrices\nNonlabor cost pressures were relatively unchanged in recent weeks after easing through much of 2023. Some restauranteurs reported that food costs had flattened out, and many manufacturing and construction contacts suggested that input costs were \"leveling off.\" One construction contact noted that \"Final pricing for several projects came in about 10 percent less than budget.\" However, several manufacturers said that a recent uptick in steel prices was likely to raise costs for some inputs as contracts renew at the start of the year. Still, many firms across industries reported continued cost increases for health and property and casualty insurance.\nPrice pressures changed little from those of the prior period after easing through the second half of 2023; however, there were some signs of upward price pressures in certain industries. Many retailers reported holding prices steady. Several auto dealers noted offering \"significant discounts\" after a long period of not doing so when inventories were severely constrained. Most manufacturers reported no change to their selling prices, though some were increasing prices to cover higher costs. Some business services firms said they will be raising rates in 2024 after a period of holding back, with one saying, \"[We] held rates at 2019 levels through 2023.\"\nConsumer Spending\nConsumer spending increased slightly following a decrease during the prior reporting period. Multiple general merchandisers and one apparel retailer cited strong sales centered on discounted items, while restauranteurs and food retailers reported mostly steady sales through the holiday season. By contrast, auto dealers continued to report slow sales because of high interest rates and high vehicle prices. One large general merchandiser said that lower-income households had become more reliant on credit cards and \"buy now, pay later\" payment options in recent months and was skeptical that these customers could sustain their current level of spending once seasonal promotions ended. On balance, contacts expected consumer spending to soften somewhat in the coming months.\nManufacturing\nDemand for manufactured goods increased from that of the prior reporting period, supported by the end of the UAW strike and ongoing federally funded projects. Contacts generally reported healthy order backlogs, and one manufacturer of machined parts said that their firm's 2024 backlog had increased by 30 percent since early November, leading to the highest single-year backlog in the firm's history. Reports from steel manufacturers were mostly positive, and one primary steel producer outlined growing confidence about general economic conditions among their firm's customers. On balance, manufacturers expected demand and orders to increase modestly in the near term.\nReal Estate and Construction\nResidential construction and real estate contacts reported that activity remained soft in recent weeks. However, one homebuilder reported an increase in inquiries as mortgage rates declined. Existing-home inventories remained low and below prepandemic levels, a circumstance which continued to constrain sales. Looking ahead, contacts anticipated activity would increase because they expected mortgage rates to fall further. One real estate agent expected \"buyers who left the market [when rates peaked] to reenter the market.\"\nNonresidential construction rebounded in recent weeks. One commercial builder noted that declining interest rates and greater optimism about the economic outlook had boosted demand. Moreover, multiple general contractors reported that customers had elected to move forward with previously delayed projects. Commercial real estate and construction contacts expected demand to remain mostly stable in the near term.\nFinancial Services\nReports from bankers were mixed but were generally less downbeat than during recent reporting periods. While most lenders reported that consumer and commercial loan demand declined in recent weeks because of still-high interest rates, a few noted that loan activity had stabilized or even increased. Looking ahead, bankers anticipated that loan demand would stabilize if interest rates remained steady or declined. One banker said, \"we're [not] building pipelines like we were before. Doesn't seem that strong, [but] doesn't seem that weak.\" Core deposits were flat, and a few bankers noted that clients continued to move funds into interest-bearing accounts. On balance, bankers reported that delinquency rates remained low.\nNonfinancial Services\nOverall, freight activity declined again in recent weeks. However, one transportation contact indicated that year-over-year comparables had recently turned positive, and multiple haulers anticipated freight activity would stabilize in the coming months. Professional and business services contacts reported steady demand as economic activity remained resilient. One contact mentioned that an expected \"pullback in discretionary marketing expenses for 2024\" had not yet materialized. Another added that \"interest rate stability and hopes for a soft landing\" bolstered demand for the firm's services. Looking ahead, professional and business services contacts expected activity to increase in the coming months.\nCommunity Conditions\nNonprofit childcare providers reported that funding had decreased even as demand for childcare services had increased during the past six months. Pandemic-era funding, such as that from the Child Care Stabilization Grant program that ended in September 2023, had primarily been used to pay staff salaries or bonuses. With the loss of government funding, one Cleveland-area provider said, \"We are forced to increase costs for private-pay families as the funds available are not sufficient to provide a living wage to our staff. It has also put a lot of pressure on us to privately fundraise to fill the gap.\"\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"January 17, 2024\nSummary of Economic Activity\nEconomic activity in the Seventh District was up modestly overall in late November and December. Contacts generally expected a small decline in demand over the next year. Employment increased moderately; nonbusiness contacts saw a modest increase in activity; consumer spending was up slightly; construction and real estate and business spending were flat; and manufacturing decreased modestly. Prices and wages rose moderately, while financial conditions loosened modestly. Net farm incomes were above average in 2023.\nLabor Markets\nEmployment rose moderately over the reporting period and contacts expected a similar rate of increase over the next 12 months. While several contacts continued to report difficulty finding workers\u2014especially in manufacturing\u2014there also were further signs that the labor market was cooling. Some contacts noted that applicant pools had grown, and contacts in construction, real estate, and finance reported staffing reductions. Wages rose moderately, and contacts indicated that wage pressures had eased considerably compared with 6 months ago. Benefits costs increased as new insurance rates took effect in the new year.\nPrices\nPrices rose moderately overall in late November and December and contacts expected a similar rate of increase over the next 12 months. Producer prices moved up moderately. Nonlabor input costs continued to rise, with contacts reporting increases in raw materials, energy, and shipping costs. One contact in heavy machinery manufacturing noted greater pushback on price increases from customers. Consumer prices also increased moderately overall, though several retail contacts noted more modest price growth.\nConsumer Spending\nConsumer spending increased slightly on balance over the reporting period. Nonauto retail sales were up slightly. Contacts reported that holiday sales met expectations, which had been for a small improvement over last year's level. Apparel and grocery sales were relatively strong, while consumer durable goods sales were soft. Leisure and hospitality spending rose modestly, with contacts highlighting increased sales at restaurants. Light vehicle sales rose slightly. Dealers said solid overall demand continued to keep prices high, but that many consumers were substituting toward smaller, more affordable models.\nBusiness Spending\nBusiness spending was flat overall in late November and December. Capital expenditures were up slightly, with several contacts reporting investments in computers, software, and new vehicles. However, demand for truck transportation services declined slightly. Inventories were comfortable for most retailers; auto dealers' inventories were around desired levels following an extended period with lower than desired inventory. In manufacturing, many contacts again stated they were no longer experiencing input shortages, and some even noted that their inventories were a little high.\nConstruction and Real Estate\nConstruction and real estate activity was little changed on balance over the reporting period. Residential construction activity was flat. Contacts said that high labor and materials costs, elevated interest rates, and slower rent growth were all slowing the pace of new multifamily construction. Residential real estate activity decreased slightly, with contacts highlighting a decline in multifamily leasing. High mortgage rates continued to put a damper on home sales, though one contact noted that the recent decline in rates had supported some new activity. Home prices were up slightly. Rents rose overall, though one contact noted that the percentage of multifamily units offering concessions had increased. Nonresidential construction activity increased slightly, while prices were unchanged. One auto dealership group said that the expectation interest rates would begin falling soon was a factor in their proceeding with a project to increase service-center capacity. Commercial real estate activity was unchanged. Demand for industrial properties remained at elevated levels. While prices fell slightly, rents, vacancy rates and the availability of sublease space were all unchanged.\nManufacturing\nManufacturing demand decreased modestly overall in late November and December. Steel orders were down modestly, with one contact reporting a decline in sales to the auto sector. Fabricated metals orders ticked down, led by lower demand from residential construction. Machinery sales decreased slightly. Auto production returned to levels seen before the UAW strike, according to contacts. Heavy truck demand remained low amidst weak freight markets and the bankruptcy of a major carrier.\nBanking and Finance\nFinancial conditions loosened modestly on balance. Bond and equity values increased moderately while volatility fell modestly. Business loan rates were steady, terms tightened slightly, and loan quality decreased slightly. Business loan demand was flat. One banking contact noted that their clients in the auto industry weathered the UAW strike well. Consumer loan rates were little changed overall and terms tightened slightly. Loan demand fell some as did loan quality, with one contact reporting \"normalized levels of past dues\" for consumer loans after an extended period of below average past dues.\nAgriculture\nDistrict net farm income was above average for 2023 according to contacts, helped by stronger than expected crop yields. However, expectations for 2024 farm income were lower, as prices started the year below break-even levels for many commodities. Corn and soybean prices edged down during the reporting period while wheat prices were up a bit. Cost changes for crop production inputs were mixed. Dairy, hog, and cattle prices decreased. Egg prices were slightly higher and rising avian influenza cases led to concerns about a repeat of last winter's large outbreak. Contacts felt District farms generally ended 2023 in strong enough financial positions to weather whatever 2024 brings.\nCommunity Conditions\nCommunity and nonprofit contacts saw a modest increase in economic activity over the reporting period. Workforce development agencies said that continued tight labor market conditions were making it easier than usual for individuals facing barriers to employment to find work, and economic development agency contacts reported the approval of several new projects in their areas. In contrast, a state government official saw some decline in tax revenues. Contacts at small business development organizations said that high interest rates combined with other rising costs, such as for insurance, were deterring clients from expanding. While the slowing rate of inflation was welcome, social service organizations noted that low income consumers were still facing the challenges of rising housing costs, additional expenses for clothing and heating during the winter months, and the end of COVID-era government financial support.\nFor more information about District economic conditions visit: https://chicagofed.org/cfsec .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2024/2024-01-bo

"January 17, 2024\nSummary of Economic Activity\nEconomic activity declined slightly on average, employment was roughly flat, and prices increased at a modest pace since the last reporting period. Retail revenues increased slightly, while tourism activity grew at an above-average pace. Software and IT services firms reported stable revenues, while manufacturers experienced slightly weaker sales. Residential real estate sales held steady at very low levels, although the prospect of lower interest rates in 2024 led to increased optimism for the housing market. Commercial real estate activity weakened further modestly, and the outlook in that sector remained mostly pessimistic, despite expected declines in borrowing rates. In sectors aside from real estate, the outlook for 2024 remained cautiously optimistic.\nLabor Markets\nEmployment was flat on average, and wage growth remained moderate. Hospitality and retail headcounts increased slightly, while employment was unchanged at software and IT firms. Manufacturing employment was also mostly stable, with the exception that a drug manufacturer carried out further large layoffs based on earlier plans. Hiring became easier on balance, and attrition rates fell to below-average levels. Nonetheless, labor scarcity persisted for auto mechanics and some highly skilled manufacturing workers. A shortage of restaurant help led one Vermont establishment to reduce its hours, but restaurant worker supply rebounded on Cape Cod. Wage growth was generally moderate, but some manufacturers and IT firms enacted above-average wage increases to compensate for price inflation. Contacts were not planning for major changes in employment moving forward, and wage pressures were expected to ease somewhat.\nPrices\nPrices increased at a modest pace on average. Among manufacturers, output prices increased at a slight to modest pace. In contrast, their input prices were mostly flat, except that fish commodities and shipping container costs each fell moderately, and localized flooding created a cost shock in one case. An online retailer continued to shift away from heavy promotional activity in favor of more stable pricing strategies; its average output price increased moderately, while its input prices were stable. Hotel room rates in the Greater Boston area edged up further, maintaining an above-average year-over-year growth pace, while room rates on Cape Cod were down slightly. Automobile list prices were steady, although promotional activity picked up following an increase in inventories. Software and IT services firms reported mostly stable output prices. Across sectors, contacts expected prices to hold steady or face only limited upward pressure in 2024.\nRetail and Tourism\nFirst District retail and tourism contacts on balance reported a modest seasonal upswing in sales in late 2023, although reports were quite mixed. On Cape Cod, revenues at retailers and hoteliers were described as \"solid\" for the fall season. Nonetheless, those revenues, net of typical seasonal fluctuations, were about flat since summer and down modestly relative to the fall of 2022. An online retailer saw modest seasonal growth despite sluggish industrywide performance. New and used automobile sales in New Hampshire were flat on balance despite improvements in inventories. Airline passenger traffic through Boston increased at an above-average pace in recent months, with the result that traffic surpassed its comparable 2019 levels for the first time since the onset of the pandemic. Hotel occupancy in greater Boston also increased at a strong pace, exceeding seasonal norms, fueled in part by robust convention activity. The outlook for tourism and convention activity for Boston in 2024 remained very bullish. In contrast, retailers around the First District were only cautiously optimistic for sales in 2024.\nManufacturing and Related Services\nOn average, manufacturing contacts reported slightly weaker sales. In one exception, a manufacturer of consumer goods experienced strong seasonal sales growth that was buoyed by promotions. A semiconductor manufacturer attributed weaker demand for their products to a general slowdown in consumer spending on electronics and autos, while a frozen fish producer attributed flat demand to increasing price sensitivity by consumers. Consistent with previous plans, capital spending was set to slow on balance moving forward, as a few firms recently completed significant capital projects and another cited high borrowing rates as an ongoing deterrent. Despite recent softness in sales, contacts were cautiously optimistic that demand would stabilize or improve in 2024.\nIT and Software Services\nFirst District contacts in the IT and software services industry experienced stable revenue streams in recent months. Sales increased at a robust pace on a year-over-year basis to the fourth quarter, and those positive results were attributed to offering products and services that met their clients' demands for greater operational efficiency. In response to price increases and cost reductions over the past year, profit margins increased modestly on balance in 2023. Capital and technology spending was flat for most firms but fell slightly at one that cut its reliance on hardware in favor of cloud computing services. Contacts expected demand to remain strong and stable moving into 2024, reflecting increased optimism for their own results and for the economy in general, compared with their forecasts from earlier in the year.\nCommercial Real Estate\nCommercial real estate activity in the First District weakened further modestly in recent months. In the already-weak office market, vacancy rates increased moderately on average, and Providence in particular saw the exit of a large downtown tenant. Office rents fell noticeably in the Boston area in recent months but were reportedly stable (if low) elsewhere. Demand for life sciences space in greater Boston dwindled further to very low levels. In the retail market, rents and vacancy rates were mostly steady at moderate levels, although lower-end malls continued to see elevated vacancies. Demand for industrial space slowed further at a modest pace, but rents and occupancy rates were described as mostly stable at healthy levels. Projections for commercial real estate activity in 2024 were mixed but remained pessimistic on balance. Some contacts predicted an increase in investment activity driven by declining interest rates. Others remained concerned that office buildings would face rising foreclosure rates even with some decline in interest rates. The industrial property market faced modest downside risks, and the outlook for Boston's life sciences properties deteriorated in response to weak recent demand.\nResidential Real Estate\nContacts reported weak but mostly stable home sales in November 2023, net of seasonal patterns. However, contacts from the Boston area noted slightly weaker sales in November, adding that the median home price declined modestly in recent months as a result. Considering year-over-year changes, single-family sales fell by double-digit margins in November in all First District states except Connecticut (for which no data are available); condo sales fell by moderate-to-steep margins in all states except Maine, which posted a slight increase. Nonetheless, the rate of decline in home sales moderated on average from earlier in 2023. Median sales prices increased moderately on a year-over-year basis in all reporting states, a development attributed to persistent scarcity of supply and significant pent-up demand. Changes in home inventories were mixed, and despite modest recent increases in supply in some states, inventories remained historically low. Looking ahead, contacts expressed growing optimism for a resurgence in residential sales in 2024 given the prospect of lower mortgage rates.\nFor more information about District economic conditions visit: https://www.bostonfed.org/in-the-region.aspx .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nJanuary 17, 2024\nSummary of Economic Activity\nEconomic activity in the Second District declined slightly during the latest reporting period, continuing a period of sustained weakness. Labor market conditions continued to cool but remained solid. Employment growth slowed to a slight pace, as demand for labor softened with economic uncertainty inhibiting hiring plans. Inflationary pressures were little changed, with prices rising modestly. Consumer spending increased moderately, with strong holiday spending on apparel, toys, and sporting goods. Manufacturing activity fell sharply, with notable declines in orders and shipments. Tourism activity in New York City approached normal pre-pandemic holiday levels. Housing markets were mostly unchanged since the last report, with low inventory continuing to restrain sales activity in most of the District, but residential rental markets softened. Commercial real estate markets mostly held steady. Activity in the broad finance sector declined modestly, with ongoing weakening loan demand and rising delinquencies. Businesses and households across the District expressed concern about the high cost and reduced availability of credit. The outlook improved but remained subdued.\nLabor Markets\nLabor market conditions continued to cool since the last report but remained solid. Employment growth slowed to a slight pace, though businesses in information services, manufacturing, transportation, and construction reported declines in employment in recent weeks. Though the availability of workers has improved, contacts noted that demand for workers softened as economic uncertainty inhibited hiring plans. Indeed, many mid-sized companies have stopped hiring, while smaller companies have become more selective in who they hire. Contacts across a variety of sectors noted that attrition remains exceptionally low.\nWages grew modestly. As conditions have continued to normalize, contacts reported that labor demand and supply have come into better balance, reducing the need for outsized wage adjustments seen through the pandemic. Still, a major payroll and human resources firm reported that bonuses were up in 2023, with more employees receiving bonuses and solid increases in average bonus percentages. Looking ahead, more firms plan on increasing headcounts in the coming months than in the previous period.\nPrices\nInflationary pressures were little changed, with prices rising modestly. On balance, the pace of input price increases continued to moderate. Contacts reported that prices for some goods, such as paper, ink, and construction materials have stabilized, while the cost of freight and insurance continued to rise. The pace of selling price increases rose slightly in the service sector but continued to moderate slightly for manufactured goods. However, construction firm contacts pointed to declining selling prices. Contacts do not anticipate significant shifts in the pace of selling price increases in the coming months.\nConsumer Spending\nLed by strong holiday sales, consumer spending was up moderately during the reporting period. Spending on apparel, toys, and sporting goods was particularly strong, while spending at restaurants and bars declined somewhat. Despite the higher cost of credit, auto dealers in upstate New York reported solid sales activity for both new and used cars at the end of 2023. With inventory continuing to improve, more buyers are able to find their vehicles of choice and ongoing declines in used car prices continued to boost sales in that segment of the market.\nManufacturing and Distribution\nManufacturing activity fell sharply, with orders and shipments declining. Transportation and distribution firms also reported declining activity. Supply availability continued to improve, with several contacts reporting that supply chains have returned to pre-pandemic norms. Moreover, an upstate auto industry contact reported that the shortage of microprocessors that stalled auto production for much of the pandemic period has largely been resolved. Still, slow delivery times remained a challenge for some industries. One local business contact reported a four-year lead time for specialty equipment delivery. Inventories increased slightly, while unfilled orders declined. Looking ahead, while manufacturers expect business conditions to improve modestly, optimism remained subdued.\nServices\nOn balance, service sector activity declined slightly in the latest reporting period. While businesses providing education and health services reported a modest increase in activity, business services firms indicated activity declined somewhat, and personal services businesses pointed to a sharp contraction. Service firms generally expect conditions to improve somewhat in the months ahead.\nA New York City tourism contact reported that the city was bustling over the holiday season, with visitor levels at normal pre-pandemic levels, busy pedestrian corridors, and long queues for entry at museums. Hotel bookings were significantly higher this year compared to the same time last year, with hotel occupancy rates notably higher than other top U.S. tourism markets. However, some inventory of hotel rooms has been set aside for emergency housing for asylum seekers, reducing the stock of available rooms. Despite economic and geopolitical concerns, contacts are optimistic about a return to normal tourism levels in 2024.\nReal Estate and Construction\nHousing markets were mostly unchanged since the last report, with low inventory continuing to restrain sales activity in much of the District. Demand remained solid, with buyers who have been waiting on the sidelines for a drop in mortgage rates returning to the market. Inventory remained exceptionally low in the New York City suburbs, while inventory increased slightly in upstate New York. In general, contacts reported that home prices have continued to trend up. New York City was the exception, where prices have leveled off as supply has normalized.\nNotably, residential rental markets softened after a sustained period of strength. Rents fell across the District, but particularly in New York City, where new lease activity continued to decline and rents dropped below last year's level. A contact in upstate New York noted that some investors who purchased and converted homes for rental income have started to sell their properties, reducing options for renters but increasing the supply of homes for sale.\nCommercial real estate markets were unchanged for most markets. New York City office vacancy rates were steady near historic highs and rents declined slightly. Upstate New York office markets saw continued increases in vacancy rates, but rents were unchanged. In the industrial market, small improvements were seen in downstate New York while conditions in upstate New York deteriorated.\nConstruction contacts reported that activity declined modestly since the last report. Office construction dropped, but industrial construction grew with high volumes under construction and significant deliveries set for 2024 in downstate New York and northern New Jersey.\nBanking and Finance\nActivity in the broad finance sector declined modestly during the latest reporting period. Contacts from a variety of sectors expressed concerns about the high cost and reduced availability of credit. Small to medium-sized banks in the region reported declining loan demand across all loan segments, including refinancing. While banking contacts reported that credit standards were unchanged for consumer loans and residential mortgages, standards continued to tighten for business loans and commercial mortgages. On balance, deposit rates were higher, loan spreads narrowed, and delinquency rates continued to rise.\nCommunity Perspectives\nHouseholds in the District have experienced greater difficulty meeting financial obligations. Though credit has become harder to get, many families have accumulated high debt burdens. To help ease these burdens and protect households, state and city governments have responded with new policies. Notably, New York State has enacted legislation prohibiting medical providers from reporting medical debt to credit bureaus, preventing the cascading effects of adverse credit reporting on household finances. Other policies have distributed funds directly to individuals, including one providing funds to cover back rent to residents of public housing managed by the New York City Housing Authority.\nFor more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/2024/2024-01-at

"January 17, 2024\nSummary of Economic Activity\nThe economy of the Sixth District grew slowly from mid-November through December. Labor availability and employee retention continued to improve, but hiring slowed for some firms, and wage pressures eased further. Nonlabor costs moderated for the most part, and pricing power slipped. Holiday retail sales were mixed; auto sales were strong. Travel activity was healthy, but spending at hotels continued to slow. Despite declines in mortgage interest rates, the housing market remained encumbered by the lack of affordability. Commercial real estate activity was sluggish. Transportation activity remained weak. Lending grew for certain types of loans, but consumer lending declined. Activity in the energy sector was robust. Agriculture conditions were mixed.\nLabor Markets\nLabor markets continued to cool, and some employers slowed hiring. Most contacts continued to report that labor markets had softened from earlier in the year amid more available labor and stronger retention rates. Many indicated that staffing levels had improved from a year ago; however, hiring in the leisure and hospitality sector remained challenging. Additionally, the lack of affordable housing was cited as an impediment to attracting workers to some areas. Weaker demand for products and services caused some employers to reduce hours or slow hiring which they expected to continue through the first half of 2024. One firm said that they were choosing to hold positions open and were \"slow walking\" new hires, as they sought to supplement productivity with Generative A.I. across all business lines and functions.\nMost firms indicated that wage pressures continued to ease, and more modest wage growth is expected in the coming year.\nPrices\nNonlabor input cost increases moderated over this reporting period. Firms cited improvements in supply chain predictability, contributing to lower freight and shipping costs. Construction costs were mixed; lumber costs decreased while concrete increased. Food product costs declined. The easing of some input costs was offset by persistent growth in labor and insurance costs, and most firms held consumer prices steady even amid diminishing pricing power. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth decreased significantly in December to 2.9 percent, on average, from 3.2 percent in November; firms' year-ahead inflation expectations for unit cost growth remained relatively unchanged in December at 2.4 percent, on average.\nConsumer Spending and Tourism\nConsumer spending generally continued the trend of normalization from the pandemic's strong pace of growth. Holiday sales were mixed. In line with pre-pandemic trends, contacts reported managing inventories more closely and many offered customary promotions and discounts. Auto sales remained strong, On average, retailers' outlook remains positive for the first half of 2024.\nHoliday travel activity was characterized as healthy, on balance, by tourism and hospitality contacts. Spending on merchandise, food, and services in hotels, however, decreased compared with the same time last year. Contacts are cautiously optimistic about travel demand in the first quarter, but characterize the environment as normalizing back to pre-pandemic levels.\nConstruction and Real Estate\nAlthough mortgage rates retreated during the fourth quarter of 2023, home sales in the District were slow to respond, as most markets remained unaffordable for median income earners. Homeowners also faced challenges with other rising costs, such as property insurance. Florida, with strong demand generated from out-of-state buyers, is the only Sixth District state reporting increases in existing home sales compared with a year ago. Inventories of homes for sale, though still tight, were boosted by new construction. Sales strategies varied by homebuilder; smaller builders focused on reducing home sizes, while larger builders reported buying down interest rates to generate demand.\nThe Sixth District's office market continued to encounter negative absorption rates and diminishing occupancies. Leasing activity at the end of 2023 dropped to 2020 levels, creating a \"tenant's market,\" where landlords were forced to offer incentives. Market conditions are expected to remain challenged in 2024 as new construction is delivered. Other property segments experienced weakening conditions as well; contacts in industrial markets reported that the amount of square feet in the pipeline is running well ahead of absorption, resulting in higher vacancy levels. Contacts expressed concerns over rising commercial real estate loan maturities in 2024.\nTransportation\nTransportation activity remained muted over the reporting period. Railroads reported declines in year-to-date total traffic; intermodal shipments were down significantly. Trucking firms cited continued softness in freight volumes, which is expected to continue well into 2024. Some carriers anticipate that additional trucking capacity will be taken offline in the next year as small owner-operators fold, and large carriers reduce capacity amid deteriorating demand. A few logistics contacts hinted at re-emerging supply chain constraints resulting from drought conditions in the Panama Canal, as shippers are forced to deploy to the Suez Canal, extending lead times for products from China and southeast Asia.\nManufacturing\nManufacturing activity slowed slightly. Some contacts reported declines in new orders and backlogs of work, along with rising finished goods inventories and faster supplier delivery times. The Manufacturing Sector Report of the Atlanta Fed's Business Inflation Expectations Survey showed that for the majority of respondents, demand had decreased or was on par with year-earlier levels. The outlook is cautiously optimistic but concerns such as inflation, interest rates, and geopolitical uncertainty were mentioned.\nBanking and Finance\nLending at Sixth District financial institutions increased since the previous report, especially for multifamily and home equity loans. Consumer lending contracted overall, alongside a rise in delinquencies in credit cards, auto loans and unsecured personal loans. Demand and large time deposit balances continued to increase as banks paid higher interest rates on deposits. However, these higher funding costs have led to earnings concerns. Hence, some banks restructured securities portfolios and reinvested proceeds into higher-yielding securities to protect margins.\nEnergy\nEnergy contacts reported historically high levels of crude oil production and record amounts of gas flow to liquefied natural gas export plants. Contacts also continued to report planning and development of industrial decarbonization and renewable energy projects; however, a few contacts noted that some of these projects are being delayed by federal approval processes. Utility contacts reported growing electricity demand, especially in the industrial and commercial segments, attributed to clean energy transitions at production facilities and hospital and healthcare projects, respectively.\nAgriculture\nLow cattle supply led to higher cattle prices, but consumers substituting less expensive proteins prevented full pass-through of prices. Domestic demand for chicken rose, but demand was down overall as cases of avian flu led to additional export restrictions and lower egg supply. Milk prices rose amid growing domestic demand for dairy, but low export levels continued to depress the market. There was little change in demand or supply for row crops, but demand for cotton remained weak.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics .\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2023/2023-11-kc

"Beige Book Report: Kansas City\nNovember 29, 2023\nSummary of Economic Activity\nEconomic activity in the Tenth District declined slightly in recent weeks. Consumers were increasingly likely to \"share a roof and share meals\" to manage household budget challenges. Demand for rental housing reportedly shifted away from single-bedroom units toward multi-bedroom housing where rent expenses could be shared with a roommate. Similarly, restaurateurs noted that revenues fell as more customers split dishes and eschewed expensive items. Manufacturing businesses reported little change in activity, though some contacts noted a decline in their expectations of demand over the medium term. Reports of planned capital expenditures were mixed depending on how directly businesses were supported by fiscal spending and municipal projects. Renewable energy activity in the Tenth District continued to expand at a moderate pace, driven by modest growth in wind generation and robust growth in solar installations. The outlook for renewable energy remained positive, but contacts noted skilled labor shortages and limitations on interregional electricity transmission as challenges. The agricultural economy and farm credit conditions in the District softened moderately.\nLabor Markets\nLabor conditions in the Tenth District remained mostly unchanged over the past month. Hiring activity in the service sector was mixed across segments. Transportation contacts reported robust employment growth while most hotel contacts reported contractions in employment. Most contacts expected to increase hiring or maintain the size their workforce over the next year, citing expected sales growth, overworked staff, and an ongoing need for workers with specific skills. Few businesses laid off workers, but many contacts reported reducing their workforce through natural attrition.\nTo build a skilled workforce, contacts noted raising wages for new hires, upskilling less-qualified workers, and making increased efforts to retain existing employees. Wages continued to grow at a moderate pace. Contacts highlighted raising wages as central to their retention of existing employees and attracting new hires over the past few years. However, some contacts noted an increased number of potential hires have refused the compensation packages offered, indicative of ongoing tightness in the labor market.\nPrices\nPrices grew at a moderate pace. While manufacturing contacts witnessed a moderation in price pressures, service firms are still facing higher prices due to tight labor market conditions. Most firms reported plans to raise prices in coming months. Contacts reported concerns about risks of higher commodity and energy prices. While higher interest rates are raising financing costs for some companies, most District firms reported a majority of their funding coming from cash financing, insulating many District firms from the higher rate environment.\nConsumer Spending\nConsumer spending declined slightly in recent weeks. Contacts suggested consumers were increasingly likely to \"share a roof and share meals\" to manage household budget challenges. Specifically, contacts in multifamily housing reported demand for single-bedroom units softened, shifting toward demand for multiple bedrooms as more renters sought to share rent expenses with roommates. Restaurant owners similarly reported that, while patronage was steady, revenues fell as more customers shared plates and avoided higher cost items. Leisure travelers accounted for a smaller share of hotel stays.\nCommunity Conditions\nOrganizations serving low- and moderate-income (LMI) populations reported LMI households have largely spent down any savings and are increasingly turning toward credit cards to make ends meet. More households were skipping car payments, rationing medication, and moving in with other families to cut back on expenses. Organizations noted that while most industries have increased wages recently, the growth in earnings at LMI households was insufficient to offset recent and ongoing inflation. As a result, non-profits were experiencing substantially higher demand for assistance. They reported struggling to meet that demand due to decreasing donations.\nManufacturing and Other Business Activity\nOverall business activity declined slightly last month. Contacts in retail and tourism reported moderate declines in sales and revenues. Hoteliers reported occupancy levels remained steady but noted an increase in stays related to business travel. This shift in traveler type raised some concerns regarding future demand, as business travelers are reportedly more sensitive to price and business cycle fluctuations. Contacts in healthcare reported a somewhat lower outlook for use of services through the end of year. With greater enrollment in high-deductible health insurance plans in 2023, more households have yet to meet their deductible despite being late in the year and may forgo care requiring out-of-pocket payment. Manufacturing businesses reported little change in activity, though some contacts noted a decline in their expectations of demand over the medium term. Planned capital spending was mixed across segments with manufacturers reporting softening investment activity. Contacts noted the emergence of a firm-specific dichotomy whereby businesses that obtained government or defense contracts are fueling the majority of capital expenditure activity.\nReal Estate and Construction\nSeveral developers and construction managers reported raw materials costs stabilized recently. They also noted greater ability to push against escalating costs from subcontractors. Public sector funding for municipal projects sustained demand for building materials, somewhat supporting materials prices. Contacts indicated that subcontractors were becoming more available for work, with holes in their backlog schedules for the first time in several years. Though construction labor was somewhat more available, growth in labor costs remain elevated.\nCommunity and Regional Banking\nLoan demand remained tepid at banks across the District as lenders continued to focus on maintaining sound credit quality, while higher rates exerted pressure on customer demand for credit. Though standards across loan types remained unchanged, several contacts expected further deterioration in credit quality over the next six months, particularly in the consumer and commercial real estate segments of their portfolios. Bankers cited higher debt service costs and declining borrower cash flow as key risks facing their CRE books, particularly for loans maturing in the near term. Rising funding costs persisted as deposit balances continued to shift to higher-yielding accounts, with contacts reporting strength in time deposit products.\nEnergy\nRenewable energy activity in the Tenth District continued to grow at a moderate pace, driven by modest growth in wind generation and robust growth in solar installations. Expectations were for a continued moderate pace of growth going into next year, driven mostly by wind generation. While growth in renewable energy in the District is expected to be slightly behind the U.S., Kansas and New Mexico are slated to outpace the U.S. average in coming months. Contacts in the renewable energy sector highlighted acute skilled labor shortages and limitations on interregional electricity transmission as key challenges. While higher interest rates are adding to the renewable development costs, most of those higher costs are being passed onto consumers in the form of higher electricity rates. Contacts highlighted the significant boost to renewable development activity expected in the coming years from fiscal stimulus spending, equating that spending to \"throwing gasoline on an already raging fire.\"\nAgriculture\nThe agricultural economy and farm credit conditions in the District softened last month alongside a moderate decrease in agricultural commodity prices. Agricultural bankers reported borrower liquidity deteriorated slightly from strong levels, and loan repayment rates were slightly lower than a year ago. Farm income declined faster in areas with more intense drought and more corn and wheat production. Agricultural real estate values remained firm. Cattle prices remained strong, supporting credit conditions in other portions of the District. Contacts cited elevated production expenses and high financing costs as ongoing concerns.\nFor more information about District economic conditions visit: http://www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2023/2023-11-cl

"November 29, 2023\nSummary of Economic Activity\nOverall, reports from contacts suggest that business activity in the Fourth District declined slightly in recent weeks, ending a period of stable activity that began in late spring this year. Contacts generally expected similar business conditions to persist in the coming months. Consumer spending was down, and general merchandisers reported discretionary goods spending declined, a trend they were hopeful would reverse with the holiday shopping season. Manufacturers that produce intermediate goods used in auto production noted that orders slowed, a situation which one contact attributed to the UAW strike. Higher interest rates continued to dampen loan demand, and several bankers reported that delinquencies edged up for specific loan categories but remained low on balance. Employment levels were flat as many firms restructured staffing for efficiency and as wage pressures continued to ease. According to contacts, nonlabor cost pressures changed little in recent weeks, while the proportion of firms reporting price increases was the lowest since 2020.\nLabor Markets\nOn balance, contact reports suggested little employment growth in the recent reporting period. Several financial services firms restructured staffing to gain efficiencies, including limiting hiring to revenue-generating roles and reducing staff in underperforming product or market areas. Some manufacturing firms reported lowering head counts through attrition and layoffs because of softening demand for their goods.\nWage pressures eased further in recent weeks. Many firms across industries reported returning to annual wage adjustments and not offering unscheduled raises like they had over the past few years. For example, one commercial real estate contact said, \"after 18\u201324 months of increases, wage growth has seemingly leveled off.\" And a hospitality contact noted that his firm was at a \"good wage level.\" Nevertheless, some firms said they increased wages for workers in high demand. For instance, one freight hauler gave raises to drivers, but not to other employees. Some bankers and manufacturers also continued to increase pay to attract and retain skilled workers.\nPrices\nNonlabor cost pressures changed little in recent weeks according to contacts, though they've generally trended down since the start of the year. Many manufacturing and construction contacts said input costs, in particular for steel and lumber, were flat to down. One contact added that some construction subcontractors were now reaching out to offer reduced fees to fill their project pipelines. Still, other firms continued to report cost increases for health insurance, software licenses, and technical support services, while some restauranteurs and wholesalers noted a recent uptick in the cost of beef, chicken, and dairy products.\nNearly two-thirds of contacts reported leaving their prices unchanged. Many contacts in manufacturing and freight said they were holding prices steady or, alternatively, reducing them to stay competitive, even in cases in which costs were increasing. Meanwhile, a homebuilder and an auto dealer sought to alleviate consumers' affordability concerns through incentives and interest-rate buydowns by the former and increased discounting by the latter. Another homebuilder noted cutting the size of homes and amenities to keep average unit prices from rising. Nevertheless, two restauranteurs who had not increased prices recently reported that they planned to do so at the start of next year. Contacts who were raising prices generally did so selectively to make up for increased costs.\nConsumer Spending\nConsumer spending softened in recent weeks. Multiple general merchandisers reported declines in discretionary goods sales. Likewise, reports from restauranteurs and wholesalers tied to the restaurant industry suggested slower spending on discretionary services. Auto dealers continued to report sluggish sales that they attributed to higher financing costs and vehicle prices; one dealer also noted that customers were holding off on purchases because of unusually low trade-in offers for used vehicles. Contacts across retail segments generally expected demand to remain soft in the near term, though some were hopeful that the coming holiday shopping season would boost sales.\nManufacturing\nOverall demand for manufactured goods was flat. Orders slowed for producers of intermediate goods used in auto production, including paints, coatings, and suspension systems, likely as a result of the UAW strike. Firms tied to commercial construction also experienced declines in orders, with one HVAC parts producer reporting considerable order declines. Reports from primary and intermediate metals producers were mixed. One steel producer reported increased orders as his firm's customers worked to boost their inventories. By contrast, orders for other metals producers were flat to down, and one producer said demand for his firm's products had reached its lowest level in 25 years. Manufacturers generally expected little change in demand in the coming weeks.\nReal Estate and Construction\nOverall, residential construction and real estate contacts indicated that activity slowed this reporting period. Higher interest rates and increasing construction costs dampened demand for new homes. On the existing homes side, the market continued to suffer from a lack of inventory. Looking ahead, contacts expected demand to weaken further as interest rates remained elevated.\nNonresidential construction slowed in recent weeks. Multiple general contractors reported that their clients had delayed or reconsidered projects because of higher financing costs or economic and political uncertainty. Demand for commercial real estate was soft, in particular for older office space. In addition, one commercial realtor noted that demand for industrial, retail, and apartment space had begun to weaken. Nevertheless, many contacts expected conditions to improve in the coming months.\nFinancial Services\nLoan demand declined in recent weeks as higher interest rates discouraged both households and businesses from borrowing. Bankers expected loan demand to weaken further in the coming weeks because of elevated interest rates and economic uncertainty. Several bankers reported that delinquencies increased slightly for certain loan categories such as credit cards. One banker attributed the uptick in credit card delinquencies to a rise in utilization by low- to middle-income consumers who had spent down excess savings. Core deposit growth continued to be soft amid persistent rate competition.\nNonfinancial Services\nDemand for professional and business services was solid, while demand for freight services was mixed. Professional and business services firms reported increased demand for their technology-related and engineering services. One contact noted that consumers' continuing shift to online buying had increased demand for his firm's services. These contacts generally anticipated that demand would remain steady going forward. Freight contacts reported an increase in certain markets such as grain and chemical transport. However, demand decreased for freight related to retail products and construction materials, for which the decrease for the latter was linked to customers' pausing projects. Freight firms typically expected demand to be flat in the coming months.\nCommunity Conditions\nNonprofit contacts noted that while demand for skilled tradespersons remained elevated, barriers to entry persisted for many lower-wage jobseekers. To meet the need for skilled labor and mitigate some of these barriers, one workforce-development contact described a construction apprenticeship program that recently opened an onsite childcare center and provided transportation to the job site. Demand for affordable housing remained high, and availability of affordable units was tight. Several contacts said homelessness had spiked recently and cited multiple reasons, including elevated rents, fewer landlords accepting housing choice vouchers, and more competition for affordable-housing units. One nonprofit indicated that construction costs were too high to build affordable housing because of current tight credit conditions and higher interest rates.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/2023/2023-11-da

"November 29, 2023\nSummary of Economic Activity\nThe Eleventh District economy expanded at slower pace than in the previous reporting period. Manufacturing output rose, while growth in services stalled out and retail sales fell. Loan volumes declined at a faster rate than the previous reporting period as credit conditions remained tight and the cost of credit high. Home sales decreased, and activity in the energy sector was flat to up. Recent rains somewhat improved district agricultural conditions. Local nonprofits continued to cite broad based increases in demand for assistance. Employment was little changed, and wage growth continued to normalize. Input cost and selling price growth were above average in the service sector but modest to slight in manufacturing, construction, and energy. Outlooks remained negative with geopolitical instability, heightened macroeconomic uncertainty, and the high cost of credit cited as key headwinds.\nLabor Markets\nEmployment expanded slightly over the past six weeks. The pace of hiring decelerated broadly, and some freight carriers, high-tech, and manufacturing companies reported layoffs. A few service firms said they were keeping staff on payrolls despite a notable drop in sales, though one respondent said they plan to cut salaries in early 2024 to avoid layoffs. Labor availability improved and reports of labor shortages were less prevalent. One staffing firm said they were more comfortable letting unproductive workers go since they felt more confident about replacing them. However, shortages of engineers, restaurant workers, and specialty construction labor persisted.\nWage growth continued to normalize, though it was still slightly elevated. Homebuilders noted some reprieve in labor costs, and energy companies said wage growth was slowing with pressures limited to select job categories. However, a fabricated metal manufacturer reported paying workers for 40 hours/week though the firm did not have enough work to keep them busy. Most staffing firms saw continued upward wage pressures, though one contact anticipates some easing in the first half of 2024 as hiring is expected to slow.\nPrices\nInput cost and selling price growth was mixed, still slightly elevated in the service sector but generally modest in construction, manufacturing, and energy. Growth in airfares eased amid increased capacity, and fuel costs ticked up. Construction materials, home, and land prices were mostly unchanged but elevated. Freight shipping rates fell, and a transportation firm reported that companies were signing longer-term freight contracts due to low rates. Numerous firms cited higher borrowing costs as an impediment to business growth.\nManufacturing\nTexas manufacturing activity expanded modestly in October. In durables, production increases were led by fabricated metals and machinery manufacturing. However, output in transportation equipment manufacturing declined, and a contact noted that the UAW strike somewhat hurt sales. Output rose in nondurable manufacturing. Chemical production was mixed, and refinery activity decreased. Overall, manufacturing outlooks worsened, and uncertainty remained elevated with several contacts citing geopolitical instability and high interest rates as headwinds.\nRetail Sales\nRetail sales declined during the reporting period. Some retailers attributed the weakness in spending to elevated economic uncertainty and high interest rates. Reduced affordability resulting from higher car prices and interest rates also depressed auto sales over the past six weeks. Overall, retail inventories dipped for the first time since mid-2022, and outlooks remained negative.\nNonfinancial Services\nService sector activity held steady during the reporting period. Overall, revenues were flat on net, with numerous firms pointing to heightened macroeconomic and geopolitical uncertainty and high interest rates as factors impacting demand. Revenues were flat to down in several industries, including transportation and warehousing and professional and business services but rose in healthcare. Leisure and hospitality firms said revenues continued to soften partly due to slower consumer spending and high economic uncertainty, and one contact said their expansion plans were on hold until yearend 2024. Staffing firms cited a slowdown in demand for their services, as demand for high-skilled workers weakened while placements for support staff and low-skilled workers remained stable. Airlines saw strong activity. Domestic leisure travel activity cooled, but international leisure travel stayed strong. Business travel was stable but trailed pre-pandemic levels.\nConstruction and Real Estate\nHousing demand weakened during the reporting period. Home sales and buyer traffic fell while cancellations rose, and contacts pointed to higher mortgage rates as the key factor impacting activity. Buyer incentives including rate buydowns and discounting remained widespread, and there were reports of additional incentives being offered to discourage buyers from cancelling contracts. Outlooks were weak and contacts noted reduced affordability, high mortgage rates, and tighter lending for construction and development loans as headwinds.\nActivity in commercial real estate softened. Apartment leasing slowed and rents were flat to down. Office leasing remained minimal; vacancy rates were high, and concessions remained generous. With new supply outpacing demand, industrial vacancy rates ticked up and rent growth cooled. Heightened macroeconomic uncertainty, high capital costs, and diminished appetite to lend continued to deter investment across property types.\nFinancial Services\nOverall loan volume declined at a faster pace over the past six weeks, led by a sharp decline in residential real estate lending. Loan demand has been falling for over a year, though the pace of decline has eased. Credit standards continued to tighten, and loan pricing continued to rise at an above-average pace this period. Driven by a marked increase in consumer loan delinquency, overall loan nonperformance rose at its highest rate since 2020. Bankers remained pessimistic, with expectations of further increases in loan nonperformance, declining loan demand, and worsening business activity over the next six months.\nEnergy\nOil field activity was flat to up over the past six weeks. The recent spate of mergers and acquisitions continued to put slight downward pressure on activity levels. Orders for oilfield services equipment were stable as customers limited spending to maintaining current capacity. In 2024, capital expenditure growth in oil and gas production is anticipated to be concentrated in international offshore drilling, with only modest increases expected in U.S. production-related work.\nAgriculture\nRecent rainfall improved soil moisture over the past six weeks, though much of the District remained in drought. Crop production was substantially higher this year across the board\u2014wheat, cotton, corn, sorghum, and soybeans\u2014largely due to drought conditions being less severe than last year, particularly in the Texas panhandle. Cattle prices declined over the reporting period but remained elevated, and contacts noted a continued tight supply of cattle and resilient demand for beef amid high prices.\nCommunity Perspectives\nDemand for nonprofit services rose broadly, and contacts expected further increases in requests for assistance with the holiday season approaching. Affordable housing continued to be a pressing concern not just for low-income households but for some seniors too, and one nonprofit said that even with housing vouchers they were facing difficulty finding units for their clients. Moreover, finding developers to build subsidized housing was difficult. Sunsetting of various COVID relief funds has posed several challenges, particularly for childcare centers. Contacts noted that multiple daycare centers had closed. Demand for food assistance has accelerated since spring 2023. Nonprofits noted challenges in meeting their fundraising goals, which some attributed to donor fatigue.\nFor more information about District economic conditions visit: https://www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

/beige-book-reports/2023/2023-11-sf

"Beige Book Report: San Francisco\nNovember 29, 2023\nSummary of Economic Activity\nTwelfth District economic activity softened slightly during the October to mid-November reporting period. Labor market tightness eased moderately, and employment levels remained generally steady. Wages and prices rose at a slower pace relative to the previous reporting period. Retail sales were flat, and activity in the services sectors picked up slightly. Demand for manufactured products remained largely unchanged, while conditions in agriculture and resource-related sectors were mixed. Residential real estate activity softened, while activity in commercial real estate was varied. Conditions in the financial sector weakened further, and lending standards remained tight. Communities across the Twelfth District saw continued high demand for support services that was harder to meet due to declining charitable donations. Contacts expressed concern over a weaker economic outlook and increased overall uncertainty.\nLabor Markets\nLabor market tightness continued to ease over the reporting period. Many employers reported improved availability and retention of workers in recent weeks as well as an uptick in job applications. Some employers, citing an uncertainty over the economic outlook, held staffing levels steady and only filled positions that opened up due to turnover. Employers in industries, such as legal services and aerospace, expanded their workforce in recent weeks, while some in manufacturing and financial services reported reductions in staffing. Nevertheless, employee turnover was reportedly elevated in hospitality and manufacturing. Several contacts expected the recent tentative agreement surrounding strike actions in the entertainment industry will bring back a significant number of workers in coming months.\nWage growth moderated across sectors as imbalances in labor market conditions for supply and demand continued to improve. Contacts reported budgeting annual pay raises in line with pre-pandemic rates. Recent layoffs in the financial services sector reportedly put downward pressure on wages within the sector. Wage pressures remained high for employers in legal services and some high-skilled trades across sectors. Some contacts highlighted upward wage pressures from the increases in minimum wages happening locally and ongoing labor union negotiations.\nPrices\nPrices remained elevated but rose at a slower pace relative to the previous reporting period. The recent drop in energy prices and signs of potential tapering overall demand growth helped alleviate some price pressures in recent weeks. Several contacts reportedly reduced fees for professional services in response to lower demand. Still, material and insurance costs continued to rise. In some instances, these costs were passed on to consumers, although one contact observed some pushback from customers to higher menu prices. Real estate firms noted that higher input, building, and loan costs adversely impacted new construction projects.\nCommunity Conditions\nCommunity and support organizations continued to report strained resources and elevated demand for services. Higher numbers of individuals across the District sought support for housing, health, and mental health services. Demand at food banks also increased. Charitable donations by corporations and households declined further, though assistance from government funding aided some nonprofit organizations. At the same time, support organizations reported higher expenses, including for insurance and business software. Small businesses in urban areas were challenged by high borrowing costs along with weaker consumer demand while widespread remote or hybrid work arrangements continued.\nRetail Trade and Services\nRetail sales were flat overall in recent weeks. Reports suggested some pullback in consumer spending on big-ticket items, such as motor vehicles. Demand was stronger for some product categories, such as groceries, fresh produce, and seafood. Retailers expected a solid holiday shopping season but noted that more discounts and offers than last year will be needed to entice consumers. Contacts in Alaska and Hawaii mentioned that despite a recent push to support local and small businesses, consumers still prefer online shopping during the holiday season.\nActivity in consumer and business services picked up slightly. Demand for leisure travel increased in recent weeks and was expected to rise further for the holiday season. Businesses across southern Nevada, particularly in leisure and hospitality, experienced unusual growth in the weeks leading up to the Formula One Grand Prix event in Las Vegas. Business demand for information technology, custodial, and security services increased, while demand for consulting services was down. Several contacts expected the end of strike actions in the entertainment industry to spur growth in the Southern California economy, although some feared that many local businesses and services providers would be unable to recover losses for an extended period.\nManufacturing\nManufacturing activity was unchanged at robust levels in recent weeks. Manufacturers reported continued general strength in the sector and solid demand for heavy machinery, capital equipment, and fabricated metal products. The aerospace industry reportedly saw an uptick in orders in recent weeks. Food manufacturing and packaging continued to operate at or near capacity. Reports indicated continued improvements in raw materials availability and supply chains, although some manufacturers mentioned lingering delivery delays.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors were mixed. Across the District, crop yields were generally at or above historical averages, particularly for apples. Domestic demand from the food services and retail sectors was solid but showed some signs of easing in recent weeks, and exports for some products such as nuts rose. Producers commanded lower prices for products such as fish and nuts and expected apple prices to fall due to the strong harvest. Costs for fuel, packaging, labor, and equipment rose, while irrigation and international shipping costs declined. One contact in Utah cited notable reductions in the cost of feeding livestock as ample growth of grasses on grazing lands lowered demand and prices for hay.\nReal Estate and Construction\nConditions in the residential real estate sector softened further over the reporting period. Asking and selling prices for single-family homes declined as buyers were deterred by high mortgage rates, and demand from first-time homebuyers was particularly weak. Inventories remained low, and properties took longer to sell. Contacts reported slight softening in the multifamily sector with lower occupancy rates in some downtown high-rise buildings and slower rent growth. In contrast, a Southern California contact noted continued strong demand for affordable multifamily units. New residential construction was stable, while renovation construction rose as homeowners sought to modify existing homes rather than buy new ones.\nCommercial real estate activity was varied in recent weeks. Office leasing activity was muted, and occupancy rates remained low. In contrast, demand for space in sectors less conducive to remote work, such as defense and lab-based sciences, was robust and occupancy rates were high. Elevated financing costs and economic uncertainty slowed commercial construction projects. A contact in Utah reported that construction continued as planned on existing industrial projects, but that rent growth in this sector began to ease.\nFinancial Institutions\nLending activity weakened further in recent weeks. High financing costs pushed more firms to delay or cancel projects and planned investments. Demand for mortgages remained muted as higher rates and limited supply continued to constrain the housing market. In contrast, consumer lending was solid, and reports indicated an uptick in demand for new credit cards and lines of credit despite the increase in rates and fees. Competition for deposits remained brisk, lending standards remained tight, and credit quality was strong.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nNovember 29, 2023\nSummary of Economic Activity\nEconomic activity in the Second District continued to weaken during the latest reporting period. Labor market conditions cooled but generally remained solid. Though employment edged up slightly, labor demand softened and workers have become easier to find. Inflationary pressures were little changed after moderating in recent months. Consumer spending continued to slow. Manufacturing activity grew modestly, though orders were weak. Tourism activity in New York City slowly inched back toward pre-pandemic levels. Housing markets in parts of the region have started to show signs of becoming more balanced, though low inventory continued to restrain sales activity. Residential rental markets plateaued. Commercial real estate markets remained strained. Conditions in the broad finance sector weakened slightly, with loan demand declining and delinquency rates edging up. The outlook worsened, with businesses in the region no longer expecting economic conditions to improve in the coming months.\nLabor Markets\nLabor market conditions cooled but generally remained solid. On net, employment continued to increase in the latest reporting period, edging up slightly. However, contacts reported some softening in labor demand and improvements in worker availability across the District. After nearly four months, the recent settling of the Screen Actors Guild strike is expected to restore jobs for many New York City-area workers who were affected.\nContacts noted that some companies have become cautious about adding to their headcounts in recent weeks. Layoffs and hiring freezes in the tech industry outside of the region have boosted the availability of tech workers. Still, despite some recent improvement in worker availability, labor supply remains an issue for most industries. Regional businesses overwhelmingly reported that the inability to find workers with the right skills was restraining hiring plans.\nThe pace of wage growth slowed somewhat in recent weeks, especially for finance and information services firms. In fact, a New York City-area company noted a reduction in starting salaries for recent college graduates as tech workers have become easier to find. Looking forward, firms plan on increasing employment only modestly in the coming months.\nPrices\nInflationary pressures were little changed in the most recent reporting period. The pace of input price increases generally held steady. While the prices of some inputs such as freight and logistics have come down, contacts reported rapidly growing costs for other inputs, particularly utilities and insurance. The pace of selling price increases also held steady this reporting period. However, looking ahead, more contacts expect the pace of price increases to pick up in the coming months.\nConsumer Spending\nOn balance, consumer spending continued to slow but remained solid. Increases in health care spending were offset by ongoing declines in spending on travel and entertainment. Auto dealers in upstate New York reported solid growth in sales activity for both new and used cars, as improving inventory continued to expand options for buyers. While creditworthy buyers were able to get financing, those with lower credit scores have increasingly found it difficult to secure auto loans. With higher interest rates, car loan terms are getting longer as 84-month loans have become the norm.\nManufacturing and Distribution\nManufacturing activity grew modestly during the latest reporting period, though orders declined slightly. Delivery times shortened and supply availability continued to improve, but some contacts reported ongoing challenges with the supply of raw materials and durables. Motor vehicle inventory continued to improve, and dealers indicated that the UAW strike had minimal impact on inventory levels. Wholesalers and transportation & warehousing contacts reported declining business activity. Looking ahead, manufacturers do not expect activity to increase in the coming months.\nServices\nService sector activity declined modestly in the latest reporting period. While businesses in leisure & hospitality reported modest growth, businesses in education, finance, and those providing business services reported sluggish activity. Service firms do not expect much improvement in the months ahead.\nNew York City tourism continued to inch back slowly to pre-pandemic levels. While New York City hotel occupancy rates remained higher than other U.S. cities, the lack of visitors from Asia remained a drag on the tourism recovery. Contacts reported that geopolitical instability overseas is beginning to dampen travel planning. Still, mid-week hotel demand in New York City was strong, reflecting increased business travel\u2014a positive sign that an important part of the City's tourism economy is showing progress after lagging through much of the recovery.\nReal Estate and Construction\nHousing markets in some parts of the region have started to show signs of becoming more balanced for buyers and sellers, though low inventory continued to restrain sales activity and other parts of the region remained red hot. Home prices have generally continued to trend up despite relatively high mortgage rates. Contacts in upstate New York noted some cooling in demand along with an increase in listings, in part due to people leaving New York state. While demand softened in New York City, demand in its suburbs remained extremely strong, with record high prices and bidding wars on about half of sales. While creditworthy buyers were able to obtain mortgages, the availability of credit has become an issue for some buyers. One contact noted that buyers needed increased attentiveness to get lenders to the closing table.\nResidential rental markets plateaued, with rents holding steady near historically high levels. New lease activity continued to fall, with landlords focusing on retaining existing tenants. In New York City, there was a small uptick in the supply of rental units, possibly due to the increased enforcement of rules restricting short-term rentals.\nCommercial real estate markets weakened for both office and industrial space, as vacancy rates edged up and rents declined across much of the District. Upstate New York office markets saw notable increases in vacancy rates, while the worsening trend in New York City's office market continued after a pause during the last reporting period. The industrial market also deteriorated, with vacancy rates increasing and rents softening from long-term highs seen during the summer.\nOverall, construction contacts reported declining activity since the last report. Office construction dropped across the District. Multi-family construction also slowed, constrained by tight credit conditions and increased costs. Still, industrial construction continued to grow, with high volumes under construction and new space set to come to market in the fourth quarter of 2023 and early 2024.\nBanking and Finance\nConditions in the broad finance sector weakened slightly during the latest reporting period. Small to medium-sized banks in the region overwhelmingly reported lower loan demand across all loan segments, including refinancing. While most banking contacts reported that credit standards were unchanged, a substantial number reported tightening standards for business and commercial loans. On balance, loan spreads narrowed, deposit rates rose higher, and delinquency rates edged up.\nCommunity Perspectives\nHomelessness has reached unprecedented levels in many parts of the District, driven by a shortage of affordable housing and the arrival of asylum seekers. Local governments are not able to meet the growing need for shelter, and the locations of new temporary shelters have been the subject of intense debate. Community planners, non-profit organizations, and government entities managing the homelessness crisis are considering new strategies to increase the supply of affordable housing units. While success has been limited, strategies have included repurposing government structures, incentivizing accessory dwelling units, and increasing tax incentives and private sector collaborations.\nFor more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2023/2023-11-mi

"November 29, 2023\nSummary of Economic Activity\nEconomic activity in the Ninth District was flat to down slightly since the previous report. Employment grew modestly, but job openings declined. Wage pressures were unchanged but ongoing wage growth remained above average, while price pressures were modest. Growth was noted in some areas of construction, but residential construction was slow, and manufacturing also fell slightly. Consumer spending was flat. Agriculture weakened as farm incomes softened, and energy exploration was unchanged. Minority- and women-owned businesses reported steady activity.\nLabor Markets\nEmployment grew modestly since the last report. But there was variation among sectors, some of which had increased layoffs. Labor demand was positive overall but somewhat lower than earlier in the year. Some contacts reported that they were not replacing workers who had left, or were eliminating open positions. Strong labor demand was reported by health care and finance firms, while hiring sentiment was softer in other sectors, including manufacturing. More than half of construction contacts were hiring, though many were attempting to fill turnover; the share that was not hiring grew, and one in seven was cutting workers. Expected labor demand for the coming months was moderately positive overall. Among those planning to hire, a notable share cited overworked staff as an important factor for doing so.\nWage pressures were unchanged since the last report, but ongoing wage growth remained above average. A general survey of District firms found that about 30 percent were raising wages by more than usual, while a similar share reported raising wages by less than usual or not at all. A survey of construction firms found that about 70 percent had increased wages by at least 3 percent over the last year despite some evidence of recent sectoral slowing. Expectations of future wage increases were similar to the sentiment six months ago.\nPrices\nPrice pressures increased modestly since the last report. Slightly fewer than a quarter of firms responding to an October business conditions survey indicated that their prices charged to customers increased from the month prior, while 15 percent said they reduced their prices. A larger share reported that their nonlabor input prices increased. Administrative contacts reported an increase in the price of office supplies. A regional food producer said that milk and cheese prices declined recently. Retail fuel prices in District states decreased briskly since the previous report.\nWorker Experience\nIn a recent survey, half of employed respondents expressed satisfaction with their current job, wages, and company culture. The other half of respondents were looking for new opportunities and hoping to increase their earnings, but they categorized potential opportunities as average at best. Job seeking respondents cited bad job options, lack of response from potential employers, and unreasonable skill or experience expectations as the top three factors preventing them from reaching their objectives. A worker highlighted that starting pay was \"far too low\" despite his experience in a variety of trades. Another worker expressed frustration with college education requirements, saying that \"most companies are not willing to compensate for years of service without a degree.\"\nConsumer Spending\nConsumer spending was flat since the last report. Recent sales tax receipts in Minnesota were flat month over month and year over year. Contacts reported that consumers have become more price sensitive for everyday goods, with growing purchases at low-cost retailers compared with premium ones. At the same time, sales of some big-ticket items remained healthy. A vehicle dealer with locations in multiple District states saw October sales rise by 10 percent over last year. A northern Wisconsin banker noted the disparate tendencies. \"People are mad about eggs costing more, but they'll still buy a car.\" Other banking contacts noted increased use of credit card and home equity lines of credit to maintain spending levels. Tourism traffic in Michigan's Upper Peninsula remained robust this fall. Hotel occupancy rates in Minnesota were notably higher than a year ago, and lodging and accommodation fees in Montana remained on par with last year's record pace.\nConstruction and Real Estate\nConstruction activity was flat overall since the last report, with considerable variation among subsectors and some concern for near-term activity. Firms involved with larger industrial and infrastructure projects reported moderately increased activity compared with last year, while firms in the commercial and especially residential sectors saw lower revenues over the same period. Contacts across the sector noted that project backlogs had shrunk, particularly for residential and commercial projects; new projects out for bid had also fallen. As a result, activity across the sector was expected to be lower over the coming months compared with last year. However, public sector projects remained healthy, and single-family permitting also increased in recent months in some markets. In Minneapolis-St. Paul, October permitted units doubled over the last year.\nCommercial real estate fell modestly. Office space remained challenging, with high vacancy rates because large tenants continued to seek smaller footprints. Multifamily vacancy rates have risen in many regions as new units come to market; however, new developments in this sector have slowed. Speculative development has also slowed for industrial space as vacancy rates ticked slightly higher, but from low levels. Residential real estate remained subdued, with year-over-year sales continuing to decline.\nManufacturing\nDistrict manufacturing activity decreased slightly since the previous report. Manufacturing respondents to an October business conditions survey reported decreased orders on balance relative to a month earlier, with expectations for a further decrease in the month ahead. A regional manufacturing index indicated increased activity in North Dakota and South Dakota in October from a month earlier, while activity decreased slightly in Minnesota. A custom manufacturer said recent sales \"dropped like a rock.\" One contact reported that because of the undersupply of workers to the sector, \"thousands of unfilled jobs would need to be eliminated before anyone gets to layoffs.\"\nAgriculture Energy and Natural Resources\nDistrict agricultural conditions deteriorated slightly since the last report. Despite better-than-expected crop production, lenders responding to the Minneapolis Fed's third-quarter survey of agricultural credit conditions, conducted in October, reported lower farm incomes and capital spending over the period relative to a year earlier. Contacts expressed concern over the impact of rising interest costs as borrowing increases. District oil and gas drilling activity was unchanged since the previous report.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned business enterprises (MWBE) was balanced overall, according to respondents to a monthly survey. Roughly even shares of respondents reported higher, unchanged, or lower sales in recent weeks. Profit margins were lower for more than half of respondents while capital expenditures edged higher on balance. Hiring demand and staffing levels were largely flat. Only a quarter of respondents reported having increased their final selling prices, but 35 percent expected to increase them within the next month. A Minnesota contact expected MWBE construction companies to be disproportionately affected as federal funding and high interest rates shift activity from multifamily housing developments to infrastructure projects. \"The capital required for infrastructure projects is greater than for vertical building. Lack of access to banking capital continues to leave MWBE companies at a disadvantage,\" they highlighted.\nFor more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2023/2023-11-ri

"November 29, 2023\nSummary of Economic Activity\nThe Fifth District economy grew slightly in recent weeks, mainly due to continued strength in consumer spending. There were some reports of reduced spending on durable goods like furniture and appliances, but spending on nondurable goods and on travel was strong and growing. Nonfinancial service activity remained stable, however real estate activity and bank lending softened amid higher interest rates. The labor market remained tight, overall, but employment rose, and some firms reported finding workers a little easier. Price growth moderated slightly in recent weeks but remained elevated on a year-over-year basis.\nLabor Markets\nEmployment in the Fifth District picked-up moderately in the most recent reporting period. Although the labor market remained tight, several contacts reported some easing. A motorcoach company reported that they were still understaffed but that finding workers \"is better than it was.\" This was the first time they indicated hiring optimism in several years. A construction company reported that a slowing industry made finding workers a little easier. Retaining workers, especially high performers, was mentioned by several contacts. For example, a general contractor reported wage increases as large as 15% to retain their highest performers.\nPrices\nYear-over-year price growth moderated slightly in recent weeks but remained elevated. According to our most recent surveys, prices received by service providers increased by a little more than four percent compared to last year, this was down from the peak of about seven percent, but still elevated compared to historical averages. Meanwhile, prices received by manufacturers increased by just over two percent compared to the same time last year. A few contacts noted that higher interest rates were making the cost of operations more expensive.\nManufacturing\nFifth District manufacturing activity remained mixed. A textile manufacturer reported an increase in demand because their clients have worked through the excess inventories that they built up during COVID and were now needing to place new orders. Conversely, a furniture manufacturer reported that the home furnishings industry had been in an 18-month recession and did not expect demand to increase soon. To counteract labor shortages and declining purchasing power from businesses and households, several contacts invested in automation to increase productivity and manage costs. A contact that produces equipment for businesses invested in automating several of their back-office functions to reduce the need for labor. A coffee manufacturer incorporated a suite of customer-service software products that will change the type of skills needed as well as the amount of labor.\nPorts and Transportation\nVolumes were sluggish at Fifth District ports this period as trade volumes were down; imports were flat year-over-year but up slightly month-over-month. The higher import volumes were mainly due to more consumer goods coming into the ports. Exports were mostly down this period. Spot shipping rates continued to decline on transatlantic cargo but were slightly up on freight from Asia. The ports were not having any issues with container congestion and railroads were no longer metering freight. Carriers were doing more blank sailings to streamline services in order to cut costs and have greater vessel utilization. Demand for airfreight improved this period, especially for exports. Air cargo rates were back to 2019 levels.\nTrucking firms reported that underlying demand was low, particularly on the industrial side as freight volumes for construction materials were down. Due to decrease capacity in the less-than-truckload segment, spot prices remained stagnant. However, freight rates in the truckload segment were down slightly this period. Trucking firms noted that drivers were more readily available but that it remained very difficult to hire skilled mechanics. Trucking companies stated that they were not having any issues maintaining their fleet of trucks and trailers and that there were no significant backlogs on orders of new equipment.\nRetail, Travel, and Tourism\nConsumer spending increased modestly, on balance, in recent weeks. Reports from retailers, however, were mixed. Clothing and grocery stores reported steady to increasing sales and demand while furniture and appliance stores reported declines in purchases. A jewelry store owner said that foot traffic was steady, but sales were down, and they felt that some customers were browsing now but waiting until closer to the holidays to make any purchases. Meanwhile, travel and tourism contacts generally reported steady to increasing activity. A hotel chain manager said that after experiencing a lull in the summer, fall bookings were up and better than expected. Airline bookings remained solid and passenger traffic was up compared to last year.\nReal Estate and Construction\nResidential real estate respondents indicated that sales volumes and buyer traffic decreased this period as buyers pulled back amid low inventory and higher mortgage rates. The number of new listings were down as well. Days on market increased slightly but remained below historic averages. Sellers were often providing concessions and/or dropping sale prices for homes that have been on the market for over 30 days. However, there remained upward pressure on home prices, especially in more desirable neighborhoods. Builders indicated that it was more difficult to build new homes at a fair price due to the high cost of materials, labor, trades, and financing.\nIn the Fifth District, overall market activity in commercial real estate (CRE) was slow this period. Industrial and retail were both fairly stable with low vacancy levels and rising rental rates. In the office sector, owners were having to offer generous concessions, incentives, or tenant improvement allowances to secure new leases\u2014so effective rental rates were much lower. In multifamily, rents were flat or down due in part to the amount of new construction coming to market. Banks were being very selective on financing any type of CRE investment. The lack of available financing dampened a broad range of activities within the CRE sector, including new development and refinancing. Contractors noted a slowdown in new work.\nBanking and Finance\nLoan demand continued to slow down with several respondents describing demand as \"softening.\" This was observed in all loan portfolios, but especially in the commercial and consumer real estate segments. Higher interest rates as well as global and domestic political concerns were noted as factors driving this softening demand. Many institutions renewed their focus on deposit retention and growth by continuing to increase rates with a focus on money market accounts and certificates of deposit. Overall loan delinquencies and credit quality remain stable with institutions continuing to monitor their portfolios closely and making underwriting adjustments as needed.\nNonfinancial Services\nNonfinancial service providers continued to report that demand for their services as well as revenues remained stable. One firm observed from their clients that available capital is still sitting on the sidelines due to increased borrowing costs, which, in turn, has constrained the clients' growth opportunities. Wage and expense pressures still existed but have started to moderate. A staffing firm noted there was still demand for high skilled workers and a slight increase in the candidate pool. One firm expressed concern that demand was going to soften due to the restarting of student loan repayments and decreased discretionary income available to consumers.\nFor more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nNovember 29, 2023\nThis report was prepared at the Federal Reserve Bank of Atlanta based on information collected on or before November 17, 2023. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nOn balance, economic activity slowed since the previous report, with four Districts reporting modest growth, two indicating conditions were flat to slightly down, and six noting slight declines in activity. Retail sales, including autos, remained mixed; sales of discretionary items and durable goods, like furniture and appliances, declined, on average, as consumers showed more price sensitivity. Travel and tourism activity was generally healthy. Demand for transportation services was sluggish. Manufacturing activity was mixed, and manufacturers' outlooks weakened. Demand for business loans decreased slightly, particularly real estate loans. Consumer credit remained fairly healthy, but some banks noted a slight uptick in consumer delinquencies. Agriculture conditions were steady to slightly up as farmers reported higher selling prices; yields were mixed. Commercial real estate activity continued to slow; the office segment remained weak and multifamily activity softened. Several Districts noted a slight decrease in residential sales and higher inventories of available homes. The economic outlook for the next six to twelve months diminished over the reporting period.\nLabor Markets\nDemand for labor continued to ease, as most Districts reported flat to modest increases in overall employment. The majority of Districts reported that more applicants were available, and several noted that retention improved as well. Reductions in headcounts through layoffs or attrition were reported, and some employers felt comfortable letting go low performers. However, several Districts continued to describe labor markets as tight with skilled workers in short supply. Wage growth remained modest to moderate in most Districts, as many described easing in wage pressures and several reported declines in starting wages. Some wage pressures did persist, however, and there were some reports of continued difficulty attracting and retaining high performers and workers with specialized skills.\nPrices\nPrice increases largely moderated across Districts, though prices remained elevated. Freight and shipping costs decreased for many, while the cost of various food products increased. Several noted that costs for construction inputs like steel and lumber had stabilized or even declined. Rising utilities and insurance costs were notable across Districts. Pricing power varied, with services providers finding it easier to pass through increases than manufacturers. Two Districts cited increased cost of debt as an impediment to business growth. Most Districts expect moderate price increases to continue into next year.\nHighlights by Federal Reserve District\nBoston\nEconomic activity was flat or down slightly. Employment was stable but labor demand showed weakness. Results were quite mixed among manufacturers, some of whom have recently experienced an extended period of weak activity. Contacts noted an increase in loan defaults for office properties and expected further distress moving forward.\nNew York\nRegional economic activity continued to weaken. Though still solid, labor market conditions cooled, and consumer spending slowed. Inflationary pressures were little changed after moderating in recent months. There were some signs of housing markets becoming more balanced in some parts of the District, though inventory remained exceptionally low.\nPhiladelphia\nBusiness activity continued to decline slightly during the current Beige Book period. Wage and price inflation subsided significantly \u2013 but price levels remain high for many items. Consumers became yet more price sensitive, and real consumer spending declined. Employment grew modestly as labor availability improved further. Expectations for economic growth remained subdued.\nCleveland\nThe District's economy contracted slightly in recent weeks after a long period of stability. Accompanying slower business activity, labor demand eased further, and employers reported returning to more normal wage increases and schedules. Input costs continued to trend down. Moreover, some firms noted that pricing power was reduced by weakening demand and competition.\nRichmond\nThe regional economy grew slightly in recent weeks mainly due to modest increases in consumer spending. Manufacturers reported mixed activity. Underlying volumes in the transportation sector were low. Residential real estate continued to be constrained by limited inventory. Commercial real estate activity and lending demand declined. Employment increased modestly and price growth moderated slightly.\nAtlanta\nEconomic activity grew slowly. Labor markets cooled, and wage pressures eased. Some nonlabor input costs, mostly in construction, decreased. Retail sales softened. New auto sales remained strong. Leisure and group travel were solid. Housing demand slowed. Banking conditions were stable. Transportation activity weakened. Energy demand rose. Agricultural conditions improved somewhat.\nChicago\nEconomic activity was up slightly. Employment increased moderately; business spending was up slightly; nonbusiness contacts saw little change in activity; consumer spending and construction and real estate activity decreased slightly; and manufacturing was down modestly. Prices and wages rose moderately, while financial conditions tightened slightly. Expectations for farm incomes in 2023 were little changed.\nSt. Louis\nEconomic activity has slowed slightly since our previous report. Retailers and freight transport contacts reported slowing consumer demand, particularly for high-end goods. Construction activity slowed, with multifamily in particular seeing projects delayed or cancelled due to higher rates.\nMinneapolis\nDistrict economic activity was down slightly. Employment grew modestly but labor demand softened. Wage pressures were stable but still above average, and price pressures were modest. Consumer spending was flat as shoppers sought low-priced options, while construction and manufacturing sectors both faced challenges. Farm incomes were also lower.\nKansas City\nEconomic activity in the Tenth District declined slightly in recent weeks. Consumers were increasingly likely to \"share a roof and share meals\" to manage household budget challenges. Wage growth remained steady, but job gains were modest. Most firms reported plans to raise prices in coming months and noted heightened uncertainty about the outlook for commodity prices. Renewable energy activity continued to expand at a moderate pace.\nDallas\nThe Eleventh District economy expanded at a slower pace than in the previous reporting period, as growth in services stalled out, retail and home sales fell, and loan volumes declined at a faster rate. Job growth softened, and wage growth continued to normalize. Price pressures were above average in the service sector but modest in other sectors. Outlooks worsened, and uncertainty remained elevated with numerous contacts citing geopolitical instability and high interest rates as headwinds.\nSan Francisco\nEconomic activity softened slightly. Labor market tightness eased moderately. Wage and price pressures moderated. Retail sales were flat, and demand for manufactured products remained largely unchanged. Conditions in agriculture were mixed, while real estate activity softened somewhat. Financial sector conditions weakened further. Local communities faced high demand for support services.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/2023/2023-11-ch

"November 29, 2023\nSummary of Economic Activity\nEconomic activity in the Seventh District was up slightly overall in October and early November. Contacts generally expected a small decline in demand over the next year and many continued to express concerns about the potential for a recession. Employment increased moderately; business spending was up slightly; nonbusiness contacts saw little change in activity; consumer spending and construction and real estate activity decreased slightly; and manufacturing was down modestly. Prices and wages rose moderately, while financial conditions tightened slightly. Expectations for farm incomes in 2023 were little changed.\nLabor Markets\nEmployment rose moderately over the reporting period and contacts expected a similar rate of increase over the next 12 months. Some manufacturers continued to have difficulty finding workers, particularly higher skilled ones. However, there were also signs that the labor market was cooling. Some contacts said their applicant pools had grown and that turnover had declined. And some contacts in construction, real estate, and finance reported taking down job postings, while others in those sectors were planning for layoffs. Wage and benefit costs rose moderately, but several contacts said wage pressures had cooled.\nPrices\nPrices rose moderately in October and early November and contacts expected a similar rate of increase over the next 12 months. Nonlabor costs were up moderately, in part because of increases in energy and shipping costs. Some contacts noted that while they had fewer supply chain issues, raw materials remained expensive. A few producers said that they were getting more pushback on price increases. Consumer prices moved up moderately due to solid demand and the passthrough of higher costs.\nConsumer Spending\nConsumer spending decreased slightly on balance over the reporting period. Nonauto retail spending was up slightly. Contacts highlighted higher spending on luxury items, new product lines, lower-priced items at outlet stores, and at e-commerce websites. However, a processor of product returns reported that returns of clothing and electronics were down, which is an indicator of lower sales of those items. In the leisure and hospitality sector, spending fell on air travel and hotels. Light vehicle sales decreased modestly overall. New vehicle sales were down but held up better than expected in light of the UAW strike, with several dealers commenting they saw little effect from the strike. Used vehicle sales fell. Contacts noted that lower-end used vehicles were selling faster than higher-end models.\nBusiness Spending\nBusiness spending increased slightly in October and early November. Capital expenditures moved up slightly, with several contacts reporting purchases of new software. That said, a number of contacts said higher interest rates and tighter lending standards were leading them to hold off on investments until credit conditions loosen. Demand for heavy truck transportation services declined moderately. Residential and commercial electricity usage decreased modestly, but industrial electricity consumption was up some, with one contact noting an increase after the end of the UAW strike. Inventories for most retailers were near desired levels. According to contacts, the UAW strike had little effect on overall auto inventories. In manufacturing, inventories were generally a little high. Most contacts noted fewer input shortages overall, though some remained, including for specialty electrical and polymer components.\nConstruction and Real Estate\nConstruction and real estate activity decreased slightly on net over the reporting period. Residential construction was down slightly with demand for major remodeling projects falling substantially. According to a survey, homebuilders were more pessimistic about activity in the coming months than they had been earlier in the year. Residential real estate sales decreased slightly, while continued low home inventories supported a slight increase in prices and rents. Nonresidential construction activity was unchanged as were prices of new construction. Contacts again reported that high interest rates were forcing previously financially viable projects to be delayed indefinitely. Commercial real estate activity declined slightly, though vacancy rates and the availability of sublease space also fell. Prices and rents edged down. One contact reported that while leasing activity had held up, sales activity had fallen off.\nManufacturing\nManufacturing demand decreased modestly overall. Steel and fabricated metals orders ticked down, with contacts highlighting lower sales to the construction, automotive, and medical sectors. Machinery sales were down modestly, in part because of fewer sales to the automotive sector. Auto production declined on average over the reporting period, largely because of the UAW strike. Heavy truck demand decreased modestly.\nBanking and Finance\nFinancial conditions tightened slightly on balance in October and early November. Bond and equity values were up some, while volatility fell. Business loan demand decreased modestly, and loan quality was also down, with contacts highlighting struggles in the commercial real estate sector. One contact noted loan quality improvements in hospitality. Business loan rates increased modestly, and standards tightened slightly. Consumer loan demand fell modestly across most segments. Some contacts noted that home equity lending was up because consumers were avoiding mortgage refinancing. Consumer loan quality decreased slightly, notably in credit card lending. Consumer loan rates increased modestly, and standards tightened slightly.\nAgriculture\nProjected farm income in the District was little changed over the reporting period as both expenses and expected revenues moved lower. Despite widespread drought, there were reports of record yields across multiple states and crop types, including corn, soybeans, tomatoes, and wheat. One contact mentioned that early and dry spring planting contributed to better-than-expected crop yields. Corn and soybean prices dropped to their lowest levels in over two years, while wheat prices were flat. Costs were lower for key crop inputs, including fuel and fertilizer. Egg prices edged up, milk prices were flat, and butter prices were down. Cattle and hog prices both declined.\nCommunity Conditions\nCommunity, nonprofit, and small business contacts reported little change in economic activity from a robust level. State government officials saw some decline in tax revenues but continued low demand for unemployment insurance. Small business owners reported that high labor and capital costs were eroding profit margins. Nonprofit contacts were experiencing ongoing high demand for services, especially at food pantries, and expressed concern about lower levels of private funding, delayed receipt of public funding, and the end of COVID-era government support. Heading into the winter months, low- and moderate-income consumers were \"piecing it together\" to meet their needs for winter clothing in anticipation of higher housing, food, and heating costs.\nFor more information about District economic conditions visit: https://chicagofed.org/cfsec\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nNovember 29, 2023\nSummary of Economic Activity\nEconomic activity has slowed slightly since our previous report. Labor markets remained tight, but reports of easing continued. An increased share of contacts reported holding wages flat. Prices rose moderately, though businesses continued to report consumer price sensitivity. Retailers and freight transport contacts reported slowing demand, particularly for high-end goods, but hospitality and travel contacts saw steady growth. Construction activity slowed, especially for multifamily projects, many of which have been delayed or cancelled due to higher interest rates. Loan demand fell, and delinquencies ticked up above pre-pandemic rates. The general outlook for the regional economy weakened slightly due to concerns about future demand.\nLabor Markets\nEmployment has remained unchanged since our previous report. Labor mismatches and struggles replacing departing employees have contributed to a tight labor market, but reports of easing have continued. Some contacts reported that availability of skilled workers remains a top issue, while others reported a more stable labor force for the first time in a few years. Staffing contacts reported clients are staying at jobs and less prone to leave than they were last year.\nWages have continued to grow slightly since our previous report, with an increased share of contacts reporting that wages remain level. A manufacturing contact in Evansville noted that hourly wages have risen only slightly, but an increase in overtime pay due to labor shortages has driven up labor costs. Several hiring contacts in St. Louis reported wage growth has slowed or reverted to pre-pandemic trends and fewer prospective employees have successfully negotiated for higher wages.\nPrices\nPrices have increased modestly since our previous report. Although approximately three-quarters of contacts reported higher labor and nonlabor input costs, many businesses are choosing to maintain or only slightly increase prices. Among respondents who do not plan to fully pass on costs to consumers, two main reasons stood out: First, some previous price increases were enough to cover more-recent cost increases. In an effort to raise prices less frequently, some businesses hedged by implementing larger increases earlier in the year. For example, an Arkansas brewer reported that they incorporated potential future volatility in input costs in past price increases. Second, increased consumer sensitivity to price increases has lessened businesses' ability to raise prices. Some items, such as luxury handbags and watches, have seen price decreases of about 15%.\nConsumer Spending\nDistrict general retailers, restaurant, and hospitality contacts reported mixed business activity since our previous report. In general, auto dealers reported a decline in business activity. Louisville auto contacts reported that higher interest rates have slowed consumer demand for new car purchases. October real sales tax collections increased in Kentucky, Missouri, and Western Tennessee relative to September and decreased in Arkansas. A Little Rock pawn shop noted that, while sales over the past 18 months have been at high volumes historically, sales have slowed in recent months. A Memphis hospitality contact noted that hotel occupancy rates have been consistent compared with the same 6-month period last year.\nManufacturing\nManufacturing activity growth has declined slightly since our previous report. In Arkansas and Missouri, firms reported slight decreases in production and employment and slight increases in delivery lead times and new orders. Missouri reported a slight decrease in inventories, while Arkansas saw a very slight increase. Higher interest rates and the auto worker strikes impacted deliveries of some products for local automotive markets. On average, firms reported they expect slight decreases in production, capacity utilization, and new orders in the coming quarter.\nNonfinancial Services\nActivity in the nonfinancial services sector has cooled since our previous report. Overall, sales and sales expectations were the same or slightly lower, and the general outlook was slightly worse. A Louisville tourism contact reported postponing capital expenditures because of flagging demand but also reported local growth in the hospitality industry. A St. Louis tourism contact reported continued investment and expressed hope that the local economy would be somewhat insulated from economic challenges faced by more expensive areas. A Memphis freight contact echoed the sentiment of low demand, which, coupled with overbuying during the COVID pandemic, has contributed to slow reduction of inventory. A St. Louis transportation contact reported stable demand from ongoing customers, but less new client acquisition. A Little Rock healthcare provider reported lower sales expectations and a worsening outlook.\nReal Estate and Construction\nResidential rental prices across the District have remained unchanged since our previous report. In the Louisville, Memphis, and Little Rock MSAs, pending sales and houses off the market in two weeks have fallen since our previous report, while inventory and months of supply for residential real estate have increased. Contacts reported high mortgage rates continuing to constrain demand for buying homes. In commercial real estate, strong demand for office space continues to be focused on Class A buildings, while vacancies remain high for Class B and C office space.\nCommercial construction has slowed sharply since our previous report, particularly for new starts in the warehouse and industrial sectors. Residential construction has also seen slowing activity, with some projects sidelined or cancelled, especially for multifamily. One Memphis commercial real estate contact reported that new construction has all but stopped for developments aside from single-family housing. While the number of ongoing projects remains high, contacts with a strong existing project pipeline have reported slowing demand for future projects.\nBanking and Finance\nActivity in the banking sector has slowed modestly since our previous report. A survey of contacts found that, overall, credit card and commercial and industrial loans all show signs of modest decreases in demand. Mortgage loan demand moderately declined due to high mortgage rates and low housing inventory, making housing affordability beyond the reach of many buyers. Contacts across the District reported that profit margins are tightening due to higher interest expenses. Consumer delinquencies continue to rise and are being closely monitored by banking contacts, who report they are returning to and in some cases exceeding pre-pandemic levels. Overall, banks continue to report stable conditions due to low credit risk and high asset quality.\nAgriculture and Natural Resources\nAgriculture conditions have improved slightly since our previous report. Yields for the District's primary commodity crops were at or moderately below 2022 levels. Despite this slight decline, total corn production in the District rose relative to last year. Rice production also rose, reaching levels over 33% higher than in 2022, while soybean production dipped slightly below 2021-22 levels and cotton production returned to 2021 levels. Commodity crop prices fell but remained at or above typical levels for the 2015-2020 period and stayed relatively stable throughout the reporting period. District contacts reported a mixed outlook but were generally less pessimistic than in previous reports. A Louisville contact attributed the moderate improvement in outlook to higher-than-expected yields and prices for crops such as corn and soybeans.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

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"November 29, 2023\nSummary of Economic Activity\nEconomic activity was flat or down slightly on balance, as prices held mostly steady and labor demand slowed. Retail results were mixed but neutral on average, and restaurant sales fell slightly. Manufacturers reported modest recent revenue declines, and a few experienced sharp reductions in demand from a year earlier. Staffing services contacts enjoyed modest gains in revenues but noted a slowdown in hiring plans among their clients. Residential home sales were flat at very low levels, and sales were not expected to rebound until interest rates fell. Commercial real estate activity slowed modestly, and the outlook for office properties was increasingly dim. Outside of real estate, contacts on balance were cautiously optimistic for at least stable activity moving forward.\nLabor Markets\nEmployment appeared stable on balance, but hiring activity and hiring plans were dialed back noticeably in some sectors. Wage growth was moderate on average and eased further overall. Staffing services contacts reported slight increases in labor supply and sustained but modest demand for most roles. The same contacts said that clients were \"rightsizing\" their businesses through occasional layoffs and reduced hiring plans. Starting wages actually declined for some positions because of an increased candidate pool, and signing and retention bonuses became less common. Demand apparently picked up for legal staffing roles and remained robust for convention staffing positions. Restaurant industry contacts said that labor supply increased modestly further, with the exception that managers remained scarce. Retail headcounts were roughly steady, and contacts saw moderately lower attrition and a slight increase in applications. Labor demand weakened among manufacturers, as two firms reduced headcounts sharply from one year ago amid restructuring and others planned to let headcounts fall gradually through attrition and conservative hiring. Manufacturers said that wage growth was stable but stayed at an above-average pace. A workforce development contact said that select employers were willing to provide training to new hires with weak qualifications, enabling more first-time jobseekers to join the labor force, but that the practice was still not widespread. The outlook was mixed but most contacts predicted stable or slower labor demand moving forward.\nPrices\nPrices were stable on average across First District contacts. Retail sticker prices were flat and planned price increases remained muted relative to recent years. For restaurants, menu prices held roughly steady and wholesale food prices were also mostly flat in recent months, excepting modest increases in the prices of pork and eggs. Restaurants' profit margins were down somewhat from a year earlier because menu price increases have fallen short of overall cost increases. Output prices were stable across manufacturing contacts, while input costs were down on balance and several contacts enjoyed sharply lower freight costs in particular. Contacts expected only modest pricing pressures moving forward.\nRetail and Tourism\nRetail contacts had flat revenues on average and restaurants had slightly weaker sales. A clothing retailer experienced a moderate decline in year-over-year sales following months of modest growth. The contact said that unseasonably warm temperatures this fall had delayed winter purchases, but they saw a rebound more recently as the weather turned colder and they remained optimistic for the holiday season. A discount retailer saw further modest improvements in sales volumes, pointing to strong inventories and the ongoing shift of consumers toward discount goods. A Massachusetts restaurant industry contact reported marginally lower sales throughout the state in recent months, with meal tax receipts dipping slightly from a year earlier despite a modest increase in meal prices over that same period. There are now more restaurant establishments in the state than there had been prior to the pandemic. Restaurant owners remained optimistic for the holiday season, but maintaining profitability was expected to be an ongoing challenge.\nManufacturing and Related Services\nReports were mixed for our manufacturing contacts, with revenues down modestly on balance and only one firm reporting robust sales growth. Several contacts reported significant revenue declines from one year earlier, in one case because of a comparison to an unusually strong 2022 benchmark and in other cases because of lackluster demand in 2023. A maker of testing equipment attributed weaker demand to reductions in COVID-related medical spending. A microelectronics industry contact said that the down cycle that started in the third quarter of 2022 is the longest in the history of the industry. A chemical manufacturer said higher interest rates were at least partly to blame for sharply weaker sales in 2023. Contacts with slowing sales said they were reducing capital expenditures, but only slightly, as the returns to automation remained high. Outlooks were guardedly positive on balance.\nStaffing Services\nFirst District staffing firms reported modest revenue increases on balance in the third quarter of 2023. Revenue gains were driven by elevated pay rates for temporary placements and temp-to-hire roles, positions which have rebounded since the pandemic. Nonetheless, the overall hiring plans of staffing firms' clients seemed to slow on balance. Given the slowdown, one staffing contact decided not to fill an internal talent acquisition position that had been created by a resignation. The outlook was cautiously optimistic, as firms expected stable demand on balance. One contact hoped to expand into a new geographic region, provided revenues held at least steady in the coming months.\nCommercial Real Estate\nCommercial real estate activity slowed further on balance, albeit modestly. Demand for industrial space weakened a bit, particularly among e-commerce and warehousing tenants. Industrial rent growth slowed but remained positive, and vacancy rates increased slightly from near-zero levels. Office leasing was flat on balance; a Hartford contact described activity as anemic, and a Providence contact saw an uptick that was limited to renewals and downsizing moves. Office rents were stable and vacancy rates edged up to near 20 percent. Retail market fundamentals were stable but prospective tenants delayed lease signings amid uncertain consumer demand. One contact noted strong performance of hotel properties, particularly in Boston. High borrowing costs continued to deter commercial property sales and construction. The outlook for office properties was seen as dire, with loan defaults on the rise and valuations likely to fall further. Also, contacts predicted a glut of life sciences space in Boston for 2024. Broadly speaking, contacts expected somewhat slower leasing and sales activity in 2024, but noted that results would depend heavily on the direction of interest rates and consumer demand.\nResidential Real Estate\nAcross the First District, residential real estate sales were about flat in recent months net of seasonal adjustments. Considering year-over-year changes to September or October, home sales were down sharply from a year earlier, although in some markets the pace of decline moderated a bit. The greater Boston area experienced its weakest September for single-family home sales since 1995. Condominium sales were down by more moderate margins but were also historically weak. Prices continued to climb at a moderate-to-strong pace owing to very low inventories. Although inventories fell again on a year-over-year basis, the pace of decline moderated, and modest seasonal supply increases were seen in September from August. Contacts again pointed to high interest rates as the most important factor holding back activity in the residential property market, and therefore pinned the outlook for sales on the course of interest rates in 2024.\nFor more information about District economic conditions visit: https://www.bostonfed.org/in-the-region.aspx\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"November 29, 2023\nSummary of Economic Activity\nThe economy in the Sixth District grew at a tepid pace from October through mid-November. Labor availability and employee retention improved, and wage pressures continued to ease. Some construction input costs fell, but fuel prices and insurance costs rose; pricing power dwindled. Retail sales moderated; new auto sales were strong, although demand for used cars declined. Domestic leisure and group travel was healthy, but spending at hotels slowed. Home sales remained constrained as house prices and mortgage interest rates rose. Commercial real estate activity decelerated. Demand for transportation services remained soft. Loan growth was flat. Energy demand increased.\nLabor Markets\nMost business contacts reported that labor markets softened further but continued to describe conditions as tight. Labor availability, retention, and candidate quality improved. Firms that required in-office attendance experienced higher turnover in professional roles than companies with more flexible work arrangements. The pace of hiring slowed for most, and many employers noted being more selective as they backfilled roles while letting low performers go. Fewer firms reported hiring to expand headcount. Reports of worker shortages varied considerably by occupation across the region but were more widespread among South Florida contacts.\nMost firms indicated that wage pressures continued to ease, and further moderation is expected next year. Several contacts noted that rising healthcare costs would be passed along to employees in 2024.\nPrices\nHealth and property insurance costs continued to rise. However, the cost of other nonlabor inputs like freight, steel, and lumber declined. Several contacts, most notably homebuilders, said construction input cost decreases were slow to translate into realized savings. Fuel costs rose, though shipping costs, while still elevated, fell somewhat. Food prices increased. Pricing power diminished amid pushback from customers. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth increased slightly to 3.2 percent, on average, in October, from 3.1 percent in September; firms' year-ahead inflation expectations for unit cost growth declined slightly in October to 2.4 percent, on average, from 2.5 percent in September.\nCommunity Perspectives\nJobseekers and workers in lower-wage positions expressed ongoing confidence in the labor market, both in available opportunities and in the potential to secure better pay. Still, many reported ongoing difficulties to cover basic household expenses. Business contacts affirmed that high prices continued to squeeze consumer finances, with rental delinquencies rising slightly and financially constrained households relying to a greater extent on credit card debt to get by. Some civic leaders shared concerns that worker shortages in construction could delay anticipated infrastructure investments. Workforce development contacts indicated that employers are finding labor more readily available when offering on-the-job training.\nConsumer Spending and Tourism\nSimilar to the previous report, retailers noted a softening in consumer spending, which was again described as a normalization from the pandemic's strong pace of growth. Demand for services and luxury goods remained robust; however, lower income consumers continued to trade down. Automobile dealerships reported that manufacturers were offering incentives for new vehicle purchases, resulting in strong sales, but that the demand for used vehicles ticked down. Most retailers do not expect significant declines in sales over the coming months.\nTourism and hospitality contacts characterized leisure and group travel to the District as healthy. However, some noted mounting levels of uncertainty among travelers as indicated by shorter booking windows. Spending on merchandise, food, and services in hotels decreased compared with year-earlier levels. On balance, contacts described the environment as continuing to normalize and remain cautiously optimistic into the first quarter of next year.\nConstruction and Real Estate\nHome sales throughout the District remained constrained amid higher prices and volatile interest rates. Home purchases by repeat buyers contracted the most, as many who were locked in at low interest rate mortgages remained disincentivized to re-enter the market. Though moderating, house prices in most markets were at or near peak levels. Price growth was strongest in South Florida. Rising homeowners' insurance premiums have become a major expense, especially for homeowners with lower and/or fixed incomes. Home builder sentiment deteriorated amid declining affordability. Builders experienced more challenges qualifying buyers. Incentive offers, such as rate buy downs, remained prevalent.\nCommercial real estate (CRE) contacts reported diminishing conditions across the sector. In addition to the office segment, high-end multifamily and industrial real estate were noted as areas of distress. Contacts reported concerns regarding financing, as most lenders increased underwriting standards and reduced funding commitments. A growing wave of CRE loan maturities and declining asset values are significant downside risks to the CRE outlook.\nTransportation\nTransportation activity remained weak. Freight forwarders noted double-digit declines in year-over-year average daily volumes, citing downturns in exports and lower consumer spending. Railroads reported increases in the total number of carloads, but softness in intermodal freight. Some ports noted an increase of cars shipped in containers due to capacity constraints on roll-on, roll-off vessels; overall cargo volumes declined. Inland waterway activity was characterized as back to pre-pandemic levels. Trucking contacts reported a drop in consumer-driven freight and characterized the 2023 peak season as \"non-existent\" for parcel carriers. Insurance and regulation costs, along with the current geopolitical environment, were cited as significant longer-term risks.\nBanking and Finance\nConditions at District financial institutions remained sound. Loan growth was flat for most portfolios. Asset quality was stable with low levels of nonperforming loans as a percentage of total loans, despite an uptick in credit card and auto delinquencies. Institutions relied on noncore funding sources, such as large time deposits, while reducing borrowings. Net interest margins remained compressed given high funding costs, and some financial institutions sought cost savings to improve earnings. Securities portfolio losses remained a drag on capital.\nEnergy\nDemand for fuel picked up over the reporting period compared with a year ago, as more employees returned to the office and business travel improved. Mid-level fuel demand increased, with contacts speculating that drivers of luxury vehicles were trading down from premium grade gasoline. Fossil fuel companies continued to invest heavily in charging stations in preparation for increased electric vehicle (EV) usage. Demand for electricity shifted from residential to commercial with more employees in office, and industrial electricity demand began to move from chemical, paper, and housing-related industries to data centers and battery and EV manufacturing. Demand for chemical intermediate products remained sluggish.\nAgriculture\nDemand for agriculture rose slightly in recent weeks. Recent cattle herd liquidation constrained the supply of beef, driving prices up. Meanwhile, the supply of dairy was down as high beef prices led to an increase in dairy cows being slaughtered, resulting in higher dairy prices. Poultry farmers expressed growing optimism as stronger demand allowed some to turn a profit again after losing money amid low prices. Most row crops produced strong yields, but demand for cotton remained low.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"November 29, 2023\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to decline slightly. High interest rates and tightening credit standards continued to constrain demand for big-ticket consumer items and private market transactions. Wage and price inflation subsided significantly \u2013 to a still-modest pace somewhat higher than the pre-pandemic rate \u2013 but price levels remain high for many items. Consumer spending fell modestly in real terms across most segments as consumers became yet more price sensitive. Low-income households have struggled the most. Despite demand falling slightly, employment grew modestly as more job candidates applied and hiring difficulties eased. Overall, contacts' concerns have shifted away from COVID-19, supply chain issues, and labor market issues to uncertainty about interest rates, world affairs, and the 2024 election cycle. On balance, expectations for economic growth over the next six months are mostly positive but remain well below historical averages.\nLabor Markets\nEmployment grew modestly \u2013 faster than the slight growth in the prior period. In our monthly surveys, nonmanufacturing firms reported further increases in full-time jobs and an uptick in part-time employment. Manufacturing firms reported a slight increase in employment levels but noted a modest decline in the average employee workweek.\nContacts continued to note an increase in job applicants but a dearth of qualified candidates. Looking ahead and citing expectations of weaker demand, firms expressed more caution about future hiring. A staffing contact reported that orders were down year over year for the firm as well as for most of its peers, although an uptick had narrowed the decline recently.\nIn a broad annual survey of all of our contacts, 40 percent expected employment to increase over the year, 45 percent expected no change, and 16 percent expected a decrease. The net 24 percent of firms that hope to hire is the lowest share we've recorded dating back to 2011.\nFirms reported that wage inflation continued to subside and is approaching pre-pandemic levels but remains at a modest pace overall. On a quarterly basis, firms' expectations of the one-year-ahead change in compensation cost per worker edged down to a trimmed mean of 4.1 percent in the fourth quarter of 2023, from 4.3 percent in the third quarter (and from a peak of 5.8 percent in the third quarter of 2022). Expectations averaged 3.2 percent prior to the pandemic. Expected compensation growth fell to 4.1 percent for manufacturers and to 4.2 percent for nonmanufacturers.\nPrices\nOn balance, firms reported that price increases subsided significantly but remained modest \u2013 somewhat higher than the typical increases in the 1.5 to 2.0 percent range that were observed before the pandemic.\nFirms reported that increases in prices received for their own goods and services over the past year fell significantly in the fourth quarter of 2023 compared with the third quarter. The trimmed mean for reported price changes, as indicated by responses to our quarterly survey questions, fell to 3.6 percent from 4.5 percent for all firms. Price increases fell to 3.0 percent among nonmanufacturers and to 4.2 percent for manufacturers.\nContacts noted that while inflation has subsided, many prices remain at new high levels \u2013 straining household budgets and business profitability. Some food pantries recently reported that 25 percent of the families served are new; other pantries exist to serve university students. Meanwhile, food banks are struggling to secure food.\nLooking ahead one year, the increases that firms anticipated in the prices for their own goods fell significantly. The trimmed mean for all firms fell to 2.7 percent in the fourth quarter of 2023, from 3.7 percent in the third quarter. After reaching a peak of 5.9 percent in the fourth quarter of 2021, expectations are now only slightly above the quarterly average of 2.3 percent for 2016 through 2019. The expected rate of growth fell to 2.3 percent for nonmanufacturers and to 3.1 percent for manufacturers.\nManufacturing\nOverall, manufacturing activity declined slightly during the period following a modest decline in the prior period. The index for new orders edged up slightly; however, shipments sank deep into negative territory after oscillating over the past four months.\nExpectations among manufacturers for growth in the next six months remained mostly positive but weakened considerably compared with historical averages.\nConsumer Spending\nOn balance, retailers (nonauto) continued to report a modest decline in real sales. Some contacts noted that nominal sales were flat or slightly increased. Most said that lower-income consumers were shopping for discounts and spending less; one observed that middle-income consumers were buying fewer items per trip.\nAuto dealers reported a slight decline in unit sales after holding steady in the prior period. Contacts noted that supply constraints have mostly ended, but pent-up demand persists \u2013 sustaining high prices. Contacts observed that electric vehicles were accumulating on dealer lots as high prices, high interest rates, and consumer hesitancy curbed demand.\nTourism activity continued to decline slightly. Contacts noted that demand is weakening and pricing is softening, especially for budget-oriented properties. One contact noted that business travel has eased \u2013 adding that it had not yet fully recovered.\nNonfinancial Services\nOn balance, nonmanufacturing activity resumed a slight decline following a modest decline in the prior period. The index for new orders remained negative, while the shipments index turned positive by the end of the period.\nExpectations among nonmanufacturers for growth in the next six months improved somewhat but remained well below historical averages.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew slightly during the period (not seasonally adjusted) \u2013 significantly slower than the moderate pace observed last period and during the same period last year.\nDuring the period, District banks reported moderate growth in home mortgages, modest growth in commercial and industrial loans, and slight growth in home equity lines and other consumer loans. Commercial real estate loans were flat, while auto loans fell modestly.\nCredit card volumes were flat following strong growth last period. The pace of growth had been modest during the comparable period last year; however, little or no growth was typical for the comparable time period in most pre-pandemic years following the Great Recession.\nBanking contacts noted that delinquencies and bankruptcies are rising but remain at low levels \u2013 overall credit quality remains sound. However, nonprofit agencies continued to report higher cash flow problems among small and minority businesses as banks tighten credit standards.\nReal Estate and Construction\nBrokers reported that existing-home sales were mired at historically low levels \u2013 still buffeted by high prices, high interest rates, and low inventories. New-home builders reported a slight decline in home sales but noted that demand remains strong. People with means continue to buy new or existing homes, while affordability has forced many potential buyers to remain in the rental market.\nAccording to contacts, high interest rates continue to have a dampening effect on commercial real estate market transactions and on new construction. Leasing activity declined slightly accompanied by growth of concessions. The construction pipeline is not yet full for 2024. Activity fell slightly; however, infrastructure projects are keeping some firms very busy.\nFor more information about District economic conditions visit: www.philadelphiafed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"October 18, 2023\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to decline slightly. Consumer demand appeared to decline as contacts noted more cautious spending habits by consumers, including fewer visits to stores and substituting toward lower-priced items. High interest rates continued to constrain the listings of existing homes for sale, which has benefited new-home builders. Employment again grew slightly as labor availability continued to improve. Wages and prices continued to grow at a modest pace. Contacts also indicated that wage and price pressures slowly subsided. Overall, contacts reported a steadier cost of goods for their inputs, as most supply chains had returned to pre-pandemic norms. Contacts continued to note a tightening of credit standards, although credit quality remained good. On balance, expectations for economic growth over the next six months remained subdued, as both manufacturing and nonmanufacturing firms expected slight growth.\nLabor Markets\nEmployment continued to grow slightly. Contacts described improvements in labor availability and the ability to hire. A staffing firm noted candidates were more willing to accept positions they may have otherwise turned down in recent months, highlighting that it had become easier to recruit employees for night and weekend shifts. Despite the slight growth in employment overall, a few firms across various industries reported layoffs and allowing reductions of their workforces through attrition.\nIn our monthly surveys, nonmanufacturing firms reported increases in full-time jobs and mostly steady levels of part-time employment. On balance, manufacturing firms reported a decrease in employment levels. The indexes for these categories were little changed from the prior period.\nFirms reported that wage inflation continued to slowly abate but remained at a modest pace overall \u2013 near pre-pandemic levels. Contacts noted some ongoing wage pressure, particularly from skilled trade workers, as the supply of qualified candidates remained scarce. A contact reported a recent increase in retirements among trade workers but said many returned almost immediately as part-time employees.\nIn our monthly surveys, the distribution of nonmanufacturing firms reporting higher or lower wage and benefit costs per employee remained typical of the pre-pandemic era, when modest wage growth prevailed.\nPrices\nOn balance, firms reported that prices continued to rise modestly; however, they also continued to note that the rate of price increases appeared to subside. Contacts described lower and less widespread price increases compared with earlier this year but noted that year-over-year price increases remained slightly above the average increases seen before the pandemic.\nIn our monthly surveys, the prices paid and prices received indexes declined for nonmanufacturers, though the prices paid index remained above its nonrecession average. Among manufacturers, the prices paid index rose, and the prices received index held steady, slightly above its nonrecession average.\nThe indexes for future prices paid and future prices received continued to suggest that firms expect price increases over the next six months. Both indexes declined relative to last period but remained somewhat above their long-run averages.\nManufacturing\nManufacturing activity declined modestly during the period after slight growth in the prior period. The indexes for new orders and shipments returned to negative territory after jumping higher in August. Contacts reported slower orders as customers looked to reduce inventories.\nThe share of firms that estimated increased total production growth for the third quarter of 2023 compared with the second quarter was the same as the share that estimated a decrease. Most firms continued to report labor supply as at least a slight constraint on capacity utilization. Over the next three months, more than one-fifth of the firms expect COVID-19 mitigation measures to be a constraint on capacity utilization, up from zero percent last quarter.\nExpectations among manufacturers for growth in the next six months rose but remained somewhat subdued compared with historical averages.\nConsumer Spending\nOn balance, retailers (nonauto) reported a modest decline in overall sales \u2013 a faster pace than the slight decline in the prior period. One retail contact noted that customers were visiting less frequently and substituting lower-priced goods when possible. A tourism contact reported that travelers were becoming increasingly price sensitive and spending less once they arrived at their destination. Multiple contacts expressed concern that the resumption of student loan payments may be a potential headwind for consumer spending in the coming months.\nAuto dealers reported mostly steady sales during the period following a slight decline in the prior period. Contacts continued to report improved inventories, but rising interest rates and high prices weighed on demand.\nTourism activity continued to decline slightly as overall demand for leisure travel slowed from high levels throughout the region. Contacts attributed this slowdown to increased international travel, as well as weakening demand for economy hotels and more budget-friendly destinations. Meanwhile, travel to luxury destinations remained strong.\nNonfinancial Services\nOn balance, nonmanufacturing activity declined modestly after a slight decline in the prior period. The indexes for new orders and sales remained negative, as the share of firms reporting decreases exceeded the share reporting increases for both. Expectations for growth over the next six months remained subdued.\nFinancial Services\nThe volume of bank lending (excluding credit cards) continued to grow moderately during the period (not seasonally adjusted) \u2013 comparable with the same period last year.\nDuring the period, District banks reported strong growth in home mortgages, auto loans, and other consumer loans. Commercial and industrial loans grew moderately, while home equity loans grew modestly, and commercial real estate loans were up slightly. Credit card volumes resumed strong growth following moderate growth last period. The pace was slightly slower than the comparable period last year.\nBanking contacts and large service companies continued to report good credit quality \u2013 noting only small upticks in late payments and loan delinquencies, which remain at very low levels. Market participants continued to report a tightening of credit standards and noted that higher financing costs were especially challenging for smaller businesses.\nReal Estate and Construction\nExisting-home sales rose slightly in the current period but remained well below the level of sales observed in prior years. Brokers continued to report that inventories and rising costs were a significant constraint on sales, particularly for first-time homebuyers. New-home builders, aided by the dynamics of the existing-home market, continued to report steady sales. Multiple homebuilders noted a slowdown in prospective buyer traffic during the period but highlighted that a larger share of that traffic turned into sales.\nHousing affordability remained extremely low, and rents remained high in the current period. Requests for assistance with housing and utility bills continued to dominate 211 requests in New Jersey and Pennsylvania. Roughly one-third of all requests in the two states were related to housing, while 27 percent of the requests involved utility bills.\nAccording to contacts, construction activity for commercial real estate held steady as financing conditions for new projects remained difficult. Despite steady construction overall, contacts reported a slight slowdown in multifamily construction activity. Nonresidential leasing activity continued to fall modestly as contacts described ongoing distress in the office market.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nOctober 18, 2023\nThis report was prepared at the Federal Reserve Bank of St. Louis based on information collected on or before October 6, 2023. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nMost Districts indicated little to no change in economic activity since the September report. Consumer spending was mixed, especially among general retailers and auto dealers, due to differences in prices and product offerings. Tourism activity continued to improve, although some Districts reported slight slowing in consumer travel, and a few Districts noted an uptick in business travel. Banking contacts reported slight to modest declines in loan demand. Consumer credit quality was generally described as stable or healthy, with delinquency rates still historically low but slightly increasing. Real estate conditions were little changed and the inventory of homes for sale remained low. Manufacturing activity was mixed, although contacts across multiple Districts noted an improving outlook for the sector. The near-term outlook for the economy was generally described as stable or having slightly weaker growth. Expectations of firms for which the holiday shopping season is an important driver of sales were mixed.\nLabor Markets\nLabor market tightness continued to ease across the nation. Most Districts reported slight to moderate increases in overall employment, and firms were hiring less urgently. Several Districts reported improvements in hiring and retention as candidate pools have expanded and those receiving offers have been less inclined to negotiate terms of employment. However, most Districts still reported ongoing challenges in recruiting and hiring skilled tradespeople. A few highlighted that older workers are remaining in the labor force, either staying in their existing position or returning in a part-time capacity. Wage growth remained modest to moderate in most Districts. Contacts across many Districts reported less pushback from candidates on wage offers. There were multiple reports of firms modifying their compensation packages to mitigate higher labor costs, including allowing remote work in lieu of higher wages, reducing sign-on bonuses or other wage enhancements, shifting compensation to more performance-based models, and passing on a greater share of healthcare and other benefits costs to employees.\nPrices\nPrices continued to increase at a modest pace overall. Districts noted that input cost increases have slowed or stabilized for manufacturers but continue to rise for services sector firms. Increases in fuel costs, wages, and insurance contributed to growth in prices across Districts. Sales prices increased at a slower rate than input prices, as businesses struggled to pass along cost pressures because consumers had grown more sensitive to prices. As a result, firms struggled to maintain desired profit margins. Overall, firms expect prices to increase the next few quarters, but at a slower rate than the previous few quarters. Several Districts reported decreases in the number of firms expecting significant price increases moving forward.\nHighlights by Federal Reserve District\nBoston\nBoth business activity and employment expanded only slightly, and price increases were modest. The rainy summer yielded mixed results on Cape Cod. Tourism contacts in Boston expect strong demand in 2024, while real estate contacts remained rather pessimistic. Hiring plans were relatively subdued, and so were planned price increases.\nNew York\nRegional economic activity weakened modestly, though labor market conditions remained solid. Consumer spending increased at a slightly slower pace, with declines in spending on experiences offset by increases in spending on goods. Financial conditions weakened somewhat. Inflationary pressures moderated slightly.\nPhiladelphia\nBusiness activity continued to decline slightly during the current Beige Book period. Consumer spending declined overall, as did manufacturing and nonmanufacturing activity. Employment again rose slightly as labor availability improved further. Wage growth and inflation slowly subsided but continued at a modest pace. Expectations for economic growth remained subdued.\nCleveland\nEconomic activity in the Fourth District was little changed in recent weeks. Manufacturers noted an uptick in activity but expressed concerns over potential adverse impacts of the UAW strike. Hiring activity was flat, and firms more frequently reported holding wages steady following sizeable increases over the past few years. Input costs stabilized for many manufacturers, while service providers reported rising vendor costs.\nRichmond\nThe regional economy contracted slightly this period. Consumer spending grew slightly but reports varied across spending categories. Manufacturers noted a decrease in demand. Transportation volumes remained steady. Residential real estate was constrained by limited inventory. Commercial real estate activity and lending declined. Employment increased moderately and price growth was unchanged in recent weeks.\nAtlanta\nEconomic activity grew slowly. Labor markets improved, and wage pressures eased. Some nonlabor costs stabilized. Retail sales slowed. New auto sales were strong. Domestic leisure travel declined, while international and business travel rose. Housing demand fell. Transportation activity decelerated. Energy demand was flat. Agriculture conditions were mixed.\nChicago\nEconomic activity was up modestly. Employment increased moderately; consumer and business spending were up slightly; nonbusiness contacts saw little change in activity; and manufacturing, construction, and real estate activity decreased modestly. Prices and wages rose moderately, while financial conditions tightened slightly. Expectations for farm incomes in 2023 were little changed.\nSt. Louis\nEconomic conditions have remained unchanged since our previous report. Labor markets remained tight, and employers reported that where applications had increased there were frequent difficulties finding the skills desired. Prices increased modestly due to higher input costs, though the rate of increases slowed. Businesses reported softer consumer demand and difficulty passing on input costs.\nMinneapolis\nRegional economic activity increased slightly. Employment grew modestly and labor demand softened. Wage pressures were stable as job seekers pursued higher-paying jobs. Price pressures eased modestly. Consumer spending was modestly higher and auto sales rose moderately. Most contacts said that higher long-term interest rates had weakened their economic outlooks for next year.\nKansas City\nEconomic conditions softened slightly across the Tenth District in recent weeks, driven by lower energy, agriculture, and commercial real estate activity. Several bankers characterized their appetite for lending as being on a \"loan diet.\" Employment levels were stable, but wage growth slowed, particularly among entry-level jobs. Prices continued to grow at a moderate pace generally, but growth in housing rental rates slowed substantially.\nDallas\nModest economic expansion continued, with growth moderating in the service sector but rebounding in manufacturing and energy. Retail and financial services activity declined. Employment growth was modest, and wage growth continued to normalize. Outlooks generally weakened slightly, with contacts expressing concern over worsening business conditions, high interest rates and the political environment.\nSan Francisco\nEconomic activity was stable on net. Labor market tightness eased, and both wage and price pressures moderated. Retail sales were robust, and manufacturing activity remained largely unchanged. Activity in the services and real estate sectors eased. Financial sector conditions moderated further over the reporting period. Local communities faced continued challenges with affordable housing.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2023/2023-10-kc

"Beige Book Report: Kansas City\nOctober 18, 2023\nSummary of Economic Activity\nEconomic conditions softened slightly across the Tenth District in recent weeks. Hiring activity and business conditions were mostly unchanged, but contacts in the energy, agriculture and commercial real estate sectors reported moderate declines in activity. Several bankers characterized their appetite for lending as being on a \"loan diet\" \u2013 looking for smaller portions (smaller balances) and only healthy fare (better creditworthiness). Most businesses indicated wage growth slowed to a moderate pace. In particular, wage growth among entry-level jobs slowed as job hopping became less common. Lower turnover reportedly eased wage competition and led job switching to result in smaller wage gains for workers compared to earlier in the year. The pace of consumer spending was unchanged. Some contacts noted that household spending on home renovation activity grew slightly, which they attributed to a \"lock-in effect\" among homeowners with low interest rate mortgages. Prices generally grew at a moderate pace. However, several housing property managers reported that rent growth decelerated significantly in recent weeks. Contacts also indicated that rent pressures will subside further due to a substantial amount of new multifamily housing becoming available over the next eighteen months.\nLabor Markets\nLabor market conditions in the Tenth District were unchanged over the last month on average. Though several contacts in manufacturing reported slight job gains over the last month, they indicated they were filling long-vacant positions rather than growing their workforce. Average hours worked at manufacturing facilities fell slightly as new staff allowed employers to reduce overtime hours. Service contacts reported a slight contraction in employment. Labor markets remain tight on balance, but wage growth slowed to a moderate pace.\nBusiness contacts reported their workforce is less qualified and less productive compared to earlier this year. They attributed the moderate declines in workforce effectiveness to high turnover of more skilled and tenured staff in recent years. Most contacts expected these workforce conditions to persist due to continued difficulty hiring qualified workers. Many noted new applicants across job levels and occupations are less skilled, experienced, or educated than applicants earlier this year. Service contacts mentioned particularly pronounced issues with new applicant reliability, experience, and skills \u2013 making it difficult to fill open positions.\nPrices\nPrice growth remained moderate across the District. Services businesses noted ongoing difficulty passing price increases to their customers. Given these pressures on their margins, most contacts expected to continue raising their prices over the next six months. Several multifamily housing property managers reported that growth in rent prices stalled in recent weeks, and that rent growth is down considerably compared to last year. Contacts expected rent pressures to further subside over the next year due to a substantial amount of multifamily housing supply coming online.\nConsumer Spending\nThe pace of consumer spending was unchanged in recent weeks. Spending at restaurants slowed mildly but other leisure spending maintained momentum. Retail spending picked up slightly, which some contacts noted was concentrated among larger retail businesses. Citing the \"lock-in effect\" of homeowners with low interest rate mortgages, some contacts noted that spending on home renovation activity grew slightly. However, spending on renovation activity was constrained by the limited availability of contractors willing to take smaller jobs.\nCommunity Conditions\nContacts reported that low- and moderate-income (LMI) workers continued to pursue higher wages through job hopping, but those opportunities were becoming less advantageous. Entry-level wages have continued to rise, though at a much slower pace than a few months ago. Most workforce organizations said they focused on directing clients to seek more career-oriented opportunities in preparation for a possible recession. However, clients have been hesitant to pursue such opportunities due to the time they would need to spend in training, favoring more immediate employment. Workforce organizations reported seeing more LMI individuals pursuing work despite ongoing challenges reaching employer locations and finding childcare. One organization with a harder-to-place clientele reported placement rates fell to a multi-year low of 30 percent, citing higher rates of addiction, mental health issues, and physical disabilities.\nManufacturing and Other Business Activity\nOverall business activity was mostly unchanged, with subtle differences across sectors. Manufacturing firms, especially durable goods producers, continued to report broad-based declines in new orders, shipments, and order back logs \u2013 all indicators of future softening in demand. Service contacts in consumer-facing retail businesses, healthcare, and education reported strength in activity. However, several transportation contacts highlighted broad-based declines in shipments and freight rates. One contact specifically highlighted a decline in shipments of goods tied to interest rate sensitive sectors like housing and construction, noting that shipping volumes of carpet and other building materials were down. Another contact in trucking highlighted a risk surrounding credit performance of owner-operators who are facing lower revenues and steeply declining valuations on equipment that was used to collateralize loans.\nReal Estate and Construction\nContacts across the commercial real estate sector highlighted distinctions in performance across property classes. Newly constructed \u2013 or otherwise prime \u2013 office, retail, and industrial spaces continued to perform above expectations while class B properties faced lower operating incomes and valuations. Most contacts noted funding for renovation activity was substantially less available than for new property development. Several contacts suggested uncertainty about rates inhibited transaction activity more so than higher rates. They expected revaluation of properties and greater transaction activity would emerge once rate stability was achieved.\nCommunity and Regional Banking\nSeveral bankers characterized their appetite for lending as being on a \"loan diet\" \u2013 looking for smaller portions (smaller balances) and only healthy fare (better creditworthiness). Although credit quality remained sound across commercial loan types, pockets of deterioration appeared in various consumer loan segments. Weakness grew in mortgage loans and consumer installment debt, in particular. Bankers expected additional deterioration in consumer credit quality over the next six months. Loan demand was mostly unchanged during the last month as higher interest rates continued to mute activity from the commercial real estate and commercial and industrial sectors. Deposit balances exhibited continued migration from checking accounts into higher yielding time deposits and money market accounts. Contacts highlighted deposit promotions and maintaining competitive pricing as key strategies for deposit retention.\nEnergy\nTenth District energy activity declined moderately over the last month. Oil prices rose recently and regional inventories in the District decreased to multi-year lows. Yet, the number of active oil rigs declined, with contacts citing capital discipline as a constraining factor amid slightly declining profits for District firms. Profitability was expected to increase as contacts' six-month oil price expectations moved up over the last month. Firms also anticipate a slight increase in productivity over the next year, further boosting future profit expectations. Accordingly, contacts noted capital expenditures are expected to increase at a faster pace in coming months, as access to credit remains steady. District states added gas rigs recently due to a slight increase in natural gas prices during the summer months.\nAgriculture\nConditions in the Tenth District farm economy softened alongside further declines in commodity prices and prolonged drought. As harvest began in some areas, at least one third of corn and soybean acres were in very poor condition, raising concerns about yields and revenue. Dry conditions across the nation also reduced water levels in the Mississippi River, disrupting barge traffic along many gulf port routes and heightening concerns about freight costs and export activity. Cattle prices continued to be supported by low inventories, but drought also constrained hay supply in many areas, raising costs for ranchers. Interest rates were another key concern cited by agricultural contacts, as producers faced significantly higher financing costs.\nFor more information about District economic conditions visit: https://www.kansascityfed.org/research/regional-research/\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2023/2023-10-cl

"October 18, 2023\nSummary of Economic Activity\nOverall, Fourth District business activity was relatively unchanged in recent weeks. Consumer spending was flat to down, as discretionary goods spending softened further. Manufacturers noted an uptick in activity but expressed concerns over potential adverse effects of the UAW strike. Bankers reported lower loan volumes for commercial and consumer loans because of higher borrowing costs. Similarly, demand for new and existing homes was dampened by higher rates, with sales of existing homes also constrained by limited inventories. While nonresidential construction activity was solid, many contacts suggested that new projects were at risk because of higher financing costs. Overall, firms expected activity to remain flat in the coming months. This will likely impact capital spending plans and hiring, which were flat in recent weeks. Contacts more frequently reported holding wages steady following sizeable increases over the past few years. Input costs stabilized for manufacturers, while service sector firms indicated broad cost increases from their vendors. Price pressures continued to ease, with contacts citing increased competition and greater resistance from customers to price increases.\nLabor Markets\nOn balance, contact reports suggested little employment growth during the most recent reporting period, though demand for labor varied by industry segment. Some business services and freight contacts noted increasing staffing levels to expand operations. One management consultant said that the \"stability of the last year has allowed for expansion of staff instead of [outsourcing of] work.\" By contrast, some manufacturers and auto dealers reported that weaker profits and slower demand led them to reduce staffing levels. Still, other firms across industries reported maintaining staffing levels. Some firms did so because demand was flat, and others said they had reached their target staffing level.\nWage pressures continued to ease slowly. More firms across industries reported holding wages steady to stabilize labor costs after larger-than-normal increases over the past few years. One manufacturer noted that his firm plans to offset the cost of its annual wage increase by decreasing the employer's contributions to medical coverage costs, a change it had not enacted for the past two years. Still, some auto dealerships and manufacturing firms continue to increase pay to compete for technicians and skilled laborers.\nPrices\nOn balance, nonlabor cost pressures changed little in recent weeks but were down from those earlier in the year. Many manufacturers reported that many of their input costs have stabilized despite remaining elevated. Indeed, one manufacturer noted that raw materials' prices have not gone up since earlier in the year, and he has found new suppliers offering lower prices. Nevertheless, several service sector firms noted broad cost increases from vendors, in particular for health and car insurance, software subscriptions, and other technology services. And construction contacts stated that costs were increasing for some materials such as cement.\nPrice pressures eased recently, continuing a trend that began at the start of the year. Contacts noted that they were not raising prices because of increased competition and greater resistance from customers to price increases. One retailer said, \"We will try our best to hold the line as consumers seem to be tightening their belts.\" Several manufacturing and construction contacts noted steadying or reducing prices in accordance with input costs. However, other manufacturers and freight contacts were able to raise prices during contract renewals.\nConsumer Spending\nConsumer spending was flat to down in recent weeks. One large general merchandiser noted that discretionary-goods spending had softened further as households faced continued pressure from higher prices for necessities, adding that many lower-income customers had increased their reliance on credit cards. Auto dealers said that sales had slowed because of higher interest rates and higher vehicle prices. Reports from restauranteurs were split, with lower-priced establishments reporting steadier sales than their higher-end counterparts. On balance, contacts expected sales to stay flat in the coming weeks, and many hoped that the approaching holiday season would help boost demand.\nManufacturing\nOverall demand for manufactured goods increased slightly in recent weeks, though activity varied by industry segment. An aerospace parts manufacturer reported heightened orders for both civilian and military products, and a heavy truck and trailer parts producer noted strong demand. Steel producers reported steady demand but said some of their customers had been hesitant to place new orders out of concern about the ongoing UAW strike. One steel wholesaler said that recent declines in steel prices had divergent impacts on demand; spot customers delayed orders in the hope that prices would fall further, while many contract customers sought to negotiate next year's agreements early and lock in low prices. Manufacturers generally expected demand to increase modestly in the coming months.\nReal Estate and Construction\nOn balance, residential construction and real estate activity slowed. Contacts reported that new-home sales declined slightly as higher interest rates discouraged potential buyers. Demand for new and existing homes was dampened by higher rates, with sales of existing homes also constrained by limited inventories. Residential construction and real estate contacts anticipated activity will slow in the coming months because of seasonality and higher interest rates.\nNonresidential construction activity increased slightly. General contractors reported strong activity from ongoing projects, but many contacts across industry segments noted that new deals had been difficult to complete because of higher financing costs and, in some cases, hesitance on behalf of lenders. Reports on office demand varied. One commercial property manager said that many of his customers had surrendered existing, underperforming office properties to lenders rather than refinance at higher interest rates. Another contact noted that the return of in-office work continued to boost his firm's leasing activity for office space. Nonresidential construction and real estate contacts expected activity to increase modestly in the months ahead.\nFinancial Services\nOverall, loan demand continued to soften this reporting period. Bankers cited higher interest rates as the primary reason behind the decline in borrowing from households and businesses. One banker reported that because of higher interest rates, firms increasingly used cash-on-hand to meet their financing needs rather than apply for additional loans. Lenders reported that delinquency rates remained at historically low levels for both commercial and consumer loans. Core deposits declined slightly as customers sought higher-yield alternatives. In the coming months, bankers expected loan demand to continue to decline as interest rates remain elevated.\nNonfinancial Services\nOn balance, freight contacts noted a slight uptick in activity this reporting period. One hauler indicated that his firm's volumes increased in part because the firm absorbed the clients of a large carrier that closed. Looking ahead, haulers expected conditions to improve slightly as the holiday season draws nearer. Professional and business services contacts reported relatively flat activity as uncertainty led some clients to pull back on spending. However, contacts expected activity to remain relatively flat outside of some seasonal pickup in demand.\nCommunity Conditions\nNonprofit contacts noted that small businesses and low- and moderate-income households experienced declines in credit access, while the latter also saw affordable-housing conditions deteriorate over the past six months, according to a semiannual survey. Several contacts said higher interest rates and tight credit requirements impacted businesses' and households' ability to qualify for loans. One contact indicated that businesses with long-standing banking relationships had difficulty securing traditional financing. Rising rents and a shortage of affordable housing continued to impact low- and moderate-income households' ability to secure housing. Moreover, some landlords stopped accepting housing choice vouchers in order to get higher rents in the open market.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nOctober 18, 2023\nSummary of Economic Activity\nEconomic activity in the Second District weakened modestly during the latest reporting period. Still, labor market conditions remained solid with contacts reporting ongoing modest employment gains and steady wage growth. Inflationary pressures moderated slightly in recent weeks, though supply chain conditions were unchanged after nearly a year of steady improvement. Consumer spending increased at a slightly slower pace, with declines in spending on experiences offset by increases in purchases of apparel and home goods. Tourism activity in New York City was strong, as several events attracted record visitors. Despite rising mortgage rates, home prices have continued to edge up with still-solid demand and exceptionally low inventory. Commercial real estate markets improved slightly. Conditions in the broad finance sector weakened somewhat, with loan demand continuing to decline and delinquency rates edging higher. Looking ahead, businesses in the District expected little improvement in conditions in the coming months.\nLabor Markets\nLabor market conditions have been solid since the last report. Overall, employment continued to increase modestly, though employment declined among retailers. Although layoffs were generally not occurring in the region, an upstate New York employment agency pointed to a slight softening in conditions in recent weeks.\nDemand for workers remained solid across the District, particularly for those with skills in finance, accounting, and information technology. Many contacts noted that labor shortages continued to challenge hiring plans. A contact at a New York City employment agency noted that candidates are approaching job negotiations with greater seriousness and realism with regard to wages and in-person requirements, though these factors remain persistent challenges in the labor market.\nThe pace of wage growth has been steady in recent weeks, though firms in the wholesale trade sector reported greater wage increases. On balance, businesses anticipate only modest increases in headcounts in the months ahead.\nPrices\nInflationary pressures moderated slightly in recent weeks. Service sector contacts reported some slowing in the pace of input price increases, while manufacturers indicated the pace of input price increases was little changed. The pace of selling price increases slowed somewhat among both manufacturing and service firms. Fewer businesses expect rising prices in the months ahead. Still, inflation remains a significant concern, and contacts noted that higher prices are taking a toll on household balance sheets and limiting discretionary income.\nConsumer Spending\nConsumer spending increased at a slightly slower pace in the latest reporting period with some shifts in the composition of purchases. Spending on apparel, interior furnishings, home electronics, and appliances grew at a steady clip after a period of stagnation. Meanwhile, spending on restaurants, travel, and entertainment slowed after a strong summer, in part reflecting seasonal shifts. Auto dealers in upstate New York reported moderate increases in sales, particularly for new cars, as inventory continued to improve. Still, sales remain well below pre-pandemic levels as limited inventory has constrained sales despite solid demand. One contact reported that higher financing costs are pushing some buyers to opt for more affordable models. Ongoing declines in used car prices have restored the normal gap between new and used car prices, boosting sales of used cars.\nManufacturing and Distribution\nManufacturing activity edged down during the latest reporting period. Supply availability was unchanged after nearly a year of steady improvement, yet several business contacts described difficulty obtaining high quality parts and products. These shortages were particularly noted for auto parts, and some anticipate the UAW strike will reduce the supply of vehicles in the coming months. While wholesalers reported solid growth in business activity, transportation & warehousing contacts noted declining activity. Manufacturers and distributors generally remained optimistic that conditions would improve in the months ahead.\nServices\nService sector activity declined modestly in the latest reporting period. While there was some growth in the education & health sector, businesses in the information sector and those providing business services reported moderate declines, and leisure & hospitality firms noted more modest declines. Looking ahead, service firms generally do not expect conditions to improve in the coming months.\nNew York City tourism was strong in the latest reporting period. The overlap of the US Open tennis tournament and New York Fashion Week boosted visits and demand for hotel rooms, pushing average daily hotel rates near historical highs and hotel occupancy rates above 90 percent for several nights in September. Statue of Liberty visitors have surpassed pre-pandemic numbers in recent weeks, an indicator that the number of international visitors has picked up.\nReal Estate and Construction\nPersistently low inventory has remained a limiting factor in housing markets across the District and continued to restrain sales activity. Despite rising mortgage rates, home prices have continued to edge up with still-solid demand and low supply. One contact noted that bidding wars are being reported on nearly half of transactions in the New York City suburbs, where low inventory has been particularly acute. Real estate contacts in upstate New York reported an increase in activity with higher attendance at open houses, boosted by a steady inflow of people moving from New York City.\nResidential rental markets remained tight across the District. Rents continued to rise in upstate New York. In New York City, rents were unchanged but at record high levels, with some scattered signs of cooling. New lease activity continued to fall, suggesting that landlords are opting to retain current tenants amid high turnover costs and plateauing rents. Further, renters are increasingly opting for shorter leases, reflecting sentiment that the pace of rent increases will not be sustained. Going forward, contacts anticipated that the increased enforcement of rules restricting short-term rentals in New York City would likely shift more units into the general rental inventory, providing some easing of supply constraints.\nCommercial real estate markets improved slightly. In New York City, office vacancy rates declined since the last report, the first protracted decline since the pandemic began, and office rents were essentially flat. The industrial market worsened slightly, with increases in vacancy rates, though rents remained firm.\nOverall, construction contacts reported sluggish activity since the end of the summer. Office construction was relatively flat across most of the District. Industrial activity grew, with high volumes under construction and new space set to come to market in the fourth quarter of 2023. Multifamily construction continued apace in the New York City area and in northern New Jersey, but such activity remained fairly weak in upstate New York.\nBanking and Finance\nAfter stabilizing, conditions in the broad finance sector weakened slightly during the latest reporting period. Small to medium-sized banks in the region reported lower loan demand across all loan segments, including refinancing. On balance, credit standards tightened for all loan types and loan spreads continued to narrow. Most banking contacts reported higher deposit rates. Delinquency rates edged up.\nCommunity Perspectives\nCommunity and education leaders around the District reported significant challenges with staffing shortages in schools. Teacher vacancies are higher this fall than in past years, particularly for math, world languages, and English as a new language. Additionally, key personnel such as counselors, librarians, school bus drivers, food service workers, and custodians are in low supply, placing increased pressure on existing staff and reducing the quality of the services provided. Financial pressures have mounted due to the combination of increased services, rising educational needs of the children of asylum seekers, and the winding down of federally provided pandemic relief funds.\nFor more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/2023/2023-10-da

"October 18, 2023\nSummary of Economic Activity\nThe Eleventh District economy continued to expand at a modest pace overall. Growth moderated in the service sector but rebounded in manufacturing and energy. Retail and financial services activity declined. Existing-home sales dipped while new home sales were mostly solid. High temperatures and insufficient rainfall continued to plague agricultural conditions. Nonprofits expressed concern over daycare closures in the wake of pandemic era relief funds expiring. Employment growth was modest, and wage growth continued to normalize. Input cost growth remained slightly elevated overall, while selling price growth was average or below average. Outlooks generally weakened slightly, with contacts expressing concern over worsening business conditions, high interest rates, and the political environment.\nLabor Markets\nEmployment growth remained modest over the past six weeks. Hiring decelerated in the service sector but picked up in manufacturing. In the energy sector, job growth moderated to a more average pace after two years of elevated hiring. Layoffs were noted by some cargo carriers and high-tech companies. Most sectors reported greater ease in finding workers than in prior periods. However, oilfield contacts said shortages of high-skill blue collar workers persist, and hospitality workers were also in short supply. There were scattered reports of labor hoarding\u2014businesses saying they ordinarily would release some workers because of weak sales but were holding off \"just in case.\" A staffing firm noted the labor market is looser than it has been, saying \"it's not a pool, but at least we've got some drops on the ground.\" Another said baby boomers were staying longer in the workforce because increases in cost of living have left them without much of a choice but to work.\nWage growth continued to normalize, though it was still somewhat elevated. Homebuilders noted some reprieve in labor costs, and energy companies said wage pressure lessened from last quarter. Staffing firms said wage pressure eased over the past six weeks, in part because firms were pushing back more on hybrid and remote arrangements, and candidates were willing to ease up on wage demands to gain that flexibility.\nPrices\nInput cost growth showed no signs of easing over the past six weeks outside of the energy and construction sectors. Oilfield cost increases moderated, and contacts reported cost declines in some inputs like sand and steel. Also, builders said the cost of most construction materials have stabilized. Meanwhile, airlines and cargo carriers noted an increase in fuel costs. Selling price growth remained subdued in manufacturing and energy but was more moderate in services. A staffing firm reported an increase in payment delinquency due to cash flow issues among clients.\nManufacturing\nTexas manufacturing activity rebounded in September. Production increases spanned durables and nondurables and were led by machinery and high-tech manufacturing. Chemical production improved amid stabilizing demand. However, much uncertainty persists, and manufacturers' perceptions of broader business conditions worsened overall. Outlooks continued to deteriorate, with several contacts citing high interest rates as a headwind, particularly auto manufacturers.\nRetail Sales\nRetail sales declined slightly over the past six weeks, with notable weakness in auto sales. Some retailers said the continuation of unseasonably hot weather was a factor behind the slump. Auto dealers pointed to reduced affordability spurred by higher interest rates as a major factor. Meanwhile, contacts along the border noted that the strong peso was drawing Mexican shoppers to U.S. stores. Retail outlooks improved slightly, though auto dealers expressed concern over the impact of the strike.\nNonfinancial Services\nGrowth in service sector activity decelerated to a more typical pace in September. Professional and business services remained the top performing industry, and a pickup was seen in health care. Airlines continued to report robust demand, particularly for leisure and international travel. A transportation contact noted that the drought impact on the Panama Canal may increase air cargo demand as an alternative for moving goods internationally. Reports from staffing services firms were mixed. One contact said contract business is way down across the board, as more customers are looking for permanent hires. Service sector outlooks worsened slightly overall, with contacts citing inflation and softness in the real estate market as headwinds. One business executive said he expects the next twelve months to be \"chaotic,\" with uncertainty driven by high interest rates and the national political landscape.\nConstruction and Real Estate\nHousing demand generally held up during the reporting period despite higher mortgage rates, though contacts noted some seasonal softening. Existing-home sales dipped in part due to lack of inventory, while builders said new home sales and buyer traffic were mostly solid for this time of the year. Incentives such as rate buydowns remained in place and were buoying sales of new homes. A shortage of transformers continued to dampen single-family home completions. Outlooks remained cautious.\nActivity in commercial real estate was little changed since the last report. Apartment leasing was solid, though rents and occupancy were largely flat as supply continued to outpace demand. Office markets continued to face headwinds. Industrial demand softened, though the overall level of activity remained robust. Investment sales activity was subdued, and outlooks were mixed.\nFinancial Services\nLoan demand has been declining for a year, and the pace accelerated this period. Overall loan volumes declined at a quicker pace this period as well. Loan nonperformance rose, particularly for consumer loans, but increased delinquency was seen across the board. Credit standards continued to tighten, most notably on the commercial side. Loan pricing pushed up further, though at the slowest rate so far this year. Bankers remain pessimistic, with expectations for increasing loan nonperformance, decreasing loan demand, and worsening business activity over the next six months.\nEnergy\nEnergy activity picked up modestly over the reporting period. Respondents to the Dallas Fed Energy Survey indicated a rise in business activity and a sharp increase in oil and natural gas production in the third quarter. Drilling and completion activity for oil and gas wells declined over the past six weeks, though most contacts expect the rig count to stabilize soon. Outlooks improved notably, particularly among exploration and production firms. Contacts expressed confidence that oil prices will remain conducive for profitability over the next year but said their natural gas drilling outlook had worsened.\nAgriculture\nDrought intensified across much of the District over the past six weeks and crops continued to suffer from excessive heat. Grain prices fell notably, with wheat hitting its lowest price in two years. Pasture forage conditions were poor to very poor, and ranchers were still supplemental feeding, which is unusual for this time of year. Cattle prices remained high amid tighter supply, cheaper production costs in feed lots, and strong demand for beef.\nCommunity Perspectives\nDemand for nonprofit services remained elevated. Affordable housing was a pressing concern, and one nonprofit said they received additional housing assistance funding but were constrained by the limited number of landlords willing to accept housing vouchers. Another contact noted that inflation continued to squeeze households' food budgets, putting healthier food options out of reach. One nonprofit reported they often had a two-to-four-hour line at their food pantry.\nSeveral contacts expressed concern over the ending of pandemic era relief funds, particularly for childcare centers. Multiple daycare centers have already announced closures, with one nonprofit leader noting that the impact to affected families is \"catastrophic,\" as there aren't other options in the area. Some local workforce boards were proactively enrolling childcare centers into the state childcare subsidy program and mentoring them, with the hope of providing more options for low-income families.\nFor more information about District economic conditions visit: https://www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2023/2023-10-bo

"October 18, 2023\nSummary of Economic Activity\nBusiness activity expanded slightly on balance, as employment edged up by a small margin and price increases were modest. Retailers reported modest growth in sales, led by strong seasonal sales growth at retailers on Cape Cod. The summer tourism season yielded a solid increase in air travel and hotel occupancy in the Boston area and relatively mild growth in lodging on the Cape. Manufacturers reported modest revenue growth on balance. Home sales stayed at very low levels as mortgage rates reached fresh highs and inventories remained scarce. Commercial real estate activity was mostly unchanged, with only a slight seasonal uptick in office leasing. The outlook was cautiously optimistic, but risks were perceived as skewed to the downside.\nLabor Markets\nEmployment levels were up slightly on balance, even though one manufacturer was in the process of enacting substantial layoffs. Wages were up only marginally, and few contacts perceived significant further upward pressure on wages. Contacts across sectors reported slight-to-modest improvements in hiring and retention in recent months, but hiring difficulties and elevated attrition persisted for some roles and the labor market was still described as tighter than average. One online retailer said that attrition stayed at historically low levels throughout the summer. Airline contacts in Massachusetts said that despite having sufficient staff locally, lingering labor shortages in other parts of the US continued to have negative impacts throughout the air-travel system. Regarding the employment outlook, one firm planned a modest increase in hiring and otherwise no large employment expansions were expected.\nPrices\nOutput prices were up modestly, and cost pressures were mixed but appeared to ease further on average. A few manufacturers raised their prices by slight-to-moderate amounts to keep up with earlier cost increases. Software and IT firms held prices steady following moderate price increases enacted earlier in 2023. Hotel room rates in the greater Boston area were up moderately on a year-over-year basis but the pace of increase slowed relative to the spring. Cape Cod average rental and hotel room rates were down moderately from the two preceding summers but remained well above 2019 levels. Regarding input prices, a semiconductor firm said that memory prices fell slightly, and a frozen fish producer observed somewhat lower pollock prices in response to looser catch restrictions. Input cost pressures stabilized for an online retailer, who held list prices steady. Most contacts expected pricing pressures to abate further moving forward, and only one mentioned the possibility of enacting significant price hikes in the near future.\nRetail and Tourism\nFirst District retail contacts reported a modest increase in sales through the end of the third quarter relative to earlier in the year, while tourism contacts saw mixed results. An online retailer experienced modest but better-than-expected growth in sales despite sluggish industrywide performance. Cape Cod contacts reported mixed results for the summer season, as typical vacation patterns were disrupted by rainier-than-normal weather: hotel occupancy rates were moderately lower compared with the record-setting summers of 2021 and 2022, but retail sales enjoyed a strong seasonal surge as day trips to the Cape were up and the rain drove visitors into the shops. Airline passenger traffic through Boston increased further in recent months, reaching roughly 95 percent of pre-pandemic levels, and international passengers slightly exceeded summer 2019 levels. The Greater Boston hotel occupancy rate surpassed its 2019 levels for the first time since the pandemic started. The outlook for 2024 was very optimistic among greater Boston hospitality contacts, who expected record-breaking convention and cruise activity and air travel well above pre-pandemic levels. The retail outlook was cautiously optimistic but somewhat uncertain, and maintaining profitability was seen as an ongoing challenge.\nManufacturing and Related Services\nManufacturing firms in the First District reported modest revenue growth on average, but results were quite mixed. A precision parts maker said that revenues reached a 15-year high, while a frozen fish producer suffered weaker sales after having raised prices earlier in 2023. One manufacturer adjusted to a permanent negative (idiosyncratic) demand shock by making significant staffing reductions. No contacts reported major revisions to capital expenditure plans, although one firm increased its capital spending earlier than planned to take advantage of favorable tax treatment. Most contacts were at least cautiously optimistic for near-term growth, but some faced regulatory risks that could hurt profitability moving forward and others were watching carefully for signs of a recession. A semiconductor manufacturer noted that, while the outlook for their company was good, the downturn in the industry had been much more severe than anticipated, and recovery of memory chip demand was not expected until late 2024 or 2025.\nIT and Software Services\nDemand was healthy and largely unchanged for software and IT contacts. For one contact, stable demand was attributed to the fact that they make essential products, and at another firm sales were supported by a recent acquisition. Contacts reported moderate-to-robust revenue increases on a year-over-year basis, results that were at least slightly higher than those recorded in Q2. Capital spending was flat. Contacts generally expected demand to hold steady for the rest of 2023 and throughout 2024, based on confidence in their firms' products and business models despite what was perceived as a weakening macroeconomic environment. Regarding risks to the forecast, one contact was concerned that customers would rein in their budgets in 2024, and another said that another major COVID outbreak would be very disruptive.\nCommercial Real Estate\nCommercial real estate activity in the First District remained limited in recent weeks. Office leasing picked up slightly for seasonal reasons but was still minimal. Office vacancy rates remained high but were essentially flat, while office rents were down slightly, and tenant concessions remained generous. Vacancy rates and rents were stable on average in the retail sector, but leasing demand was weak for malls outside the luxury sector. The industrial market continued to show very low vacancy rates and elevated rents, but contacts said that demand was a bit softer recently and leasing activity was light. High borrowing costs continued to deter investment across property types. Banks' appetite to lend to commercial real estate was limited. On balance, contacts expected the weak status quo to persist, but forecasts were characterized by significant uncertainty. Risks were skewed to the downside and included an increase in commercial property distress in 2024.\nResidential Real Estate\nThroughout the First District, extremely low inventories kept residential home sales at very low levels relative to seasonal norms. As of August 2023, inventories and closed sales were down sharply from a year earlier in all markets. The rate of decline in sales was about on par with that recorded in July, and August's weak sales were described as disappointing but not surprising. Multiple contacts pointed to mortgage rates, which reached a two-decade high in August, as the key barrier to inventory growth and sales. Contacts in greater Boston remarked further that growing uncertainty about the economy contributed to increased buyer hesitancy, which showed up as a decline in offers per listing. The inventory drop was most pronounced in Massachusetts\u2014where the supply of both single-family homes and condos declined by more than a third from a year earlier. In Rhode Island the pace of inventory decline moderated from earlier in the summer, suggesting that supply and demand might be moving into balance. Price growth remained robust, rising to double-digit rates in some markets. Contacts expected no significant improvement in residential sales activity until interest rates reversed course.\nFor more information about District economic conditions visit: https://www.bostonfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2023/2023-10-ri

"October 18, 2023\nSummary of Economic Activity\nThe Fifth District economy contracted slightly in recent weeks. Fifth District manufacturers reported mixed results in the most recent reporting period. Food service and office supply contacts reported steady growth in sales while furniture, appliance, and home remodeling and repair stores reporting sales declines in recent weeks. Travel and tourism activity slowed slightly in recent weeks, but air travel remained strong as business travel picked up. Nonfinancial services firms noted that demand for their services as well as revenues had remained stable. District ports remarked that demand was weak this period with not the usual seasonal rebound in volume; imports were lower year-over-year and month-over-month. Trucking firms reported that underlying demand was flat this period. Residential real estate respondents stated that the home sales were constrained by both affordability and the lack of inventory. Commercial real estate markets slowed this period; however, leasing remained strong for retail and industrial properties with rents continuing to escalate. Loan demand continued to slow this period both for commercial and consumer real estate loans. Employment grew modestly in the most recent reporting period, although finding workers with certain skills remained difficult. Price growth was unchanged this period but labor costs, on the other hand, continued to rise.\nLabor Markets\nFifth District employment grew modestly in the most recent reporting period and wages increased moderately. Some firms reported that it had become more challenging to find frontline workers, while others cited ongoing shortages of skilled-trades workers such as CDL drivers. A food manufacturer couldn't attract or retain associates for jobs that require work in cold-temperature environments. A pre-planned vacation company continued to raise wages, but reported that a people shortage, not pay rates, as the main reason for not finding motorcoach drivers. Conversely, a staffing firm specializing in placing executive-level marketers reported too many candidates for the number of open roles.\nPrices\nPrice growth remained at an elevated rate, but growth is lower compared to last year. According to our most recent surveys, growth in prices received by manufacturers was unchanged while prices received by services firms slowed marginally. Prices paid for nonlabor inputs rose slightly for manufactures but declined according to service providers. Labor costs, on the other hand, continued to rise. Several contacts noted that wage increases to recruit and retain workers had reduced their margins, as customers were pushing back on any further price increases, making it hard to pass along rising costs.\nManufacturing\nFifth District manufacturers reported mixed results in the most recent reporting period. A fabric manufacturer cited declines in demand in consumer related markets due to retailers having too much inventory. Both the manufacturer and retailer \"took haircuts\" on margins to clear inventories. However, a steel manufacturer reported strong demand for steel construction throughout their region. Macroeconomic factors were cited by several firms as reasons for slowdowns. For example, a gaskets manufacturer was \"hunkering down\" and halted hiring and capital expenditures due to fears of a potential economic downturn. A plastics coater reported smaller orders because customers had less money due to increased food and energy costs.\nPorts and Transportation\nDemand was weak at Fifth District ports this period due to less than the usual seasonal rebound in volume; imports were lower year-over-year and month-over-month. The decline in import volume was mainly due less consumer goods coming into the port. Exports were flat this period. Spot shipping rates have continued to decline and carriers were doing more blank sailings in recent weeks to limit capacity. Empties were still moving and containers were flowing smoothly at the ports; turn times were good and container dwell times had returned to normal. Demand for airfreight was soft this period; there was an especially sharp decline in international airfreight, both in terms of exports and imports.\nTrucking firms reported that underlying demand was flat this period. However, capacity decreased due to several trucking companies shutting down. Freight rates were up slightly as existing capacity exited the market in recent weeks and customers were looking for new carriers. Trucking firms noted that they had not seen the usual seasonal uptick as companies try to more normalize their inventory and there had not been the usual sequential improvement in consumer product shipments this month. Trucking companies stated that are not having any issues hiring or retaining drivers.\nRetail, Travel, and Tourism\nOn balance, consumer spending grew slightly this cycle, but reports varied across spending categories. For example, food service, grocery stores, and office supply stores reported steady to increasing sales while furniture, appliance, and home remodeling and repair stores saw sales decline in recent weeks. One retailer was concerned that the restart of student loan payments was going to lead to lower consumer spending going forward.\nTravel and tourism activity slowed slightly in recent weeks. Contacts noted that the slowdown was partly attributable to typical seasonal slowdown; however, a contact in South Carolina added that the threat of hurricanes led to lower tourism in coastal destinations. Air travel remained strong as business travel picked up, which offset some declines in leisure travel.\nReal Estate and Construction\nResidential real estate respondents indicated that home sales were constrained by both affordability and the lack of inventory. The number of new listings in the Fifth District was down year-over-year. Buyer traffic declined due to frustration with elevated sales prices, lack of housing inventory and higher mortgage rates. Days on market increased slightly but remained below historic averages. Prices for homes held steady but there were some price reductions for homes that have been on the market for over 30 days. Prospective buyers were not having difficulties obtaining mortgages other than issues with affordability. Home construction costs stabilized this period but remained elevated mainly due to higher labor costs.\nIn the Fifth District, development and construction of commercial real estate was significantly reduced this period. The pace of construction cost increases slowed, but costs remained historically high. Availability of credit and the cost of capital were the biggest detractor from commercial real estate projects moving forward. Credit underwriting was much stricter with higher equity requirements for most commercial real estate deals. However, leasing demand in the industrial and retail sectors continued to outstrip supply and rents continued to escalate. In the office market, there has been a flight by tenants to better quality space. Net effective rents in the office segment were lower due to landlords offering more incentives and/or concessions to potential credit tenants.\nBanking and Finance\nLoan demand continued to slow with one respondent noting it was \"anemic\". This slowdown was being observed primarily in the real estate portfolios, both commercial and consumer. Increased rates and lower home inventories were noted as potential causes for this lack of demand. Home equity lines of credit continued to see increased demand with borrowers still finding this a viable lending alternative. Maintaining deposits remained a struggle with continued competition for balances across all sectors. Credit quality as well as delinquency rates remained stable, but institutions continue to monitor these indicators closely as rates continue to rise.\nNonfinancial Services\nNonfinancial service providers continued to report that demand for their services as well as revenues had remained stable. Some firms noted that their clients, as well as themselves, were still putting off large capital purchases due to uncertainty with the economy and political environment. Firms reported a loosening in the job market and found the applicant pools getting larger, but still far from historical norms. Wage pressure continued as current employees sought higher wages due to inflation and other employment opportunities available in their fields.\nFor more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"October 18, 2023\nSummary of Economic Activity\nEconomic activity in the Seventh District was up modestly overall in late August and September. Contacts generally expected a small decline in demand over the next year and many expressed concerns about the potential for a recession. Employment increased moderately; consumer and business spending were up slightly; nonbusiness contacts saw little change in activity; and manufacturing, construction, and real estate activity decreased modestly. Prices and wages rose moderately, while financial conditions tightened slightly. Expectations for farm incomes in 2023 were little changed.\nLabor Markets\nEmployment rose moderately over the reporting period and contacts expected a similar rate of increase over the next 12 months. Many contacts continued to have difficulty finding workers, particularly those with higher skills. Several noted strong, steady demand for workers in the skilled trades. However, there were also signs that the labor market was cooling. Some contacts said workers were job-hopping less and pushing back less on wage offers. In retail, holiday hiring was down modestly compared with the same time last year. Wage and benefit costs rose moderately, but there were indications growth was slowing.\nPrices\nPrices rose moderately in late August and September, and contacts expected a similar rate of increase over the next 12 months. Nonlabor costs were up modestly, with several contacts highlighting rising energy costs. Some contacts noted that while they had fewer supply chain issues, costs of raw materials remained high. Shipping prices increased slightly, largely because of higher gasoline prices. Consumer prices moved up moderately due to solid demand and the passthrough of higher costs.\nConsumer Spending\nConsumer spending increased slightly over the reporting period. Nonauto retail sales were up a bit. Contacts highlighted higher overall grocery sales, though one noted that lower income shoppers had reduced their basket size and were trading down in quality. Back-to-school and early holiday volumes met expectations. Led by declines at hotels and restaurants, leisure and hospitality spending softened slightly. Light vehicle sales edged up. Multiple contacts said that so far, the UAW strike was having a negligible effect on sales and inventories but was influencing parts availability.\nBusiness Spending\nBusiness spending increased slightly in late August and September. Capital expenditures moved up a bit, with several contacts reporting purchases of new equipment, software, or expansions of existing facilities. That said, several contacts noted that high interest rates were leading them to delay some acquisitions. In addition, one manufacturing contact said that increases in operating, labor, and materials costs were holding back equipment investment. Demand for industrial and commercial energy increased slightly, while demand for residential energy decreased modestly. Inventories for most retailers were a little higher than desired. Looking ahead, one contact reported retailers had ordered less merchandise for the holidays than in previous years, with some foregoing the usual seasonal inventory build. In manufacturing, inventories were generally at comfortable levels, and several contacts noted improved supply chain conditions.\nConstruction and Real Estate\nConstruction and real estate activity decreased modestly on balance over the reporting period. Residential construction was down modestly and contacts expected the slower pace of activity to continue for the rest of the year. There were reports of fewer home remodeling projects in higher end homes. Residential real estate activity also decreased modestly. Home prices were up slightly but rents were unchanged. Nonresidential construction fell slightly. Contacts noted that the building currently taking place had entered the pipeline 12 to 24 months ago and that permit issuances for future projects were down noticeably. Land development also declined. Supply chain issues lingered, with contacts reporting difficulty finding electrical switch boxes, circuit boards, transformers, fuses, and HVAC equipment. Commercial real estate activity decreased modestly, most notably in office and retail. Prices decreased modestly, and contacts anticipated further declines. Vacancy rates and the availability of sublease space were up. Rents were down slightly.\nManufacturing\nManufacturing demand decreased modestly in late August and September. Steel orders were down modestly, helping push up service center inventories. Fabricated metals orders decreased slightly, with contacts highlighting lower demand from homebuilding and aerospace. Machinery sales were steady on balance: while there was a decline in demand from the auto sector, demand for machinery used in infrastructure construction was still strong and plenty of projects are in the pipeline. Motor vehicle production fell with the UAW strike; at the end of the reporting period, a little over 10 percent of U.S. production was offline. According to one auto supplier, automakers were willing to pay high prices to get necessary parts before a work stoppage. This supplier received a large order soon before workers at a plant they supply went on strike, and then worked through the weekend and delivered the order via helicopter to meet the automaker's deadline. Heavy truck demand remained flat amidst moderately low inventories.\nBanking and Finance\nFinancial conditions tightened slightly over the reporting period. Bond and equity market asset values decreased slightly while volatility ticked up. Business loan demand fell slightly. Contacts noted a further decrease in commercial loan demand, particularly for real estate. Asset quality was down a bit. Business loan rates increased modestly and standards tightened slightly. Consumer loan demand also fell slightly overall, with auto and home equity loan volumes dropping but credit card debt increasing. Consumer loan quality declined slightly. Consumer loan rates increased modestly, and lending standards tightened some.\nAgriculture\nProjected farm income in the District for 2023 remained well below 2022 levels, as lower crop prices offset positive news from early harvested acres. Notably, corn and soybean prices continued to fall, while yields were coming in above earlier expectations, which had been pessimistic due to the ongoing drought. Cattle prices moved higher, but growth slowed some. That said, one contact reported that with the exception of beef, many animal operations were experiencing below breakeven prices. Egg prices were flat, while dairy prices were mostly higher. Prices for agricultural land showed signs of softening, especially for ground of lesser quality. Rising interest rates stretched farm finances given high debt levels of many operators.\nCommunity Conditions\nCommunity, nonprofit, and small business contacts reported little change in economic activity from a robust level. State government officials saw some decline in tax revenues but low demand for unemployment insurance continued. Small business owners said tight labor markets were hampering growth and that they were reluctant to pursue expansions, in part because of tighter credit conditions. Nonprofit contacts reported that a limited supply of lower end housing was contributing to rising rents and straining household budgets. In addition, there were long waiting lists for prospective tenants at some places. Contacts noted that in some smaller municipalities limited options for housing and childcare were undermining efforts to attract and retain workers.\nFor more information about District economic conditions visit: https://www.chicagofed.org/research/data/cfsec/current-data\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2023/2023-10-mi

"October 18, 2023\nSummary of Economic Activity\nNinth District economic activity increased slightly since late August. Employment grew modestly and wage pressures were stable. Inflationary pressures eased modestly. Growth was noted in consumer spending and tourism, and agricultural conditions strengthened, while energy and commercial construction and real estate were flat. Manufacturing as well as residential real estate activity decreased. Minority- and women-owned businesses reported modestly lower activity. Most business contacts reported that recent increases in long-term interest rates had diminished expectations for their businesses in the coming year.\nLabor Markets\nEmployment grew modestly since the last report. Contacts overall reported somewhat slower labor demand and fewer job openings, with the exception of health care, which continued to exhibit strong labor demand. Recent surveys showed hiring sentiment was modestly contractionary in Minnesota and South Dakota, but positive in North Dakota. Staffing firms reported lower job orders in September compared with earlier in the year and one year ago. But they also noted that filling positions was easier. A Montana staffing contact said that \"things have improved but are still difficult\" regarding labor availability. A northern Minnesota workforce contact noted that there were \"still plenty of available jobs, but employers were not as desperate as before.\" Candidate quality improved for some contacts. Turnover was lower or unchanged for most contacts.\nWage pressures were stable since the last report, but ongoing wage growth remained above average. Staffing contacts noted flattening wage pressure for industrial and professional positions. A South Dakota retail contact said that wage pressure had stabilized from higher levels earlier in the year \"though virtually all businesses would say they are too high.\" Some contacts noted a reduction in sign-on bonuses and other wage enhancements. Wage pressures remained elevated in health care. A skilled nursing facility in Minnesota said it was looking to increase wages for the third time in a year \"just to keep up with competition from other health providers.\"\nPrices\nInflationary pressures eased modestly since the previous report. Most firms responding to a monthly business conditions survey reported no changes in prices charged to customers in September from a month earlier, but a larger share indicated that they decreased their prices than said that they increased them. Input prices continued to increase on balance from the previous month, but were also unchanged for most respondents. The wholesale prices component of a regional manufacturing index indicated rising input prices in September from a month earlier. Following a sharp spike in early September, retail fuel prices in District states subsided to a level slightly higher than the previous report. Prices received by farmers increased in August from a year earlier for barley, lentils, chickpeas, and cattle; prices decreased from a year earlier for corn, wheat, soybeans, hay, potatoes, dry edible beans, canola, milk, hogs, turkeys, chickens, and eggs.\nWorker Experience\nJob seekers who responded to a survey of workers in Montana were mainly looking for the opportunity to raise their income. Most had just begun searching for better opportunities but faced a variety of challenges reaching their objectives. Low pay offered by prospective employers made it unattractive for most to make a switch. While inflation has softened, most respondents perceived prices being higher over the last four-week period, particularly for groceries and fuel. In a different survey, North Dakota job fair attendees said the most important aspects of a job were good pay, fulfilling and engaging work, having a good boss, and offering a good schedule. Employers not offering enough pay was also a barrier to applying for jobs among this group.\nConsumer Spending\nConsumer spending was modestly higher overall since the last report. Hospitality and tourism firms across Minnesota reported revenue increases overall, but foot traffic was flat; expectations for the coming months mirrored the recent summer season. Tourism spending in northern Wisconsin was reportedly \"very healthy\" at restaurants, bars, and golf courses. A source in Michigan's Upper Peninsula also reported strong tourism crowds, high hotel occupancy, and busy restaurants. However, retail contacts in Minnesota and South Dakota reported that revenues were only slightly higher in September. Airline traffic has been healthy across the District. Lodging and accommodation tax collections in Montana remained at strong levels through September. Gaming handle in South Dakota was up only slightly over last year. New vehicle sales remained healthy thanks to higher vehicle inventories; one dealer with multiple locations saw sales increase by 30 percent in August and September, year over year. However, there were concerns over the impact of the autoworkers strike on future vehicle deliveries. Recreational vehicle sales remained lower, but marine and powersport vehicle sales were on par with last year.\nConstruction and Real Estate\nConstruction was flat overall since the last report, with mixed activity among subsectors and across regional markets. Industry data and contacts suggested that commercial and residential activity remained slower, while industrial and infrastructure sectors saw healthy activity. Recent commercial permitting was lower year over year in Billings, Mont., and Minneapolis; unchanged at healthy levels in Fargo, N.D., and Eau Claire, Wis.; and higher in Rapid City, S.D., and Rochester, Minn. Single-family residential construction was lower overall, but a few markets saw increased activity. Multifamily permitting also saw a small increase across the District.\nCommercial real estate was flat overall. Office vacancy rates remained high in Minneapolis-St. Paul but have leveled off. Retail has seen comparatively little new development, but consumer demand has helped keep vacancy rates relatively stable. Multifamily vacancy rates have been rising modestly. Industrial space, in contrast, has seen strong leasing and new construction activity in Minneapolis-St. Paul, including a considerable amount of speculative development. Residential real estate remained soft. Inventories of homes for sale remained exceptionally low. Contacts reported that many potential sellers remained on the sidelines due to higher financing costs compared with their existing mortgage.\nManufacturing\nManufacturing activity in the District fell slightly since the previous report. Manufacturing respondents to a September business conditions survey reported decreased orders on balance relative to a month earlier, with expectations for a further decrease in the month ahead. A regional manufacturing index indicated nearly flat activity in Minnesota and South Dakota in September from a month earlier, while activity increased in North Dakota. Several producers of inputs for heavy and commercial construction reported that demand weakened further recently. A diversified producer of industrial inputs noted that regional manufacturers \"seem to be slowing their consumption of contracted manufacturing sub-components.\"\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions strengthened slightly since the previous report. Drought conditions moderated in parts of the District but persisted in the eastern and northern regions. Industry contacts reported that early indications of crop production were better than expected, given weather conditions. However, farm incomes decreased from a year earlier in the third quarter, according to preliminary results of the Minneapolis Fed's survey of agricultural credit conditions. District oil and gas drilling activity was unchanged since the previous report.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned business enterprises was modestly lower over the reporting period. Half of contacts reported lower sales, compared with 20 percent who saw higher sales. Capital expenditures were mostly unchanged and plans to invest in the near future edged slightly lower on balance. Higher labor and nonlabor input prices were taking a toll on profitability; more than half of contacts reported lower margins and expected that to continue into the fall. Labor demand was slightly higher on balance, and payroll was mostly unchanged. Some contacts expected their need for additional workers to soften somewhat in the following weeks.\nFor more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nOctober 18, 2023\nSummary of Economic Activity\nEconomic conditions have remained unchanged since our previous report. Labor markets remained tight, and employers reported that while applications had increased there were continued difficulties finding candidates with desired skills. Prices increased modestly due to higher input costs, though the rate of increases slowed. Businesses reported softer consumer demand and difficulty passing on input costs. Seasonal declines in leisure travel and increases in business travel moved the market closer to pre-pandemic norms. Rental rates in the residential and commercial real estate sectors were unchanged. Banking contacts saw some signs of consumer finance stress increasing but reported that overall credit risk remained moderate. Many contacts expressed concern about the economic outlook due to ongoing strikes and prospects of a government shutdown, but they noted few effects were immediately apparent.\nLabor Markets\nEmployment has increased slightly since our previous report. Labor markets continue to be tight, and reports of easing have remained constant. Several industries reported a mismatch of labor\u2014plenty of applicants, but few with the correct matching of skills. A banking contact in Louisville reported taking more risks with less-experienced candidates, and several agriculture contacts in the District reported that it has become harder to find qualified workers. Some contacts reported it was easier to find and hire workers. Central Tennessee manufacturing and shipping contacts reported that labor shortages were no longer their most pressing issue.\nWages have grown slightly since our previous report, with the overall pace of increases slowing. A financial services firm in Louisville has seen a reduction in wage-increase requests from previous years, while agribusiness contacts noted lower-wage workers were requesting wage increases due to higher cost of living. A transportation contact in Central Kentucky has had to offer higher wages and retirement benefits to attract drivers.\nPrices\nPrices have increased moderately since our previous report. Of the firms that reported higher prices, the main driver was input costs. A couple common cost increases stood out: rising food prices and rising fuel prices. Although input costs are rising, multiple contacts noted that the rate of increase has slowed over the past few quarters. Firms' ability to pass costs on to consumers varied, and contacts noted that customers are pushing back on increasing prices. One contact who operates a bookstore reported that costs are directly passed on to consumers since their products are essentially pre-priced. Another contact from the hospitality industry noted that while they attempt to pass on costs, the increases are about 15 percent less than the actual growth in costs. A manufacturer cut back on non-essential expenditures, such as sponsoring school events, to help profit margins. A few contacts noted a decrease in prices, most notably in the used car industry.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported mixed business activity and a slightly negative outlook. A retail contact in Louisville reported that their sales are starting to ramp up due to Halloween seasonal merchandise. A St. Louis auto dealer reported that despite pent-up demand from lack of inventory, business activity is being affected by decreased savings and high credit card debt. Their outlook for the next few months was initially optimistic but has weakened, and given the auto worker strikes they now expect business activity to be impacted until 2024. A Memphis restaurant contact reported that business activity was down slightly due to unseasonably hot weather. District hospitality contacts reported mixed business activity and a slightly negative outlook.\nManufacturing\nManufacturing activity has moderately increased since our previous report. Firms in both Arkansas and Missouri reported moderate increases in new orders, production, and inventories. However, there were moderate decreases in employment. Rising input costs continue to be an ongoing issue for manufacturers, with labor being a significant factor. Auto workers went on strike at a St. Louis-area plant. A St. Louis-area steel manufacturer announced plans to temporarily idle one blast furnace at a plant and shift work to other facilities. On average, firms reported they expect slight decreases in employment in the coming quarter.\nNonfinancial Services\nActivity in the non-financial services sector has cooled since our previous report. Overall, airport contacts reported leisure travel decreasing and business travel increasing, marking a return to pre-pandemic norms. A Memphis airport contact reported shortages due to a lack of trained pilots. A Memphis freight contact was one of many facing challenges with finding contractors willing to bid on smaller projects. Healthcare contacts reported high staffing turnover rates and uncertainty around the unwinding of pandemic-era policies and regulations.\nSt. Louis and Memphis trucking contacts reported that their industry was in a recession, with low demand and falling profits as consumers shifted spending to services and necessities. The consensus was that conditions will worsen, as elevated inflation, high interest rates, and persistent labor shortages negatively impact business.\nReal Estate and Construction\nRental rates in the residential, industrial, and office real estate market have remained unchanged since our previous report. Demand in the office market continues to be a concern. Rental rates in retail spaces have increased since our previous report. Residential real estate median sale prices have remained constant since our previous report. Total homes sold have dropped over 10 percent in Little Rock and Louisville, and residential inventory has increased slightly across the District.\nIndustrial, multifamily, and residential construction have all slowed since our previous report. Construction contacts reported input costs plateauing in the past three months, but lead times continue to be longer than pre-pandemic. Construction contacts across the District reported that while financing is available for new projects, it is at such high rates that, when combined with higher input costs, \"the numbers don't work\" on even the best projects. Contacts report that due to uncertainty, some developers are buying land to save and develop in 12-18 months, while other developers are donating their owned land for tax write-offs.\nBanking and Finance\nBanking conditions in the District have remained stable since our previous report. Commercial and industrial loan demand has remained steady. The demand for new housing loans is limited due to few home transactions. Rising deposit interest rates continue to create a tight market for deposits, raising the cost of funds and shrinking profit margins. Contacts reported that merger and acquisition activity of smaller banks has increased, with investment bankers reaching out for potential buyers. Demand for consumer loans continued to decline, and credit card usage remained elevated. While banking contacts reported that signs of consumer financial stress are increasing, they believe that overall credit risk remains moderate.\nAgriculture and Natural Resources\nOverall agricultural activity has remained stable since our previous report, though contacts' outlook for future conditions was mixed. Corn and cotton yields across the District fell slightly below 2022 levels, while rice and soybean yields hovered slightly above. Corn and rice production increased relative to this time last year, but cotton and soybeans decreased. Low water levels meant that barges needed to float at a lower weight, which raised shipping costs. Due to elevated storage and transport costs, some contacts stated they planned to leave their crop in the field rather than harvest.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"October 18, 2023\nSummary of Economic Activity\nThe Sixth District economy grew at a slow pace from mid-August through September. Labor availability and candidate quality improved, and wage pressures eased further. Some nonlabor input cost increases stabilized, and pricing power was mixed. Retail sales slowed somewhat, but new auto sales were strong. Domestic leisure travel continued to decelerate, but business and international travel strengthened. Home sales were subdued compared to year-earlier levels amid low inventories and rising prices and interest rates. Commercial real estate conditions were mixed. Transportation activity remained slow. Loan growth slowed, and consumer loan delinquencies rose. Energy demand was flat. Agricultural conditions were mixed.\nLabor Markets\nMost contacts reported that labor markets continued to soften. Labor availability, retention, and the quality of candidates improved by most accounts. However, skilled labor, particularly in construction, remained in short supply in several parts of the District, resulting in project delays. Similarly, agriculture contacts noted that worker shortages prolonged the planting season. Contacts in several Florida markets said that the high cost of living had hurt retention and recruiting efforts. Many firms backfilled open positions while a few said they were hiring for growth. Some contacts in retail, manufacturing, and staffing reduced headcount or hours to align with weaker demand.\nWage growth remained elevated as compared with pre-pandemic levels, but many firms noted that wage pressure continued to ease and further moderation is expected next year. Several contacts had shifted compensation programs to more performance-based models or were promoting other benefits such as hours or location flexibility, development, employee events, and other non-wage incentives.\nPrices\nContacts continued to report stabilizing nonlabor input cost increases, though fuel costs, particularly fuel surcharges, rose. Supply chains were described as more predictable; however, delays in the delivery of some construction inputs raised project costs. Food prices were generally cited as easing, though increases in sugar and grain prices persisted. Pricing power was mixed, and many contacts reported continued margin pressure, largely from rising labor and/or insurance costs. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth decreased to 3.1 percent, on average, in September, from 3.3 percent in August; firms' year-ahead inflation expectations for unit cost growth remained unchanged in September at 2.5 percent, on average.\nConsumer Spending and Tourism\nDistrict retailers reported some slowing in demand as customers cut back on discretionary spending; however, this was described as a normalization from the pandemic's robust pace of growth. Many contacts expect some deceleration in demand growth through the rest of the year and view this decline as meaningful but not overly concerning. Automobile dealers reported healthy sales of new vehicles.\nSimilar to the previous report, tourism and hospitality contacts reported slowing demand for domestic leisure travel. However, cruise activity and business and international travel were robust. Contacts were cautiously optimistic about the upcoming holiday season, noting challenges in forecasting future demand due to shorter booking windows.\nConstruction and Real Estate\nHome sales were suppressed compared to a year ago due to low supply and declining affordability. House prices continued their sequential gains and have returned to near peak levels in many District markets. With both prices and interest rates on the rise, home ownership affordability deteriorated to record lows. Though homebuilders have increased their market share, contacts expressed growing concerns about the lack of affordability and an inability of some buyers to qualify for financing. Rate buy downs have emerged as the most frequent incentive offered to secure new home sales.\nCommercial Real Estate (CRE) contacts reported slowing rent growth, absorption, and sales over the reporting period. Activity in high-end multifamily units slowed and owners acknowledged concessions were needed to finalize leases. Office sector conditions remained mixed as newer buildings saw healthy activity, while occupancy in older buildings declined. More contacts reported growing concerns about the availability of financing, as most lenders strengthened underwriting standards and reduced funding commitments. Some smaller banks, however, continued to actively engage in CRE lending.\nTransportation\nTransportation activity remained sluggish. While railroads experienced a pickup in domestic intermodal freight, shipments of imports were soft. Some trucking firms reported that flatbed freight volumes remained depressed; others saw slightly stronger export volumes. This year's peak shipping season is expected to be muted as underlying demand remains soft and import activity subdued; container shipping companies have reduced capacity in line with expectations for weaker consumer demand. Warehousing contacts noted that the decline in freight volumes caused a pullback in industrial real estate investments. Florida ports and railroads mentioned minor temporary disruptions from Hurricane Idalia's landfall in Florida's Big Bend in late August.\nManufacturing\nManufacturing activity was mixed. Several firms reported increased production while experiencing a contraction in backlogs, new orders, and finished goods inventories. Auto manufacturers not impacted by the UAW strike noted that strong demand was outstripping production of both luxury and standard models, and some noted robust demand for lower-priced autos. Demand for food products for at-home consumption and quick service restaurants softened, though revenues remained above year-earlier levels due to higher pricing. Some manufacturing contacts reported increasing optimism about activity over the next twelve months.\nBanking and Finance\nLoan growth slowed across most portfolios. While asset quality was stable, consumers appeared to experience increased financial stress as evidenced by an uptick in consumer loan delinquencies. District financial institutions continued to fund loan growth with large time deposits given heightened competition for core deposits. However, the higher funding cost of time deposits put increased pressure on net interest margins and earnings.\nEnergy\nDemand for utilities and petroleum-refined fuels was described as flat. Rising input and maintenance costs put pressure on margins across energy sectors. Regulated utilities passed through price hikes to customers with further increases anticipated. Private companies actively invested in federal infrastructure-related projects in anticipation of future tax credits and funding distributions. However, many petroleum refiners noted concerns about deteriorating infrastructure necessary to support the transition to renewables, given the lack of investor interest in maintenance or capacity-expanding projects. Investment costs were cited as prohibitive, resulting in project delays. Surplus chemical product supplies from China and Europe lowered demand for U.S. products. Further chemical product demand erosion is a potential risk resulting from a protracted auto manufacturing shutdown.\nAgriculture\nAgriculture conditions were mixed. Demand for butter increased, but there remained an excess supply of cheese products. In Louisiana and Mississippi, droughts led to the liquidation of herds, resulting in an oversupply of beef. Chicken exports were weak. Soybean and corn yields were strong, creating surpluses. Domestic cotton yields were high, but demand for textiles softened. Hurricane Idalia hit Florida's \"timber basket,\" causing farmers to give away downed trees or pay to have them removed, dampening sales of timber.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics.aspx\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nOctober 18, 2023\nSummary of Economic Activity\nEconomic activity in the Twelfth District was stable on net during the mid-August through September reporting period. Employment levels were little changed, and labor market tightness eased slightly. Prices and wages both rose, but at slower rates. Retail sales were robust, while activity in the service sectors moderated somewhat. Demand for manufactured products remained largely unchanged, and conditions in agriculture and resource-related sectors strengthened slightly. Activity in residential and commercial real estate markets eased. Conditions in the financial sector moderated further over the reporting period. Communities across the Twelfth District faced challenges with the availability of affordable housing and saw continued high demand for support services. Looking ahead, contacts expected weaker economic conditions overall.\nLabor Markets\nLabor market tightness eased slightly over the reporting period as labor supply and demand came into better balance. Employment levels were little changed. Across the District, hiring was somewhat easier with contacts reporting more job applicants, higher quality candidates, and lower employee turnover. Still, challenges persisted in recruiting high-skilled workers in several sectors including nonprofits, financial services, hospitality, construction, and retail. Manufacturing and medical services providers noted continued investment in labor-saving technology. While several contacts reported hiring freezes in sectors such as business services and technology, others took advantage of easing labor market tightness to fill job vacancies. In the financial services and technology sectors, firms lowered head counts through attrition and continued layoffs.\nWages grew over the reporting period, but at a slower rate. Several firms reported stable wages for new hires and annual wage increases for staff normalizing, while other contacts noted employees' wage growth expectations remaining elevated. An employer in Northern California reported that employee demands to work from home eased, and a contact in Washington reported some firms are less willing to offer nonwage benefits such as remote work. However, a firm in Oregon noted employee demands for higher wages and benefits rising recently.\nPrices\nPrices continued to rise, albeit at a more moderate pace than in the last reporting period. Contacts noted price increases for inputs, such as business insurance, health insurance for employees, and raw materials, with particularly higher prices for petroleum-based products and fuel. Still, prices of some inputs fell, such as wood and steel products. Retail prices overall for food and gasoline rose, while one contact in the Pacific Northwest noted that seafood prices fell. A Southern California restauranteur observed more consumer resistance to menu price increases, limiting their pricing power.\nCommunity Conditions\nDemand for community and support services remained elevated. In particular, households and community members sought support for house affordability, food assistance, rental assistance, childcare, and mental health services. Nonprofit organizations continued to report notable drops in funding and charitable donations, which further constrained their ability to meet demand for basic needs. Some contacts highlighted the negative impact on housing affordability from the ongoing transformation of many old residential properties to newer upscale units in urban areas across the District.\nRetail Trade and Services\nRetail sales were robust in recent weeks. Demand for groceries, particularly health-oriented and fresh products, was strong. Retailers reported robust demand for furniture and some home improvement products. Higher gasoline prices pushed some consumers to pull back on discretionary spending. Nonetheless, reports suggested higher energy prices impacted household spending decisions to a lesser degree thus far relative to last summer's spike in energy prices.\nActivity in the consumer and business services sectors moderated slightly. Demand for leisure travel was largely unchanged in recent weeks, while business travel strengthened somewhat as attendance of in-person conferences and conventions continued to recover. International inbound travel activity remained subdued relative to pre-pandemic levels due to a strong dollar, brisk competition from foreign destinations, and reportedly longer visa-processing times. Some contacts in the Pacific Northwest reported demand for restaurants and regional resorts softened since Labor Day. Production activity in the entertainment and media industry remained weak as labor contract negotiations continued between the studios and the actors' union. Demand for health-care services and laboratory testing reportedly rose.\nManufacturing\nManufacturing activity remained largely unchanged over the reporting period. Manufacturers reported generally stable demand despite a tighter credit environment and continued labor challenges. Demand for manufactured wood products softened due to the impact of higher interest rates on residential construction activity. Capacity utilization remained high in food manufacturing but weakened somewhat in metal production. Raw materials availability was steady overall, though electrical supplies were limited. Supply chain disruptions continued to improve, although some manufacturers mentioned lingering delays.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors strengthened slightly overall. Growers reported strong demand for fruits, vegetables, and cotton, as well as steady demand for nuts. Inventories from prior harvests bolstered supply, and the upcoming harvest season is expected to produce large yields. Production at fisheries was stable. Overall exports of agricultural products softened somewhat due to a strong dollar and weaker growth abroad. While input costs remained generally elevated, increased water availability from higher rain and snowfall helped reduce the costs of irrigation. Nonetheless, severe weather events had negative impacts on the production of some food crops, including grapes. Producers expressed concern about the ramifications of geopolitical and extreme weather events on future food availability. Investment in timberlands rose as investors continued to seek alternatives to more traditional investment vehicles.\nReal Estate and Construction\nActivity in residential real estate slowed somewhat over the reporting period. Inventories of single-family homes remained tight as owners with existing lower-rate mortgages stayed out of the market. Despite high rates for new mortgages, demand continued to exceed supply, and prices rose further. Activity in the multifamily sector was mixed: while some regions, like the Pacific Northwest, reported continued strength, others experienced softening demand, lower rents, and rising vacancies. Residential construction activity weakened due to high interest rates and constrained availability of labor, lots, and materials. In contrast, one contact observed better availability of labor and materials in parts of California.\nCommercial real estate activity softened on net. Weakness in office leasing activity persisted, and vacancy rates rose. In contrast, some contacts in Utah and California reported continued solid demand for retail space. While demand for new industrial construction was strong, commercial construction activity weakened overall, with builders reporting lower demand from the technology and professional services sectors. One contact mentioned higher construction demand for public projects from local governments.\nFinancial Institutions\nLending activity moderated further in recent weeks. Demand for business loans, particularly commercial real estate loans, was weak, and higher mortgage rates kept residential lending activity muted. Consumer lending, particularly for credit cards, remained solid. Deposit flows were stable on net despite strengthening competition from other depository institutions and money market funds as people sought higher rates. Lending standards remained tight, and credit quality was strong. Some contacts highlighted demand shifting away recently from large and regional banks to community banks and credit unions.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

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"September 6, 2023\nSummary of Economic Activity\nThe Fifth District economy grew slightly in recent weeks. Retailers and food service contacts reported steady to modest growth in sales, despite lower foot traffic. Auto sales were solid this period, but other consumer durables saw declines. Travel and tourism rose modestly as summer vacations were in full swing. Nonfinancial services firms noted stable demand, even with price increases caused by higher costs. District ports remarked that imports slowed as retailers and manufacturers still had elevated inventory levels. Loaded exports, particularly agriculture products, remained strong. Fifth District manufacturers reported a slowdown this period. Trucking firms reported steady, but low, levels of freight volumes this cycle. Residential real estate respondents stated that the limited inventory of homes for sale has put upward pressure on sales prices. Commercial real estate markets slowed this period; however, leasing remained strong for retail and industrial properties with rents continuing to escalate. In contrast, office and multifamily rents were starting to soften. Loan demand was stable this period despite shrinking deposit levels at banks. Employment increased modestly but at a slower pace than in previous reports. Many contacts indicated that the labor market remains extremely tight but wage growth eased slightly. Price growth continued to ease but remained elevated compared to pre-pandemic levels.\nLabor Markets\nEmployment in the Fifth District increased modestly over the most recent reporting period but at a slower pace than in previous reports. Some contacts stated that the labor market remained tight and were doing what they can do to find employees. A recruiting agency's clients are bypassing temp-to-hire workers and just bringing them on full-time. A bearings manufacturer reported that their skilled tradesmen were approaching retirement, so the company was trying to revitalize their apprenticeship program to train young adults out of high school and community colleges. An office furniture installation company reported that when people do show-up for interviews, their wage demands were too high to match their skill set.\nPrices\nPrice growth eased somewhat in recent weeks but remained elevated. According to our most recent surveys, growth in prices received by manufacturers declined to an annual rate of just over three percent. Service sector price growth also eased slightly but remained more elevated at a five percent growth rate. A plumbing supply company said material costs had fallen and they were passing along those savings by lowering their prices. Several service providers noted that wage pressures eased as the availability of labor improved somewhat, which helped to slow the increases in labor costs.\nManufacturing\nFifth District manufacturing slowed somewhat in the most recent reporting period. A steel coater stated that the economy is in a \"caution zone\" and their customers are only ordering products they know they can sell quickly. A fabrics manufacturer reported that their business is volatile due to the fact that their customers do not have the confidence to hold much inventory. Finding workers remained a significant issue, and firms are finding ways to minimize costs associated with hiring. A coffee manufacturer cited that they cannot pass costs on to customers anymore and will invest in technology throughout the production process to rely less on labor.\nPorts and Transportation\nFifth District ports stated that loaded import volume was down but back to pre-pandemic levels. Imports were lower year-over-year but flat month over month; the decline in import volume was mainly due to a decrease in consumer goods. Exports were slowly ticking up, primarily for agricultural products, wood pulp, resins, and vehicles. Spot shipping rates decreased and were slightly lower than 2019. Carriers had reduced shipping capacity in order to maintain price. Gate turn times improved and container dwell times returned to normal levels. Demand for airfreight stabilized after declining over the last 18 months and air cargo rates dropped precipitously, but both are still above pre-pandemic levels.\nTrucking firms reported that with the decrease in the number of carriers, there have been incremental opportunities to pick up freight. Demand was steady this period as there was no sizable decrease in freight volumes. Spot rates increased slightly, particularly with third party, transactional freight. However, respondents indicated that they were able to get moderate increases with their contract rates despite customers being very price sensitive. Trucking companies indicated that drivers were more readily available but that job openings for mechanics and shop staff were still difficult to fill. Firms also stated that they were experiencing higher costs of labor, parts and new equipment.\nRetail, Travel, and Tourism\nConsumer spending grew at a modest rate in recent weeks. Retail and food service contacts reported steady to modest growth in sales despite some declines in foot traffic as warm weather and summer travel led to fewer customers coming through the doors. In contrast, a couple of furniture stores saw sales decline as a result of the softness in real estate markets. Auto sales remained solid this period.\nTravel and tourism rose moderately as summer travel was in full swing. Coastal areas of North and South Carolina saw strong visitation with increased room nights sold and high levels of occupancy. Average room rates were down slightly compared to last year but revenue was still up, overall, because of the strong growth in room nights sold. An airport reported strong passenger traffic and increased seat capacity but fewer flights as larger aircraft were being utilized.\nReal Estate and Construction\nResidential real estate respondents indicated that the limited inventory of homes for sale has boosted competition among buyers and has put upward pressure on sales prices. Sellers who secured low mortgage rates have been hesitant to sell, leaving a dearth of new listings leading to a decrease in closed sales. Overall, home sales were constrained by both affordability and by the lack of inventory. In the last month, buyer traffic was lower due to the usual seasonal slowdown. Days on market increased slightly, mostly related to stale inventory. Prospective buyers were not having any difficulties obtaining mortgages. Home builders indicated that construction costs leveled off but remain high relative to pre-pandemic levels.\nOverall market activity in the Fifth District commercial real estate sector slowed this period. However, leasing remained strong for retail and industrial properties with rents continuing to escalate. In the office market, companies were looking to decrease rental cost by downsizing and relocating to smaller footprints in higher quality buildings. Rental rates in the office segment remained flat; however, landlords were offering more incentives and/or concessions to potential tenants. In the multifamily sector, rents were starting to soften partially caused by a new supply of multifamily units coming onto the market. Respondents stated that some banks have pulled back on new commercial real estate lending activity and that, coupled with higher interest rates, has made deals less attractive, and in some cases, not viable.\nBanking and Finance\nLoan demand was unchanged in recent weeks and has returned to pre-Covid levels. This stable demand has been noted across all loan portfolios, consumer and commercial. One observation was loans were being originated for only what must be done and no more. Home equity loans and lines saw an increase in demand, with respondents noting borrowers were not keen to refinance lower rate first mortgages for their needs. Deposit levels continued to shrink, and competition for balances was still strong. Credit quality continued to be a concern as the cost to borrow increased while delinquency rates remained stable at low levels.\nNonfinancial Services\nNonfinancial service providers continued to report that demand for their services as well as revenues had remained stable. One respondent observed that demand continued, even with price increases due to higher costs. Some noted that clients were finding themselves constrained due to the increasing lack of access to capital, keeping their growth muted. Labor shortages continued to ease, but wage pressures continued to be present in the marketplace. An overall sense of economic uncertainty was noted with many of the respondents, driving much of the decision making at their firms as well as their clients.\nFor more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2023/2023-09-kc

"Beige Book Report: Kansas City\nSeptember 6, 2023\nSummary of Economic Activity\nEconomic activity across the Tenth District was stable over the past two months. After falling from high rates of growth during the first half of the year, manufacturing production and sales at service businesses stabilized in July and August. Contacts indicated the recent pickup in growth was not due to increases in demand, so much as a greater ability to meet existing orders as delays along supply chains were resolved. Accordingly, job growth was flat across the District. Despite several months of subdued employment growth, wages continued to grow at a robust pace through August, exceeding historical norms and most businesses' expectations. Consumer spending continued to expand at a moderate pace, with robust leisure travel offset somewhat by tepid retail sales growth. Several contacts suggested consumers have exhausted their savings and are relying more on borrowing to support spending. Bankers noted pockets of deterioration in some consumer loan types as delinquencies rose, with further deterioration expected for consumer borrowers. Prices increased at a moderate pace in recent months, a noticeable reduction from the pace of price increases witnessed over the last year. Though slower, growth in input prices still outpaced selling prices for most firms, compressing profit margins.\nLabor Markets\nMost Tenth District contacts reported employment levels were unchanged in recent months. Labor markets remained tight with many businesses reporting ongoing difficulties hiring and retaining skilled workers, partially contributing to the slowdown in hiring activity. Both services and manufacturing businesses indicated modest improvements in expected employment growth over the next six months. These expectations were based on a better outlook for recruiting workers, rather than a desire to open more positions and recruit more workers.\nDespite several months of subdued employment growth, wages grew at a robust pace, exceeding historical norms. Most contacts reported annual wage increases between 6 and 10 percent during the first half of the year. However, these contacts also suggested the \"second half of the year will be different,\" renewing their expectations for softening of wage growth they reported in early 2023. Most contacts indicated they expect more moderate wage increases of less than 5 percent over the next year. Manufacturing contacts, in particular, reported a stark shift in wage expectations, with over two thirds of respondents downshifting their expectations to more modest wage increases.\nPrices\nPrices increased at a moderate pace in recent months, a noticeable reduction from the pace of price increases witnessed over the last year. Though slower, the pace of growth in input prices still outpaced selling prices for most firms, which contacts attributed more to elevated wage growth rather than to rising materials prices. Both manufacturing and service contacts reported compression in their profit margins in recent months, as businesses were unable to pass all their higher costs onto customers. Expectations are for continued margin compression in the coming year, but at a slower pace than witnessed in recent months.\nConsumer Spending\nConsumer spending continued to expand at a moderate pace during the last couple months, driven largely by a stronger-than-expected summer tourist season. Contacts across District states reported robust growth in leisure travel at both drive-to and fly-to destinations. Despite healthy tourism activity, contacts reported growth in retail sales has not been as robust. In several states, retail spending declined slightly, with contacts suggesting consumers have exhausted their savings and are relying more on borrowing to support spending. New auto sales increased a bit due to slightly more available inventory.\nCommunity Conditions\nHousing providers faced more difficulty building new, and maintaining existing, affordable rental properties because of substantial increases in financing and insurance costs. In Colorado, property insurance premiums reportedly rose as much as 30-50 percent over the last year, due in part to increased weather-related claims. Contacts reported some optimism in being able to help low- and moderate-income households with homeownership, using state and philanthropic funds for down payment assistance and rate buy downs. However, evictions and foreclosures continued to rise, and recently reached or exceeded 2019 levels across District states. A non-profit in Kansas City noted calls for housing and utility assistance were up 21 percent and 12 percent, respectively, over the previous six months and up 30 percent from 2019 levels.\nManufacturing and Other Business Activity\nAfter declining for several months, manufacturing production and sales at service businesses stabilized in July and August. Contacts indicated the recent pickup in activity was not due to increases in demand. Instead, business reported a greater ability to meet existing orders, as delays along supply chains were resolved. As existing orders were met, businesses indicated that backlogs and inventory levels declined significantly over the past two months. Contacts expressed mixed views on investments plans. Falling profit margins and shorter backlogs led many businesses to pull back on capital expenditures. Some contacts also noted securing financing for equipment and transportation vehicles was more difficult. Still, many businesses reported increasing investment activity in recent months and had plans to raise their investment spending over the next six months.\nReal Estate and Construction\nDemand for housing continued to exceed available housing supply across the District. Contacts noted several changes in the composition of home buyers in recent months. First, fewer institutional investors bought homes recently. Investor-buyers were more likely to own a small number of properties. Second, fewer buyers were willing to purchase homes that required significant improvements. Financing for home renovation typically requires licensed contractors perform the work, rather than owners' \"sweat equity.\" The combination of skilled-labor shortages and higher financing costs reportedly deterred renovation activity on newly purchased homes. Third, investor-buyers were much more likely to 'flip' refurbished homes, rather than hold and rent them, due to higher interest expenses.\nCommunity and Regional Banking\nLoan demand weakened further during the last month as bankers stated high interest rates and economic uncertainty resulted in a cautious approach for prospective borrowers. Contacts noted pockets of deterioration in some consumer loan types as delinquencies rose, with further deterioration expected for consumer borrowers and across the commercial real estate (CRE) industry. Several contacts also stated that credit standards for CRE loans had tightened in light of reduced risk appetite and expected deterioration in credit quality. Deposit levels stabilized during the last couple of months, while the funding mix continued to shift from checking accounts to time deposits, driving up overall bank funding costs.\nEnergy\nTenth District energy activity remained steady through August. Though oil prices rose, total oil production and rig counts in the District were essentially flat, as global oil consumption slightly underperformed a majority of District firms' expectations. The number of active gas rigs decreased slightly, and production stagnated because drilling for gas remained unprofitable for District firms. Well completions leveled off from recent declines, keeping the number of drilled-but-uncompleted wells unchanged. Accordingly, District energy employment ticked up only slightly, but still lagged pre-pandemic levels. Coal production in Wyoming increased moderately as regional prices remained above historic levels.\nAgriculture\nThe farm economy in the Tenth District remained strong, but conditions softened alongside lower agricultural commodity prices and persistent drought. Volatility in markets for major crops was elevated amid heightened uncertainty about supply and demand conditions. Through mid-August, prices for corn and wheat were about 10 percent lower than the beginning of the month and soybean prices also dropped slightly. In the livestock sector, cattle prices remained strong and continued to support profit opportunities, despite considerable cost pressures. Large areas of the region continued to be heavily impacted by drought that could reduce crop revenues and limit availability of feed for livestock operations. District contacts continued to highlight input costs, interest rates and thinner margins as other key concerns. Lenders indicated that credit conditions remained sound with support from strong farm finances.\nFor more information about District economic conditions visit: https://www.kansascityfed.org/research/regional-research/\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2023/2023-09-mi

"September 6, 2023\nSummary of Economic Activity\nThe Ninth District economy grew slightly since early July. Employment increased slightly and wage pressures were unchanged. Prices increased moderately overall. Growth was noted in consumer spending, tourism, and residential construction, while commercial construction was flat. Manufacturing as well as residential and commercial real estate activity decreased, and agriculture weakened. Oil and gas drilling also fell slightly. Minority- and women-owned businesses reported mixed activity.\nLabor Markets\nEmployment grew slightly since the last report. Hiring demand fell but remained at healthy levels. Most employers, even small ones, were hiring in some capacity. But the share of employers looking to add full-time workers dropped, and total job openings were moderately lower; very few firms reported that they were cutting workers. A South Dakota utilities company noted that it \"was hiring positions deemed critical to day-to-day business operations. All other discretionary positions are on hold.\" Labor supply was improving, but applicant quality was still poor, with some exceptions in higher-skill areas. A Montana staffing contact noted that clients were asking for fewer workers, in part because \"they know we don't have 10 [good] candidates. They are doing more with less labor, and forgoing growth.\" Larger employers reported having more success in adding workers, likely because they also reported stronger increases in compensation.\nWage pressures were flat but ongoing wage growth remained above average. A recent survey found that 60 percent of employers raised wages by 3 percent or more over the last 12 months, roughly in line with wage increases reported in January. However, respondents expected future wage growth to fall moderately. A northern Minnesota workforce contact said, \"Wage offers have stabilized in the last three to six months. Many have stopped additional wage increases as it does not seem to be effective in getting and retaining employees.\"\nPrices\nPrices increased moderately overall since the previous report. A third of firms responding to a monthly business survey reported that the prices they charged to customers increased in July from a month earlier, while 40 percent reported that their input prices increased. More than two-thirds of respondents to a recent survey said that it had gotten harder to pass their increased input costs on to customers since the beginning of the year. A regional manufacturing survey indicated nearly flat wholesale prices in July from a month earlier. A third of hospitality survey respondents reported that their prices charged to customers increased by 5 percent or more over the past year; contacts in the industry reported significant continued pressure on food prices. Retail fuel prices in District states increased briskly since the last report. Prices received by farmers increased in June from a year earlier for barley, chickpeas, potatoes, hay, and cattle; prices decreased from a year earlier for corn, wheat, soybeans, milk, hogs, turkeys, chickens, eggs, dry edible beans, lentils, and canola.\nWorker Experience\nWorkers and job seekers continued to prioritize flexibility and work-life balance, according to several contacts. A labor contact in the Upper Peninsula of Michigan shared that many police officers and nurses were choosing predictable schedules over the highest wages available when changing jobs. \"They prefer balance and flexibility in their lives,\" the contact said. According to a Minnesota contact, nearly half of clients at a coworking space chose to work there rather than at the company office or at home \"because they prefer the flexibility and autonomy.\" According to a Minnesota labor contact, financial incentives offered by employers were having diminishing effects as they tried to attract new workers.\nConsumer Spending\nConsumer spending was slightly higher overall since the last report, with some variability. Retail contacts across the District reported that recent sales were a bit slower overall compared with the same period last year, and they expected the trend to continue over the coming quarter. Hotel bookings in Montana in July were higher than a year ago, but some tourism contacts there suggested that the pandemic boom in outdoor tourism was slowing. Minnesota hospitality and tourism contacts reported that recent sales were up slightly overall, and tourism traffic in Michigan's Upper Peninsula has also been strong compared with last summer. Passenger traffic at regional airports saw continued growth. New-vehicle sales have risen thanks to increased vehicle inventory. A dealership with multiple locations saw new-vehicle sales in July rise by almost half compared with last year; used-vehicle sales have slowed somewhat as a result. Recent recreational vehicle sales remained slower across the District compared with last year, but sales of powersport vehicles have rebounded.\nConstruction and Real Estate\nConstruction activity was flat since the last report. Construction contacts across the District reported mixed sales activity, with notable shares seeing either increases or decreases compared with last summer. In some cases, decreases stemmed from lack of labor. Industry data showed that the value of construction starts in the District in July was similar to the previous two years, without factoring in inflation. Among sub-sectors, office construction remained moribund, and multifamily construction was also experiencing softer activity. Firms serving infrastructure markets reported stronger activity, likely due to increased federal spending. Single-family residential construction saw modest improvements in a few markets; Minneapolis-St. Paul saw a 10 percent increase in single-family permits in July year over year. Across the District, hiring remained robust, supply chains improved, and prices for materials were easing but still high.\nCommercial real estate activity was lower. Multifamily vacancy rates increased modestly in some markets despite a slowdown in new construction. Office vacancy rates have stabilized somewhat, but at high levels; industrial vacancy ticked higher but remained at healthy levels. Residential real estate remained soft, with year-over-year July sales falling in most markets, often by double digits. Several contacts said demand was higher than indicated by sales and attributed much of the slowness to very low inventories of homes for sale.\nManufacturing\nDistrict manufacturing activity decreased modestly since the previous report. A regional manufacturing index indicated a contraction in activity in Minnesota, North Dakota, and South Dakota in July from a month earlier. Manufacturers that responded to the monthly business conditions survey indicated increased orders in July from the month prior and were expecting growing sales in the month ahead. An electrical equipment producer reported that new business slowed and it was uncertain about its outlook after working through existing backlogs, a sentiment reported by multiple other contacts.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions weakened slightly. More than a third of respondents to a survey of agricultural credit conditions reported that farm incomes decreased in the second quarter from a year earlier. Several contacts noted that while commodity prices were still favorable, they were retreating to levels that could be below break-even for some producers given high input costs. Drought conditions improved recently but remained a concern, especially in eastern portions of the region. District oil and gas drilling activity decreased slightly since the previous report; however, contacts reported that oil production increased recently.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned business contacts was mixed. Equal shares of respondents to a July survey of businesses reported that sales were higher, lower, or unchanged over the prior month. Capital expenditures were slightly higher on balance, and more often than not, respondents reported lower profits. More than a third of respondents shared that their demand for workers had increased but hiring roadblocks continued. Retail and wholesale prices were flat for three-quarters of firms and higher for the rest. A slightly higher share reported they raised wages. \"[We] gave annual raises of 4.5 percent to stay competitive \u2026 up from our historic 3 percent,\" shared a contact with a freight railroad transportation company in Minnesota.\nFor more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nSeptember 6, 2023\nThis report was prepared at the Federal Reserve Bank of Kansas City based on information collected on or before August 28, 2023. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nContacts from most Districts indicated economic growth was modest during July and August. Consumer spending on tourism was stronger than expected, surging during what most contacts considered the last stage of pent-up demand for leisure travel from the pandemic era. But other retail spending continued to slow, especially on non-essential items. Some Districts highlighted reports suggesting consumers may have exhausted their savings and are relying more on borrowing to support spending. New auto sales did expand in many Districts, but contacts noted this had more to do with better availability of inventory rather than increased consumer demand. Manufacturing contacts in several Districts also noted that supply chain delays improved, and that they were better able to meet existing orders. New orders were stable or declined in most Districts, and backlogs shortened as demand for manufactured goods waned. One sector where supply did not become more available was single-family housing. Nearly all Districts reported the inventory of homes for sale remained constrained. Accordingly, new construction activity picked up for single-family housing. But multiple Districts noted that construction of affordable housing units was increasingly challenged by higher financing costs and rising insurance premiums. Bankers from different Districts had mixed experiences with growth in loan demand. Most indicated that consumer loan balances rose, and some Districts reported higher delinquencies on consumer credit lines. Agriculture conditions were somewhat mixed, but reports of drought and higher input costs were widespread. Energy activity was mostly unchanged during the final months of the summer.\nLabor Markets\nJob growth was subdued across the nation. Though hiring slowed, most Districts indicated imbalances persisted in the labor market as the availability of skilled workers and the number of applicants remained constrained. Worker retention improved in several Districts, but only in certain sectors such as manufacturing and transportation. Many contacts suggested \"the second half of the year will be different\" when describing wage growth. Growth in labor cost pressures was elevated in most Districts, often exceeding expectations during the first half of the year. But nearly all Districts indicated businesses renewed their previously unfulfilled expectations that wage growth will slow broadly in the near term.\nPrices\nMost Districts reported price growth slowed overall, decelerating faster in manufacturing and consumer-goods sectors. However, contacts in several Districts highlighted sharp increases in property insurance costs during the past few months. Contacts in several Districts indicated input price growth slowed less than selling prices, as businesses struggled to pass along cost pressures. As a result, profit margins reportedly fell in several Districts.\nHighlights by Federal Reserve District\nBoston\nBusiness activity expanded modestly on balance. New car inventories normalized further but used cars remained scarce. Home sales fell further, resulting in a disappointing spring and summer season. Concerning the outlook, fewer contacts mentioned a recession as a looming risk and pricing pressures were expected to ease further.\nNew York\nRegional economic activity held steady through the summer. Labor market conditions generally remained solid, with steady wage growth. Consumer spending grew steadily, while manufacturing activity declined. Home sales remained constrained due to low inventory and rising mortgage rates. Inflationary pressures picked up slightly after easing much of the past year.\nPhiladelphia\nBusiness activity continued to decline slightly during the current Beige Book period. Although manufacturers indicated an uptick in August, consumer spending declined overall as did nonmanufacturing activity. Labor availability improved further, and employment edged up once more. Wage growth and inflation continued to subside. Sentiment was somewhat divided, but expectations generally grew more positive.\nCleveland\nEconomic activity was generally flat in the Fourth District, though conditions shifted notably in some industries. While consumer spending and demand for manufactured goods softened, freight activity stabilized, and nonresidential construction activity increased. Contacts expected similar economic conditions to persist in the near term.\nRichmond\nThe regional economy grew slightly in recent weeks. Consumer spending on retail and food service, as well as on travel and tourism, picked up modestly. Manufacturers noted a decrease in demand. Transportation volumes remained steady across freight modes. Residential real estate was constrained by limited inventory. Commercial real estate activity and lending declined. Employment increased moderately and price growth eased slightly.\nAtlanta\nEconomic activity grew modestly. Labor markets improved, and wage pressures eased. Nonlabor costs moderated, on net. Retail sales were robust. New auto sales were strong. Domestic leisure travel slowed, while international and business travel rose. Housing demand was durable. Transportation activity slowed. Energy demand was strong. Agricultural conditions were mixed.\nChicago\nEconomic activity increased slightly. Employment increased moderately; business and consumer spending increased slightly; construction and real estate was flat; nonbusiness contacts saw little change in activity; and manufacturing decreased slightly. Prices and wages rose moderately, while financial conditions tightened moderately. Expectations for farm incomes in 2023 were little changed.\nSt. Louis\nEconomic conditions have remained unchanged since our previous report. Employers reported continued tight labor markets and easing wage growth. Businesses struggled to pass on price increases and reported continuing increases in price sensitivity and weaker demand for high-end goods.\nMinneapolis\nRegional economic activity crept up on balance. Employment grew slightly, with hiring activity remaining healthy. Wage pressures were flat, while job seekers prioritized work-life balance. Prices increased moderately; firms were finding it harder to pass on higher costs. Consumer spending rose and auto sales benefited from improved inventory. Manufacturing and real estate activity fell; farm conditions weakened.\nKansas City\nEconomic activity across the District was stable over the last two months. Manufacturing production and sales at service businesses improved due to a greater ability to meet existing orders, as delays along supply chains were resolved. Job growth remained flat, but wage growth continued to exceed historical norms and businesses' expectations. Contacts renewed expectations for slower wage growth ahead. Prices grew at a moderate pace.\nDallas\nModest expansion continued, though activity was mixed across sectors. Solid growth was seen in the nonfinancial services sector, while retail sales were flat and activity in the manufacturing, energy, and financial services sectors declined. Employment growth picked up slightly overall, and wage growth remained high. Price pressures remained elevated in the service sector. Outlooks were fairly stable, though uncertainty persists.\nSan Francisco\nEconomic activity strengthened slightly. Labor availability improved and wage pressures softened further. Price increases persisted, albeit at a slower pace. Retail sales rose slightly, on balance, and manufacturing activity was stable. Lending activity moderated in recent weeks. Local communities observed increased demand for support services, particularly in areas impacted by wildfires and other severe weather in Hawaii and California.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"September 6, 2023\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to decline slightly. Consumer spending was down in most sectors, including retail, restaurants, autos, and tourism. High interest rates continued to constrain the available inventory of new homes and have also excluded many low-asset consumers from purchasing homes or cars. Employment edged up as labor availability continued to improve. Wage growth and inflation continued to subside \u2013 both continued to grow within a modest range. Overall, contacts reported far fewer supply chain disruptions and a lower (steadier) cost of goods for their inputs. Contacts continued to note tighter credit standards. Credit quality remains very good, despite a slight rise in delinquencies. On balance, firms continued to expect slight growth over the next six months \u2013 weaker than the norm for an expansionary period. Sentiment is divided. A few contacts stated that their sectors were in a recession. However, most expressed that there were no signs of a recession, and many were more optimistic for a soft landing.\nLabor Markets\nEmployment appeared to edge up after falling slightly during the prior period. Staffing firms and other contacts reported an improving labor market, with more job candidates, better retention, and fewer callouts for sick time, but many also noted a lower quality of applicants.\nContacts noted few layoffs but less job loyalty. Although turnover has improved, it remains high during a worker's first year. Several contacts noted burnout of tenured employees, especially in health care, and also observed that an emphasis on return-to-office strategies significantly impacts working single mothers.\nIn our monthly surveys, employment grew slightly as the share of nonmanufacturing firms that reported increases in full-time and part-time jobs rose. This was offset, in part, by a rising share of manufacturing firms reporting a decline in overall jobs.\nFirms reported that wage inflation remained at a modest pace overall \u2013 near pre-pandemic levels \u2013 and continued to slowly subside. Moreover, firms expected worker compensation increases to subside further in 2024.\nIn our monthly surveys, the distribution of nonmanufacturing firms reporting higher or lower wage and benefit costs per employee remained typical of the pre-pandemic era, when modest wage growth prevailed. Contacts noted some ongoing wage pressure from low-skill workers, especially among smaller firms, but that unusually high salary demands from professional workers had waned.\nOn a quarterly basis, firms' expectations of the one-year-ahead change in compensation cost per worker fell to a trimmed mean of 4.3 percent in the third quarter of 2023, from 4.6 percent in the second quarter (and from a peak of 5.8 percent in the third quarter of 2022). Expectations averaged 3.2 percent prior to the pandemic. Expected compensation growth fell to 4.4 percent for manufacturers and to 4.1 percent for nonmanufacturers.\nPrices\nOn balance, inflation subsided further in the third quarter \u2013 continuing in the more modest range that began in the second quarter. Moreover, reports of price increases were below historical trends for manufacturers' inputs and for nonmanufacturers' outputs. Expectations of future price hikes edged lower.\nContacts reported that increases in prices received for their own goods and services over the past year edged lower in the third quarter of 2023 compared with the second quarter. The trimmed mean for reported price changes, as indicated by responses to our quarterly survey questions, fell to 4.5 percent from 4.6 percent for all firms. Price increases remained at 3.7 percent among nonmanufacturers and fell to 5.3 percent from 5.8 percent for manufacturers. Reported price increases had peaked during 2022 at 5.8 percent for nonmanufacturers and at 10.4 percent for manufacturers.\nIn our monthly surveys, the diffusion indexes remain somewhat elevated for prices paid by nonmanufacturers and for prices received by manufacturers compared with their nonrecession averages. However, for prices paid by manufacturers and for prices received by nonmanufacturers from consumers and other buyers, the indexes are below their nonrecession averages.\nLooking ahead one year, the increases that firms anticipated in the prices for their own goods fell further \u2013 the trimmed mean for all firms fell to 3.7 percent in the third quarter of 2023. It has fallen from a peak of 5.9 percent in the fourth quarter of 2021. The expected rate of growth edged up to 4.1 percent for nonmanufacturers but fell to 3.3 percent for manufacturers.\nManufacturing\nManufacturing activity turned positive in the latter half of the period \u2013 generating slight growth overall after a year of declines. The August indexes for general activity and for new orders were just above their nonrecession averages. The sudden uptick in the indexes was primarily driven by fewer firms reporting decreased demand rather than by more firms reporting increased demand.\nMost contacts noted ongoing improvements in the supply chain, with a return to normal for many. Despite the up-tick, sentiment weakened, as expressed by one contact, who said, \"The chatter is things are slowing down; we are just not seeing or experiencing [a recession].\" Large firms with extensive linkages to the broader economy also noted steady activity and no signs of a recession.\nConsumer Spending\nConsumer spending continued to decline slightly. Contacts noted that consumers were purchasing fewer items and were trading down by shopping for lower-priced goods and at discount stores. A fast-casual restaurateur reported a slowdown and noted \"consumer fatigue from price increases.\" However, this behavior was described as a \"slight belt tightening,\" not as a recession.\nAuto dealers reported a slight decline overall, although sales held steady for some. While inventories continued to improve, interest rates and high prices have excluded some buyers. Several contacts noted that sales of some electric vehicle models had softened.\nTourism contacts reported a slight decline overall \u2013 led by falling demand from high levels of activity at many Third District leisure destinations, in part because more travelers are going abroad again. The recovery at urban destinations leveled off.\nNonfinancial Services\nOn balance, nonmanufacturing activity declined slightly \u2013 after a more modest decline in the prior period. Contacts noted fewer concerns of a recession \u2013 invoking a soft landing instead. The index for expected growth over the next six months has risen since the prior period \u2013 nearly to its nonrecession level, although it slipped a little in August.\nFinancial Services\nThe volume of bank lending (excluding credit cards) resumed growing moderately during the period (not seasonally adjusted) \u2013 after slowing to a modest pace last period. Loan growth was also modest during the comparable period in 2022.\nDuring the period, District banks reported strong growth in home mortgages and auto loans, modest growth in other consumer loans, and slight growth in commercial real estate lending and commercial and industrial loans. The volume of home equity loans fell slightly. Credit card volumes rose moderately following a stronger surge last period. The pace was also slower than the comparable period last year.\nBanking contacts and large service companies continued to report good credit quality \u2013 noting only small upticks in loan delinquencies, which remain at very low levels. Market participants noted that higher interest rates and tighter credit standards had sidelined many deals and were especially challenging for small businesses.\nReal Estate and Construction\nExisting home sales resumed a slight downward trajectory \u2013 well below the prior-year level. Brokers noted that high interest rates are now constraining the demand for existing homes largely to high-asset buyers. However, that demand remains greater than the still-shrinking inventory \u2013 driving prices higher and low-asset buyers into rental units. New home builders reported a steady flow of contract signings as well-heeled buyers sought alternatives to the sparse existing home market.\nMarket participants in commercial real estate reported a slight uptick in construction activity. While the demand for new office and warehouse space has largely evaporated, ongoing bids for institutional, multifamily residential, and public infrastructure projects have extended the pipeline of new projects and sparked a \"shred of optimism.\" The office market contracted modestly as leases rolled over into spaces with smaller footprints.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"September 6, 2023\nSummary of Economic Activity\nThe Eleventh District economy continued to expand at a modest pace overall. Solid growth was seen in the nonfinancial services sector, while retail sales were flat and activity in the manufacturing, energy, and financial services sectors declined. Housing demand was mixed, and home price increases remained subdued. Scant rainfall and very high temperatures depressed agricultural conditions in much of the district. Employment growth picked up slightly overall, and wage growth remained high. Input cost and selling price pressures were elevated in the service sector but modest in manufacturing. Outlooks were fairly stable, though uncertainty persists around the continuing impact from higher interest rates.\nLabor Markets\nEmployment growth picked up slightly over the reporting period. Manufacturing hiring resumed an average pace after slowing in June, and service sector firms added to payrolls at a slightly elevated rate. Airlines reported a normalization after record hiring last year, and some layoffs were reported in cargo transportation. Overall, most Texas businesses said they were looking to hire, and while lack of applicants remained the top impediment, applicant availability generally improved over the reporting period. However, reports of labor shortages continued in health care, trucking, oilfield services, auto repair and skilled trades.\nWage pressures remained elevated, though there were some signs of moderation as the year progressed. Staffing services firms reported less pressure on wages over the past six weeks.\nPrices\nPrice pressures remained subdued in manufacturing but still elevated in the service sector. Oilfield services firms noted some input price softening as supply chains improved. Fuel prices were up over the reporting period. Several contacts remarked that customers were more price sensitive, and an August Dallas Fed survey of more than 300 Texas business executives showed that it has become more difficult over the past three months to pass cost increases on to customers. The survey also showed that Texas businesses expect input costs to increase 4.7 percent on average this year, down from 9.6 percent increase in 2022. They expect to raise their selling prices 3.3 percent, down from 7.4 percent last year.\nManufacturing\nTexas manufacturing activity continued to contract over the reporting period, with declines seen in new orders, output, and capital spending. The weakness was broad-based but most notable in chemical, high-tech, and machinery manufacturing. Food and fabricated metals manufacturing exhibited more strength than other segments. A chemical manufacturer said construction, packaging, and industrial demand were proving anemic, and that the weak outlook for China and Europe was weighing on expected export demand. Other contacts cited higher interest rates as a headwind for capital investments and construction-related manufacturing. An August Dallas Fed survey showed that thirty percent of manufacturers saw a decrease in production as a result of the recent heat wave, largely stemming from lower labor productivity and temperature-sensitive worksites. Overall, outlooks worsened, and contacts voiced concern over the current manufacturing slump.\nRetail Sales\nRetail sales stabilized over the past six weeks after declining in the prior period. Auto dealers noted some weakness in sales, and contacts pointed to inflation and high interest rates denting consumer demand. Several also cited a potential auto workers strike as a threat. Numerous retailers said sales have been impacted by the excessive heat hurting demand, particularly stores that rely on foot traffic. Outlooks stabilized somewhat, though were still tilted toward the negative.\nNonfinancial Services\nGrowth in service sector activity accelerated over the reporting period. Revenue growth was led by professional and business services, where contacts noted improved sentiment about economic conditions. Leisure and hospitality also experienced a pickup in August despite several contacts noting a negative impact from the extreme heat. Airlines said demand stayed strong over the summer, especially for leisure travel. Health care remained a weak spot. Overall, outlooks were fairly stable, with contacts expecting moderate growth over the next six months.\nConstruction and Real Estate\nHousing demand remained solid for new homes due to incentives such as rate buydowns that help lower mortgage rates. In contrast, existing home sales declined due to high mortgage rates and low inventories of homes available for sale. Home price increases remained subdued. Construction for new homes increased, while multifamily construction trended down. A wave of new apartment units has caused rents to fall and vacancy rates to increase.\nThe office market continues to face sluggish rents and high vacancy rates. The outlook is brighter for new Class A office buildings than older office buildings and other categories which face a more uncertain future. The retail market is doing well, though it is expected to slow as consumer spending weakens. The industrial market remains solid.\nFinancial Services\nLoan demand declined for the eighth period in a row \u2014now a full year \u2014though the rate of decline eased somewhat. The pace of decline in overall loan volume also decelerated, but residential real estate loan volume declined sharply after stabilizing in May and June. Loan nonperformance continued to increase, particularly for consumer loans. Loan pricing pushed up further. Credit standards continued to tighten, though the share of bankers reporting a tightening fell to its lowest level since February. Bankers' outlooks remained pessimistic, with most expecting a decrease in loan demand and a deterioration of general business activity over the next six months.\nEnergy\nDrilling activity for oil and gas wells declined over the past six weeks, particularly for smaller producers. The Eleventh District rig count fell moderately again, with past increases in costs and declines in prices for crude oil and natural gas making some projects uneconomical. Well completions eased but continued to hold up better than drilling activity. Most contacts expect the rig count to stabilize soon, and some expressed receding recession risks.\nAgriculture\nA significant portion of the district entered (or reentered) drought over the past six weeks due to meager rainfall and soaring temperatures. Pasture conditions deteriorated, and the weather had an adverse effect on row crops. A majority of the Texas cotton crop was rated in poor to very poor condition, and abandonment is expected to be high this year. Cattle prices rose further over the reporting period, driven by tight supply and solid demand for beef.\nCommunity Perspectives\nThe scarcity of affordable housing remained the most pressing issue for lower-income individuals, according to community nonprofits. High rent and costly utilities were pricing residents out of their current living situation. Contacts lamented that high construction costs pose a major challenge for affordable housing developers building more stock. One nonprofit serving senior adults said inflation coupled with a reduction in SNAP benefits has put food insecurity as the top threat to seniors, which is a change from the usual top threats of isolation and difficulty accessing healthcare.\nFor more information about District economic conditions visit: https://www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"September 6, 2023\nSummary of Economic Activity\nThe economy of the Sixth District grew at a modest pace from July through mid-August. Labor availability and retention improved, and wage pressures eased. Nonlabor input costs moderated further, and pricing power diminished somewhat. Retail sales were strong. New auto sales were robust; the sale of used vehicles slowed. Domestic leisure travel slowed while business and international travel improved. Housing demand was healthy, existing home inventories remained low, but new home inventory increased. Commercial real estate conditions were mixed. Transportation activity softened. Loan growth was solid except for consumer loans, and delinquencies remained low. Energy demand was strong amid high summer temperatures. Agriculture demand was unchanged.\nLabor Markets\nMost contacts continued to report improvements in labor availability and retention; however, some firms slowed the pace of hiring or reduced headcount. Despite improvements, labor availability remained a top priority for employers. Some expected skill shortages to persist and were investing in technology and automation to reduce reliance on a shrinking workforce. Employers in south Florida and along the Gulf Coast reported that the cost of living, particularly housing, restricted the supply of workers. Employers noted a growing preference among workers for fewer work hours and greater flexibility. Reactions to a new Florida immigration law were mixed; several noted no impact to business, while others said workers were leaving the state.\nWage growth remained elevated as compared with pre-pandemic levels, but most firms noted that wage pressure had eased, and many anticipate further moderation next year. Some contacts said that lower-wage workers continued to be attracted away for higher pay, better working conditions, and greater scheduling flexibility.\nPrices\nContacts described nonlabor input costs as continuing to stabilize, though they were still higher than 2019 levels. Notable exceptions included rising construction input costs (like concrete and electrical equipment), which were in contrast to price deflation in some food products (like eggs and corn). Property and liability insurance costs in coastal areas remained a top concern regarding housing affordability and firms' investment plans. Pricing power was largely reported as eroding, though most firms were holding prices steady. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth was little changed at 3.3 percent, on average, in August, from 3.2 percent in July. Firms' year-ahead inflation expectations decreased in August to 2.5 percent, on average, from 2.8 percent in July.\nCommunity Perspectives\nContacts serving low-income communities described economic conditions as largely unchanged to slightly declining. Capital and credit deployment to small businesses slowed due to rising borrowing costs and tighter underwriting standards. Lenders and investors expect an increase in small business capital availability with the roll out of federal programs like the State Small Business Credit Initiative. On the consumer side, several finance and credit contacts noted that delinquency rates for automobile loans and some credit card accounts rose slightly, and elevated auto delinquencies among lower-income populations are anticipated going forward. Contacts also noted that demand for food and housing assistance remained higher than pre-pandemic levels.\nConsumer Spending and Tourism\nDistrict retailers reported that consumer spending was robust, largely attributed to the strength in employment. Contacts continued to describe spending shifts away from discretionary items, though demand for high-end luxury products remained strong. Automobile dealers reported that rising inventory levels and demand for new vehicles drove robust sales; the pace of growth for used vehicle sales slowed.\nTourism contacts reported that demand for leisure travel slowed, which was considered a normalization of activity and aligned with expectations following pandemic-driven, pent-up demand. International, group, and business travel continued to improve but were not back to 2019 levels. Advanced bookings for the Fall were meeting expectations.\nConstruction and Real Estate\nThe housing market throughout the District remained healthy despite higher mortgage rates. Although the pace of sales was below that of a year ago, home prices continued to rise in most markets. Supply shortages in the resale market persisted, as homeowners with low-rate mortgages were reluctant to sell. The share of new home inventory increased as builders ramped up construction to meet demand. Builder contacts indicated an increased reliance on rate buydowns as an incentive to attract buyers. Builder optimism fell, however, as rising interest rates and construction costs put strains on affordability and buyers' ability to qualify.\nCommercial real estate conditions slowed. Activity decelerated for high-end multifamily units and industrial real estate. More contacts reported growing concerns about financing, as lenders heightened underwriting standards and reduced funding commitments. Contacts reported challenges with the availability of financing for office space, and transaction volume continued to deteriorate. Participants noted growing uncertainty amid declining asset values.\nTransportation\nDemand for transportation services varied by industry segment, but was on average, depressed. Trucking firms reported a continued slump in freight volumes, and e-commerce activity slowed. International air freight remained sluggish amid a global supply chain recovery and geopolitical issues that strained trade flows. Ocean carriers reported strong exports to the Middle East and Asia from the U.S., but trade with Europe softened. Imports from China fell. Ports experienced mixed demand. Railroads noted fewer shipments of consumer goods, resulting from the rightsizing of inventories and mixed consumer spending, but they saw strong activity in energy, automotive, equipment, and metals.\nBanking and Finance\nDistrict financial institutions reported sustained solid loan growth across most portfolios, with the notable exception of auto and other consumer loans. Most institutions have yet to report significant increases in delinquencies. Financial institutions continued to fund loan growth using large time deposits and other borrowings as they faced increased competition for core deposits. The rising cost of funds put more pressure on net interest margins, slowing earnings growth. Despite changes in interest rates, financial institutions reported stability in their securities portfolios with unrealized losses still elevated compared with pre-pandemic levels.\nEnergy\nDemand for and supply of energy were described as normalizing, and contacts noted ample reserves to handle increased demand resulting from high summer temperatures. Investment in renewables drove additional capacity for utilities companies. Contacts reported robust activity in plant expansions for oil and gas refineries, chemical manufacturers, and low carbon and green energy projects. Related to increased energy production, contacts described strong demand for onshoring large-scale modular plant construction since some chemical, petrochemical, and liquefied natural gas customers were \"burned\" by offshoring these builds over the last several years, which resulted in late delivery and poor-quality structures.\nAgriculture\nAgricultural conditions were little changed since the previous report. Demand for cattle was strong. Egg supply increased, but the supply of hens remained lower than normal. The supply of chickens continued to exceed demand, although there was some improvement in the market. There continued to be excess supply of milk in the market. Many row crops were expected to have a strong harvest. Demand for cotton remained weak, leading some growers to exit the cotton market.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics.aspx\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nSeptember 6, 2023\nSummary of Economic Activity\nEconomic conditions have remained unchanged since our previous report. Employers reported continued tight labor markets and easing wage pressures. Consumer demand softened slightly. Firms reported continuing increases in consumer sensitivity to sales prices and weaker demand for high-end goods or those that require financing. Banking contacts reported solid credit quality but decreasing loan demand and a continued steady rise in delinquency rates. Home sales dropped slightly, but contacts reported healthy demand and low inventory. Residential construction was mixed, but industrial and commercial construction saw growth.\nLabor Markets\nEmployment has remained unchanged since our previous report. Labor markets remained tight, and industries report mixed abilities to attract and retain talent. Contacts in tourism and food service continued to report struggles filling lower-level job vacancies. A manufacturing contact in Louisville reported having fewer applicants while requiring higher employment levels due to rising demand. However, in Little Rock, a banking contact noted success in retaining more top talent by fast tracking them to better positions.\nWages grew moderately since our previous report. On net, most contacts reported increasing wages over the previous quarter. Manufacturing contacts in Memphis reported wage inflation easing, and a hotel industry contact in Louisville noted employees' requests for wage increases have declined.\nPrices\nMany businesses are aiming to maintain prices despite increasing input costs. The main reason for this is softening demand and increased price sensitivity from consumers. A respondent from a niche import business reported that despite an increase in freight costs, they could not fully raise prices because of falling sales. Another contact in the restaurant industry reported that although credit card transaction costs increased, they have not raised prices in order to stay competitive. More broadly, a regional survey reported that two-thirds of consumers delayed or did not buy a purchase because of higher prices. Some industry contacts reported steady overall demand, with consumers making substitutions for cheaper items. Others, such as a tourism contact from Northwest Arkansas, saw no immediate effect on demand after increasing prices.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported mixed business activity and a slightly negative outlook. July real sales tax collections increased in Kentucky, Missouri, and Western Tennessee relative to the previous month and decreased in Arkansas. Retailers in St. Louis noted consumers have been watching their spending and switching to lower-quality and less-expensive goods. A Louisville auto dealer reported both new and used high-end vehicles are seeing a slowdown in demand due to affordability issues. This has been most prominent with full-sized pickup trucks and used vehicles over $25,000. District restaurant contacts noted mixed business activity over the past few months, with inflationary pressures still impacting consumer spending at all restaurants. Little Rock hospitality contacts noted a rebound in corporate travel. They also reported that the strong demand for tourism is mainly driven by high-income visitors and a drop in low- and middle-income visitors.\nManufacturing\nManufacturing activity growth has decreased slightly since our previous report. Firms in both Arkansas and Missouri have reported slight decreases in new orders and production, but moderate increases in inventories. Lingering supply-chain issues and elevated prices on raw inputs continue to be an ongoing issue for manufacturers, though they have continued to improve in recent months. Firms are struggling to entice new workers, in part because of the increased availability of remote work in other industries. On average, firms reported they expect slight decreases in production, capacity utilization, and new orders in the coming quarter.\nNonfinancial Services\nReports of activity in the nonfinancial services sector since our previous report were mixed. Freight traffic increased slightly month-over-month but was slightly depressed from last year, while passenger traffic has been increasing slightly both month-over-month and year-over-year. A Little Rock transportation contact reported high demand for air travel. A contact in the Memphis transportation industry reported issues with shipping and rising concerns about an upcoming recession due to growing warehouse inventories. Overall, sales and sales expectations for services contacts were generally about the same or slightly lower across all regions. An education provider reported low school enrollment. A St. Louis childcare provider reported that sales met expectations, but higher costs contributed to a worsening outlook. A St. Louis healthcare provider is planning to expand facilities with a new medical office building.\nReal Estate and Construction\nResidential rental rates in the four main District MSAs have remained unchanged since our previous report. Arkansas and St. Louis contacts both reported high demand for rental units, with multiple applications submitted in the first week on the market. Total existing homes sold month-over-month dropped by 11 percent and 9 percent in Little Rock and Memphis MSAs, respectively, during July. Residential inventory in Little Rock, Louisville, and Memphis remained relatively constant since our previous report. Demand continues to be consistent since our previous report.\nIndustrial and commercial construction have remained strong since our previous report. One Louisville contact reported turning down multiple projects because of labor shortages. Another contact reported that rising interest rates are stalling commercial real estate sales because building values have declined at a rapid rate. Little Rock contacts saw residential construction increase since the previous report\u2014in part a response to the tornado in March. Meanwhile, contacts in western Tennessee reported a slowing pace of residential construction.\nBanking and Finance\nBanking conditions in the District have remained stable since our previous report. Overall and credit card loan demand decreased slightly from the previous quarter, while commercial, industrial, and mortgage loan demand all decreased moderately. Contacts across the District reported tightening liquidity and profit margins due to the ongoing pressure to raise deposit rates. Delinquency rates continued to climb to pre-pandemic levels and are being closely monitored by banking contacts. One contact pointed to rising cost of living as a potential driver of the increase in consumer delinquencies. Overall, however, banks continue to report solid credit standards and quality, with little past-due loans, collections, foreclosures, or charge-offs.\nAgriculture and Natural Resources\nDistrict agricultural conditions have been mixed since our previous report. Despite record-breaking heat and heat-dome-induced thunderstorms across the District, the percent of cotton and rice rated fair or better stayed stable throughout the reporting period, with cotton returning to 2021 rating levels after a moderate dip in 2022. Corn and soybean ratings both decreased more significantly during the summer months, sustaining their fall below 2020-2021 levels the previous year. District contacts described feeling the effects of extreme weather and increased interest rates in the form of higher input costs. On net, contacts indicated a slight decline in dollar value sales and an increase in inventories.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

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"September 6, 2023\nSummary of Economic Activity\nBusiness activity expanded modestly on balance, as real estate markets continued to lag other sectors of the First District's economy. Employment was about flat, wages grew at a modest pace, and price increases were generally small. Consumer spending on retail goods and hospitality services increased moderately. Manufacturers gave mixed results, but revenues increased at a moderate pace on average. Home sales fell further on rising mortgage rates. Nonetheless, home prices continued to climb at an above-average pace from a year earlier owing to sharp inventory declines for the same period. Commercial real estate activity was limited but stable. Contacts across all sectors expected relatively stable activity moving forward, with further easing of pricing pressures, and fewer of them mentioned the possibility of a recession when considering the outlook.\nLabor Markets\nIn First District labor markets, employment was roughly flat, and wages grew at a modest pace. Labor supply increased at least slightly for a diverse range of positions and many contacts said that it had become easier to fill job vacancies. Labor demand was described as steady but relatively modest in comparison with a year earlier, and contacts reported only selective layoffs. Reduced attrition also contributed to a more stable employment environment. A restaurant industry contact said that existing workers took on more shifts and more new workers were available, developments which were attributed to the looming return of student loan repayments. Contacts in multiple industries noted that enticements such as flexible arrangements and sign-on bonuses had become less common. Wage increases were modest on average, but some employers said that the pace of wage growth remained above pre-pandemic norms, while a contact in the healthcare sector said that starting wage levels were down sharply from their pandemic peaks. A workforce development contact described sustained success placing workers with physical or developmental disabilities, and expressed confidence that placing workers from non-traditional backgrounds would remain possible moving forward, even with some uptick in unemployment. Moving forward, contacts mostly expected current labor market trends to continue, with some further softening of demand possible but no major disruptions.\nPrices\nPrices increased only slightly on average. Contacts largely reported that pricing pressures moderated further, and in some cases prices decreased outright. At Boston-area hotels, average daily room rates stabilized, rising only slightly from one year ago following several months of robust price growth. Retail sticker prices were flat but effectively down slightly because of increased promotions. Wholesale food prices for restaurants fell modestly, the first decline in several years, and menu prices were flat. Discounts on new automobiles returned as inventories approached normal levels, but prices on used vehicles remained elevated. Manufacturing contacts, with one exception, reported stable or decreasing prices, and transportation costs in particular were lower. However, one manufacturer continued to post high single-digit price increases in order to offset increases in labor and nonlabor expenses. Contacts were sanguine that inflationary pressures would continue to ease moving forward.\nRetail and Tourism\nAmong First District contacts, retail and restaurant sales increased moderately in recent months. An online retailer experienced an uptick in sales volume partially attributed to offering discounts on more products. A discount retailer saw further modest improvements in sales volumes, pointing to an improved inventory. A representative for automotive dealerships reported steady sales and improved inventories of new cars but said that inventories of used cars remained depressed. A Massachusetts restaurant industry contact reported an above-average seasonal sales uptick for July, particularly on Cape Cod and in Boston's Seaport. Nonetheless, August brought somewhat softer restaurant sales, especially in suburban areas. Occupancy rates rose modestly for Boston area hotels in recent months, but average daily room rates levelled off. Retail and tourism contacts alike had a stable outlook, cautiously optimistic for sustained modest growth for their own businesses in the near-term.\nManufacturing and Related Services\nManufacturing revenues increased moderately on average, but about half of firms reported either flat or somewhat softer sales. Those with disappointing results included a testing equipment manufacturer that endured weaker-than-expected demand from China and a semiconductor manufacturer that was vulnerable to decreased PC and smartphone sales. In contrast, a veterinary products maker experienced strong revenue growth in line with expectations, and a maker of leather goods reported very strong revenue growth led by online sales. Employment was stable among our contacts. One contact reported a major upward revision in capital expenditure plans, buoyed by several years of strong sales. The outlook was roughly stable or slightly improved, with most contacts at least cautiously optimistic about their firms' near-term prospects. However, some contacts cited further weakness in demand from China as a significant downside risk.\nStaffing Services\nFirst District staffing firms reported modest revenue gains on balance in the third quarter, although some said that revenues had fallen slightly below normal levels recently. Contacts noted slight increases in labor supply and modest but steady demand for most roles. Only selective layoffs were reported. Staffing contacts enjoyed increased revenues from temporary placements, driven by elevated pay rates for such roles, which had largely evaporated during the pandemic. While most job candidates still preferred permanent, direct-hire positions, temporary roles offering higher wages were nonetheless seen as a reasonable alternative. The outlook was quite mixed and uncertain, with about flat performance expected on balance for the rest of 2023.\nCommercial Real Estate\nThe commercial real estate market of the First District was described as mostly stagnant in recent months. In the office market, few leases were signed, rents were flat, and vacancy ticked up slightly from fresh sublease offerings. Multiple contacts reported strengthening demand for medical office space, however. In the industrial market, leasing activity slowed further on softer demand and very low vacancy rates, although some large new spaces were set to come online in Rhode Island. In the retail market, contacts said that grocery-anchored suburban shopping centers enjoyed decent leasing activity that outperformed expectations. Otherwise, the retail market was mixed, with flat or rising vacancy rates. Across markets, high borrowing costs continued to limit investment sales, impeding price discovery. Contacts anticipated that sales volume would remain low through at least the end of 2023. Multiple contacts expected a modest uptick in office leasing in the fall, mostly due to seasonal trends but also due to stricter return-to-office policies. The industrial market was expected to weaken further moving into late 2023.\nResidential Real Estate\nThroughout the First District, considerably fewer single-family homes and condos were sold in July 2023 than were sold at the same time last year. A Massachusetts contact said that the state's closed sales fell abruptly in July from the previous month, owing to further increases in mortgage rates, as Boston experienced its weakest July for single-family sales since 2010. Prices increased at a solid pace from July 2022, generally rising by between 5 and 10 percent. These trends were accompanied by a substantial year-over-year drop in inventory across New England, with the sole exception of Maine, which bucked the trend and saw growth in the number of single-family homes and condos on the market. Multiple contacts pointed to high mortgage rates as a cause of these inventory constraints, mentioning that many homeowners are hesitant to sell houses whose mortgages they obtained under more favorable conditions. One Massachusetts contact suggested that state legislation eliminating barriers to construction may help to alleviate inventory challenges going forward but cautioned that any effects would likely not appear before next year.\nFor more information about District economic conditions visit: https://www.bostonfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/2023/2023-09-ch

"September 6, 2023\nSummary of Economic Activity\nEconomic activity in the Seventh District increased slightly overall in July and early August. Contacts generally expected a small decline in demand over the next year and many expressed concerns about the potential for a recession in the U.S. Employment increased moderately; business and consumer spending increased slightly; construction and real estate was flat; nonbusiness contacts saw little change in activity; and manufacturing decreased slightly. Prices and wages rose moderately, while financial conditions tightened moderately. Expectations for farm incomes in 2023 were little changed.\nLabor Markets\nEmployment rose moderately in July and early August and contacts expected a similar rate of increase over the next 12 months. Many contacts continued to have difficulty finding workers, particularly those with higher skills. However, many also said hiring had become easier, and a staffing agency noted a decline in worker turnover. Manufacturers were responding to slowing demand by using fewer temporary workers and cutting workers' hours. Wage and benefit costs rose moderately, though several contacts noted a slowdown in the pace of wage increases.\nPrices\nPrices rose moderately over the reporting period and contacts expected a similar rate of increase over the next 12 months. Nonlabor costs were up modestly, with a number of contacts highlighting rising energy costs. Contacts noted slower growth in prices for some raw materials and price decreases for others. Shipping costs were little changed, remaining much lower than a year ago. Consumer prices increased moderately due to solid demand and the passthrough of higher costs.\nConsumer Spending\nConsumer spending increased slightly overall in July and early August. Nonauto retail sales increased modestly. Multiple retail contacts noted that back-to-school shopping got off to a strong start. Sales of nondurable goods were largely up, with contacts highlighting increases at grocery stores, gas stations, and convenience stores. In contrast, reports on sales of durable goods were mixed. Retailers expressed a considerable amount of uncertainty over the upcoming holiday season, and contacts said orders for the second half of this year were conservative. Leisure and hospitality spending softened slightly but remained at elevated levels; declines in air travel and hotels more than offset higher spending at tourist attractions and amusement parks. New and used light vehicle sales rose, helped by greater availability of more affordable models.\nBusiness Spending\nBusiness spending increased slightly in July and early August. Capital expenditures were up a bit, with several contacts reporting purchases of new equipment or software, or expansions of existing facilities. Demand for industrial, commercial, and residential energy grew slightly. Inventories for most retailers were a little higher than desired. Auto inventories were little changed and at a low level. In manufacturing, inventories were slightly elevated amidst slow demand.\nConstruction and Real Estate\nConstruction and real estate activity was little changed on balance over the reporting period. Residential construction increased slightly overall, and contacts noted that low levels of existing home inventory were making new homes more attractive. However, some contacts saw a slowdown in multifamily construction. Residential real estate activity decreased slightly as low inventories held back sales. Contacts indicated that homes were selling quickly, and many received multiple offers. A banking contact said that borrowers they had pre-qualified for mortgages were often switching to new construction after getting frustrated searching for an existing home. Home prices and rents were up slightly. Nonresidential construction was little changed. Some contacts noted a pullback in leading indicators of future activity such as environmental studies, land surveys, and financing for speculative development. In contrast, contacts noted progress on a large number of state and local construction projects. Commercial real estate activity was unchanged. Commercial prices fell slightly and rents were down modestly in some sectors, most notably office. Contacts said many investors were holding off making commercial real estate purchases because they expected prices to fall further. Vacancy rates were unchanged.\nManufacturing\nManufacturing demand decreased slightly in July and early August. Supply chain conditions continued to improve, though some contacts reported difficulty acquiring specialty items like industrial electrical components. Steel orders decreased modestly, in part due to weaker demand from the oil and gas and the machinery industries. Fabricated metals orders remained flat. Machinery sales decreased slightly, with contacts highlighting less demand from the auto industry. In contrast, auto industry contacts reported increased auto production despite supply chain disruptions at some plants. Several contacts expressed concerns about the potential for a UAW strike to put a hold on a large share of U.S. auto production. Heavy truck orders decreased slightly amidst moderately low inventories.\nBanking and Finance\nFinancial conditions tightened moderately over the reporting period. Bond and equity market asset values decreased slightly, and volatility edged up. Business loan demand decreased modestly over the reporting period, while loan quality remained flat. Business loan rates increased a bit and standards tightened moderately. Consumer loan demand also decreased modestly. Consumer loan quality deteriorated some, with multiple contacts noting an increase in credit card debt and one reporting that delinquencies for auto and card debt had risen back to pre-covid levels. Consumer loan rates were moderately higher and lending standards tightened moderately.\nAgriculture\nDistrict farm income expectations for 2023 remained much lower than 2022 levels. However, reduced costs for some inputs, particularly fertilizers, boosted net income prospects for 2024. Drought concerns lessened overall, although hot weather toward the end of the period impaired development of a wide swath of Midwest crops. Corn, soybean, and wheat prices were down. Still, there were reports of a slowdown in exports as prices offered by other producers were more favorable on world markets. Hog prices moved down after hitting a seasonal peak. Prices for dairy products rose from low levels, and egg prices crept up a bit. Cattle prices increased once again, remaining one of the few agricultural prices above the levels of a year ago. Farmland prices were still higher than a year ago.\nCommunity Conditions\nCommunity, nonprofit, and small business support contacts reported little change in economic activity from a robust level. State government officials saw slowing growth in tax revenues and a small increase in demand for unemployment insurance. Some small business lenders noted a slowdown in loan demand, which they attributed to economic uncertainty. Nonprofit contacts continued to experience challenges with wage competition from private sector employers, as well as an increase in other operational costs. Nonprofit organizations also said high demand for services was straining efforts to respond to elevated levels of food insecurity.\nFor more information about District economic conditions visit: https://www.chicagofed.org/research/data/cfsec/current-data\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2023/2023-09-cl

"September 6, 2023\nSummary of Economic Activity\nOn the surface, business activity in the Fourth District was little changed from that of the prior reporting period, though there were some notable shifts in industry conditions. Consumer spending softened in recent weeks after firming during the previous three periods. Similarly, demand for manufactured goods decreased slightly, a situation which many contacts attributed to continued inventory correction. Meanwhile, freight activity appeared to stabilize, though it remained weak. Nonresidential construction activity increased, and contacts reported that clients were moving ahead with new and previously postponed projects. Looking forward, contacts generally expected little change in overall business activity in the near term. On balance, contact reports suggested that employment increased slightly. Many firms reported that hiring was easier and turnover had declined. Upward pressures on wages, nonlabor input costs, and prices were relatively unchanged from those of the previous reporting period, but, in each case, these have eased considerably from those of the prior year.\nLabor Markets\nOn balance, Fourth District employment increased slightly, though contact reports varied more than in the recent past. On one hand, some manufacturing, construction, and freight contacts increased staffing levels in key areas to reduce backlogs, handle new projects, or meet higher-than-expected demand. On the other, some manufacturing and financial services contacts reported increased layoffs and cited tight margins and declining demand. Moreover, several firms that were trying to reduce staffing through attrition said that lower turnover prevented them from doing so; thus, they were forced to lay off workers. Several contacts noted that hiring had become less difficult. Contacts generally expected employment to continue increasing slightly in the near term.\nWage pressures have eased since the start of the year, though they changed little from those in the prior period. Firms across industries more frequently reported transitioning from previous unscheduled cost-of-living increases to regular annual wage increases. One tourism contact said there would be \"no across the board increases like last year\" because he was able to be selective when increasing pay.\nPrices\nSimilar to wage pressures, nonlabor input cost pressures changed little from those in the prior period, though they have eased since the start of the year. On balance, contacts across industries noted a \"leveling off\" of costs. Per one construction contact, \"nobody's raising prices, nobody is decreasing [them].\" Some manufacturers stated that costs for many materials, such as resins, were flat, while costs for other materials, such as steel and lumber, had declined. Looking forward, contacts expected that nonlabor input cost pressures would continue to ease.\nGeneral price pressures were largely unchanged from those in the prior reporting period. However, compared to the number of contacts early in the year, a narrower set of contacts was willing (or able) to push through price increases. Many contacts reported increased price sensitivity among their clients, and some freight contacts reported increasing some price concessions to remain competitive. One freight hauler said, \"Even our best customers are regularly seeking rate concessions.\" That said, several manufacturing and construction contacts raised prices to cover increased costs.\nConsumer Spending\nConsumer spending softened somewhat in recent weeks. Goods spending remained weak amid high interest rate's dampening sales of big-ticket items and elevated price's constraining discretionary spending. Auto dealers said that sales slowed because of higher interest rates and that inventories had increased. Moreover, some said that the pent-up demand built during pandemic-era supply shortages had been mostly exhausted. A large general merchandiser noted that discretionary goods spending was down as customers continued to spend more on food and other essentials. By contrast, apparel retailers reported steady or strong sales, and one noted that back-to-school sales had increased from those of the prior year. Services spending moderated compared to that in recent reporting periods, with, for example, restauranteur's reporting generally flat sales. Looking ahead, contacts expected demand to change little in coming months.\nManufacturing\nDemand for manufactured goods decreased slightly. Some contacts reported that new orders had declined as pandemic-era supply shortages subsided and customers no longer needed to keep excess inventory. By contrast, steel manufacturers generally reported steady or increased orders following an expected seasonal slowdown spanning the first half of July. One manufacturer tied to light vehicles noted stronger orders because of increased vehicle production by auto manufacturers. On balance, manufacturers expected customer demand to remain soft in the coming months.\nReal Estate and Construction\nNew home sales remained strong, though one contact suggested that construction was slowing because \"interest rates have finally taken their toll\" and discouraged developers from investing to create buildable lots. This contact indicated that slower construction would exacerbate an ongoing severe shortage of inventory on the existing side, something which had been constraining sales for several quarters. In the coming months, contacts generally expected demand to decline in the face of elevated interest rates and higher home prices.\nNonresidential construction activity increased somewhat. Multiple general contractors reported new projects, stronger backlogs, or past clients' decisions to proceed with previously postponed plans. Demand for office space remained weak, but one contact noted that the return of more workers to the office boosted the firm's commercial leasing activity. Nonresidential construction and real estate contacts expected activity to be stable in the months ahead.\nFinancial Services\nBankers indicated that higher interest rates and economic uncertainty continued to dampen loan demand from households and businesses. One lender reported that many firms were opting to \"wait and see\" before moving forward with projects. Overall delinquency rates remained near historically low levels, despite some bankers' reporting slight increases in delinquencies. Core deposits declined slightly as customers spent down their balances or sought higher-yield alternatives. In the months ahead, lenders expected loan demand to remain flat and higher interest rates to discourage borrowing.\nNonfinancial Services\nFreight activity remained tepid this reporting period. Haulers reported that weaker demand for consumer goods and firms' desire to draw down inventories contributed to ongoing weakness in the sector. However, contacts indicated that conditions stabilized somewhat compared to those in previous reporting periods and were optimistic that volumes would increase in the coming months ahead of the holiday season. Overall, professional and business service contacts reported that demand increased recently. In the months ahead, contacts anticipated that demand would be relatively flat as clients curtailed spending in the face of economic uncertainty.\nCommunity Conditions\nNonprofits noted increased demand for their services. For example, one entity providing mental health and addiction treatment services received 50 applications for just two openings in the program, with wait times as long as nine months. Several nonprofits said that hiring and retaining staff had been particularly challenging, and one large community service provider reported that it was 40 workers shy of its desired staffing level of 170. Contacts cited three primary reasons for the hiring challenges. First, pay rates among nonprofit entities were not competitive with those in the for-profit world. Second, limited childcare and transportation options were more likely to adversely affect workers in the nonprofit sector. Third, funders often earmarked dollars for the provision of services without earmarking accompanying funding for overhead. For example, donations to food banks were often reserved for the purchase of food, but not for the overhead associated with getting the food to those in need. One contact noted that what was needed were unrestricted funds to cover operational costs, including those for staffing.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/2023/2023-09-ny

"Beige Book Report: New York\nSeptember 6, 2023\nSummary of Economic Activity\nEconomic activity in the Second District held steady in the latest reporting period. While contacts noted some slowing in hiring, labor market conditions generally remained solid, with ongoing modest employment gains and steady wage growth. Inflationary pressures increased slightly after easing much of the past year. Supply availability continued to improve, though manufacturing activity contracted. Consumer spending grew steadily, led by spending on experiences, while spending on goods sagged. Tourism activity in New York City continued to grow through late summer, inching back toward pre-pandemic levels. Exceptionally low inventory continued to restrain home sales. Commercial real estate markets were mostly unchanged, with some further weakening in the office sector. Conditions in the broad finance sector stabilized following a period of pronounced weakness, though, on balance, loan demand continued to decline and delinquency rates edged up. Looking ahead, businesses have become somewhat more optimistic about the economic outlook.\nLabor Markets\nLabor market conditions generally remained solid, though contacts noted some slowing in hiring. Overall, employment continued to increase modestly, with stronger gains seen among wholesalers, personal service firms, and businesses in education & health, while hiring remained weak among manufacturers. Contacts generally reported ongoing low attrition rates as workers remained nervous about switching jobs in the current economic environment.\nWhile remote work has remained prevalent in the region's service sector, several contacts reported that post-pandemic return-to-office requirements are increasingly a source of friction in hiring and job negotiations. Still, employers offering remote work noted improved ease of hiring and worker retention.\nBusiness contacts generally reported ongoing steady wage growth, though a large payroll firm in upstate New York indicated that the pace of growth has moderated somewhat as labor market conditions have become more normalized and worker shortages have eased. Still, the supply of workers remains a challenge in the region, especially for the leisure & hospitality sector. On net, businesses in most sectors plan to increase employment in the coming months.\nPrices\nInflationary pressures increased slightly after easing for much of the past year. Both service firms and manufacturers reported that input price increases picked up a bit in recent weeks. One contact noted substantial increases in insurance costs. Selling prices have increased at a steady pace for both service firms and manufacturers, though contacts at retail businesses reported that selling prices had flattened and expect little change in the months ahead. Contacts noted that consumers have become more price-conscious, and now price is often the most important factor in purchasing decisions.\nConsumer Spending\nConsumer spending increased steadily in the latest reporting period. Spending on travel, entertainment, and restaurants & bars has continued to rise since the last report, though department store contacts noted goods sales have sagged, particularly for seasonal apparel. Auto dealers in upstate New York reported that new car sales edged up slightly as more inventory became available. With solid lingering pent-up demand, new inventory has been turned over quickly. Even so, some auto manufacturers have continued to use targeted incentives\u2014subsidized financing in particular\u2014to boost sales of certain models. Used car sales increased in recent weeks spurred by softening prices.\nManufacturing and Distribution\nManufacturing activity contracted during the latest reporting period. Supply availability continued to improve, delivery times held steady, and inventories declined. Businesses in transportation & warehousing also reported declining activity, while wholesalers reported that activity increased slightly. Manufacturing and distribution firms have become notably more optimistic about the economic outlook.\nServices\nService sector activity has been mixed. Businesses in the information, education & health, and leisure & hospitality sectors reported increasing activity, while contacts in the business services and personal services sectors saw activity decline. Looking ahead, service firms were fairly optimistic that conditions would improve in the coming months.\nTourism activity in New York City continued to grow slowly through late summer, inching back toward pre-pandemic levels. While the number of travelers is nearly back to normal, tourists are substituting lower-cost experiences for premium ones \u2014 such as partaking in casual dining instead of fine dining or staying at reduced-service hotels. Meanwhile, some hotels and restaurants are making do with fewer workers by reducing service levels and business hours. Looking ahead, China's recent decision to remove pandemic-era restrictions on group travel to the United States is expected to boost tourism in New York City.\nReal Estate and Construction\nExceptionally low inventory has continued to restrain home sales activity across the District, pushing up prices and frustrating potential buyers. With few properties to choose from, bidding wars remained prevalent in upstate New York and in the suburbs around New York City. By contrast, inventory hovered near historic norms in Manhattan, leaving buyers less pressured. Still, home prices were steady to up slightly, and affordability was at a long-time low. Contacts noted some concern that the resumption of student loan payments in October will make it even more difficult for some to afford purchasing a home.\nThe recent rise in mortgage rates has also pushed some potential buyers to the sidelines. Real estate contacts reported that homeowners with low mortgage rates do not want to move, and the resulting lack of inventory leaves little choice for potential sellers, making low inventory self-reinforcing.\nResidential rental markets continued to tighten. In New York City, rents climbed to new highs, though a decline in new lease activity during the high season suggests some slowing ahead, even amid historically low vacancy rates. Rents also continued to rise in upstate New York.\nCommercial real estate markets were mostly unchanged. The office market deteriorated slightly, with modest increases in vacancy rates and declines in rents. New York City's retail market was little changed in the last reporting period, with steady vacancy rates, rents, and leasing activity. While the industrial market generally remained firm, rents declined and vacancies climbed in northern New Jersey.\nOverall, construction contacts reported that conditions stabilized over the summer. Office construction in New York City continued to slow, but office construction in upstate New York and northern New Jersey remained at a moderate pace. Industrial construction activity was strong and steady. Much of the District saw increased multi-family residential construction starts, but in upstate New York activity was minimal, with no construction starts and a slight decline in units under construction.\nBanking and Finance\nConditions in the broad finance sector stabilized following a period of pronounced weakness. Small to medium-sized banks in the District reported lower loan demand in all loan categories. Bankers were split on the changes in loan interest spreads over the past two months, with as many reporting widening spreads as reporting narrowing spreads. On balance, banks reported tighter credit standards, higher deposits, and rising delinquency rates.\nCommunity Perspectives\nCommunity contacts reported that rising numbers of asylum seekers were increasing the need for the provision of social services and education across the District. Pressures were particularly pronounced on New York City's emergency shelter system. The number of individuals seeking shelter in New York City has nearly doubled in a year due to growing numbers of migrant families. The logistics and budget implications of providing migrants housing, social, and education services have been challenging for policymakers and community organizations in the District.\nFor more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

/beige-book-reports/2023/2023-09-sf

"Beige Book Report: San Francisco\nSeptember 6, 2023\nSummary of Economic Activity\nEconomic activity in the Twelfth District strengthened slightly during the July through mid-August reporting period. Hiring activity was generally stable and labor availability improved. Price increases persisted, albeit at a slower pace, and wage pressures softened further. Retail sales increased slightly, on balance, but activity in the service sectors was somewhat mixed. Demand for manufacturing goods was stable, and conditions in agriculture and resource-related sectors remained largely unchanged. Residential real estate activity was flat while that of commercial real estate was mixed. Lending activity moderated in recent weeks. Communities across the Twelfth District observed increased demand for shelters and food bank services, particularly in areas impacted by adverse effects of wildfires and other severe weather events in Hawaii and California. Contacts generally expressed a slightly more positive outlook for the economy relative to the previous reporting period.\nLabor Markets\nHiring activity was generally stable during the reporting period, and labor availability improved further. Many employers mentioned holding their head counts flat in recent weeks, and some firms reported being overstaffed. Contacts highlighted expanded candidate pools and greater ease in finding applicants with appropriate skill sets. Hiring activity in the technology sector remained subdued aside from positions focusing on artificial intelligence. Contacts in the agriculture and health-care sectors noted their continued investment in automation, reducing their demand for workers on net. Nonetheless, hiring challenges persisted for specific positions within many sectors, including aviation, retail trade, and food services. Employee turnover generally decelerated but remained high in a few industries, including hospitality and nonprofit community services. One employer in manufacturing mentioned additional interest in transitioning interns into full-time positions. In entertainment, hiring has reportedly halted while contract negotiations continued over disputes between the studios and the industry's labor unions. Looking ahead, many employers mentioned plans to hire only on a replacement basis or implement possible cutbacks over the remainder of the year.\nWage pressures softened further across most sectors. Reports mentioned continued wage growth in recent weeks but at a slower pace than previously observed. However, some firms in agriculture, hospitality, community services, and gaming continued to face upward wage pressures ranging from moderate to strong in some regions. Several employers mentioned focusing their wage increases on entry-level jobs, partially due to new local minimum wage regulation.\nPrices\nPrices increased at a slower pace for most products and services. Reports noted generally stable prices for many supplies, including most building materials, paper products, chemicals, and foods and beverages. However, strong price pressures persisted for other product and service categories, including utilities, insurance, used vehicles, packaging, and some construction materials such as cement and gypsum. One contact attributed continued price pressures to firms maintaining above-average levels of inventory due to global economic uncertainty.\nCommunity Conditions\nHousing affordability, homelessness, and food insecurity continued to challenge communities across the District. Temporary housing shelters and food banks saw increased demand in recent weeks, especially from older adults. In particular, demand for services was highest in areas impacted by wildfires and other severe weather events in Hawaii and California. Nonprofit organizations reported challenges meeting the demand for behavioral health and substance misuse services. Several contacts highlighted ongoing consolidation among nonprofit organizations due to chronic labor and funding issues.\nRetail Trade and Services\nRetail sales rose slightly in recent weeks, on balance. Retailers reported ongoing strength in consumer spending in most areas even though shoppers continued to trade down to lower cost items and reduce their spending on nonessential goods. Demand for food and beverages remained largely unchanged, while sales of pet care products slowed somewhat. A few retailers noted lingering challenges from the pandemic, as well as tighter access to affordable credit. Reports highlighted continued improvements in supply chains but noted that inventory growth ticked down.\nActivity in the consumer and business services sectors was somewhat mixed. Demand for business consulting edged down, while demand for legal and accounting services was robust. Hospitality and tourism activity remained solid despite increased competition from foreign destinations for leisure travelers. Demand for health-care services and maintenance work reportedly increased.\nManufacturing\nManufacturing activity was stable over the reporting period, on net. While many manufacturers, including automotive, commented on overall weakening demand, orders for some manufactured products grew further. Food manufacturing continued to operate at or near capacity, and demand for capital equipment and fabricated metal products remained strong. However, some customers temporarily delayed projects due to overall economic uncertainty and concerns over an economic downturn. Supply chain disruptions eased further, and some manufacturers reported normalizing inventory levels. Delivery times for supply materials continued to improve, but availability of semiconductors remained constrained.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors remained largely unchanged during the reporting period. Domestic retail and food services demand for agricultural products was stable, with strength noted particularly for fruits and vegetables. A contact from Arizona reported challenges with limited availability of produce for retail outlets. Exports of some products, such as grain and hay, reportedly fell, resulting in increased domestic supply levels and lower domestic prices. Major fish stocks were stable. Though yields for some crops remained low due to the wet winter, contacts reported high volumes of crops carried over from the prior harvest and strong projections for this year's perennial crop yields in California and Washington. Production input costs remained elevated with upward movement for some costs, such as packaging and energy.\nReal Estate and Construction\nActivity in residential real estate was flat over the reporting period. Demand for single-family homes remained strong. Contacts across the District reported that homes continued to receive multiple bids from prospective buyers. Inventories of existing single-family homes remained low as owners were reluctant to relinquish lower-rate mortgages. Multifamily rents reportedly increased but at a moderating pace. Some contacts observed that new residential construction activity rebounded somewhat in past weeks, while others noted declines in permitting and difficulty finding lots. Raw materials were reportedly more readily available.\nCommercial real estate activity was mixed in recent weeks. Weakness in the office leasing sector continued, and vacancy rates remained elevated. However, a contact in Utah reported stable demand for retail and industrial space, higher retail rents, and overall lower vacancy rates. Commercial construction activity weakened slightly. Work on existing projects continued due to lengthy construction timelines, but plans for new projects were delayed or abandoned. Some inputs, such as electrical components and appliances, became harder to find.\nFinancial Institutions\nLending activity moderated in recent weeks. Demand for business loans, particularly commercial real estate loans, weakened some as higher financing costs led firms to further delay or cancel projects. Residential lending remained subdued due to high mortgage rates and limited inventories. Consumer lending, particularly for credit cards, was reportedly solid. Some contacts reported competition for deposits strengthened to an all-time high, as more customers actively sought higher deposit rates and looked at money market funds as an alternative. Lending standards tightened further, and credit quality remained strong.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2023/2023-07-kc

"Beige Book Report: Kansas City\nJuly 12, 2023\nSummary of Economic Activity\nThe level of economic activity across the Tenth District changed little during June, with a mix in performance across segments. Although hiring remained flat generally, expected employment levels at most businesses continued to point downward. Businesses predominantly reported relying on natural turnover and attrition to reduce their headcounts, rather than layoffs. Consumer spending rose, but at a more moderate pace after surging in recent months. Homeowners in several District states indicated that recent changes to tax assessments of their homes increased their monthly housing expenses, which could persistently impair their ability to spend on more discretionary items. Concerns about the adverse effects of higher financing costs on credit quality were pervasive, spanning consumer segments, commercial real estate, and small businesses. Energy activity in the District decreased significantly as weak oil and gas prices continued to squeeze profitability. Oil and gas contacts noted that capital expenditures are down from this time last year and further declines are expected, despite steady access to credit. Expectations that dry conditions will reduce crop yields pushed several commodity prices higher, but contacts noted that lower production could still limit revenues for many producers.\nLabor Markets\nLabor conditions remained mostly unchanged in the Tenth District during June, with noticeable differences across sectors. Manufacturing contacts reported modest declines in employment amid slowing orders and weakening demand. In contrast, services contacts reported a slight increase in hiring driven by steady consumer spending. Despite the more sluggish pace of hiring recently, wages continued to grow moderately driven largely by still-tight labor conditions for services firms.\nAlthough the level of hiring was mostly unchanged, expectations for job growth and labor utilization over the next 6 months continued to soften. In fact, contacts generally expected a slight decline in their employment levels over the coming months and are reportedly already reducing hours worked. When asked, the overwhelming majority of contacts indicated they are not yet planning to layoff workers to reach a lower headcount. Instead, they indicated plans to post fewer positions and pause hiring activity in lieu of laying off employees. For example, one contact expressed that \"pausing hiring now and relying on attrition helps to avoid harder decisions later.\"\nPrices\nThe pace of price growth was mixed across the regional economy. Manufacturing contacts reported prices grew at a slight pace, continuing to moderate from historically high growth. Most non-durable manufacturers even reported declines in prices for finished products. But services businesses reported steady price growth at a moderate pace for inputs and selling prices, and some expansion of profit margins. Particularly, retail trade and leisure and hospitality businesses demonstrated improved ability to pass price increases to customers. Most businesses expected prices to continue to increase moderately over the next six months.\nConsumer Spending\nFollowing a surge in spending in recent months, the pace of spending growth slowed to a moderate pace in June. Contacts at restaurants and retail establishments reported ongoing strength, but consumers were reportedly much more sensitive to hotel rates in recent weeks. Several contacts noted a pickup in business travel during the weekdays partially offset the moderate decline in weekend hotel stays by leisure travelers, and that occupancy declined last month after rising steadily for over a year. Auto purchases remained subdued in most District states.\nCommunity Conditions\nSmall and micro businesses continued to experience financial difficulties due to the rising cost of inputs and hiring constraints. Contacts reported recent financial challenges caused them to increasingly access non-traditional forms of credit with higher interest rates, such as credit cards and online lending platforms. Moreover, a growing number of businesses reported paying only their minimum credit card payment, or missing payments completely, which has negatively impacted their credit reports. While distressed financial conditions limited access to loans from traditional lenders, community development financial institutions reported strength in the ability to provide loans with rates below 10% for qualified borrowers.\nManufacturing and Other Business Activity\nManufacturing activity declined at a moderate pace, but service contacts reported a moderate increase in activity. Manufacturing contacts reported broad based declines, including reduced order demand and shorter order backlogs. Furthermore, manufacturing contacts expect business conditions will soften in coming months, noting continued weakening in order back logs and a further deterioration in demand. Despite softening in business conditions for manufacturing firms, business contacts expressed a continued willingness invest through capital improvement projects, albeit at a much slower pace than a year ago. Service contacts generally indicated much healthier business conditions with a moderate expansion in the demand for their services. Despite current favorable business conditions, service contacts expect a softening in activity in the coming months driven by expectations for weaking demand. Contacts in advertising and marketing were an exception, already feeling a stark pullback in customer demand. Moreover, advertising contacts indicated the onset of AI was accelerating the declines in demand for out-of-house service providers.\nReal Estate and Construction\nSeveral home builders indicated activity picked up over the past couple of months. Construction was supported both by promotional deals offered by builders that mitigated the effects of higher mortgage rates and by a stabilization in the costs of building materials. Some contacts suggested that slowing commercial real estate construction could further boost growth in the supply of housing over coming months because workers may be more available and materials prices somewhat lower. Homeowners in several District states indicated recent changes to tax assessments of their homes increased monthly expenses, which may persistently impair their spending power.\nCommunity and Regional Banking\nContacts' views on loan demand were mixed across the District last month, but concerns about the effects of rising credit costs, particularly on consumer loan types, were ubiquitous. Contacts also noted concerns for commercial real estate (CRE) credit quality, particularly credits backed by office properties, and expected credit quality to worsen across all loan types over the next six months. Credit standards remained unchanged, though some respondents highlighted reduced risk appetite for CRE deals. Deposit balances declined in June as customers moved to competitors offering higher yields or invested in U.S. Treasuries after the resolution of the debt ceiling. Deposit insurance coverage and the desire for diversification also drove movement of large customer balances and contributed to continued tightening in banking system liquidity.\nEnergy\nTenth District energy activity declined moderately last month. The number of active rigs decreased significantly as weak oil and gas prices continued to squeeze profitability. District firms reported a substantial decline in revenues, profits, and supplier delivery times since the last report. Profits and supplier delivery times are expected to continue declining over the next six months. Accordingly, District firms anticipate further reduction in activity in the near term. The average price needed for a substantial increase in drilling to occur remains above long-term price expectations for oil and gas, indicating that future production growth may be constrained for a while. Contacts noted that capital expenditures are down from this time last year and further declines were expected, despite steady access to credit.\nAgriculture\nAgricultural economic conditions in the Tenth District were steady through June. The price of most major commodities increased moderately from the previous month as drought intensified in many major crop production areas across the nation. Expectations for dry conditions to reduce yields pushed prices higher, but lower production could limit revenues for some producers. Through mid-June, an average of about 15% of corn and soybean acres and nearly 30% of winter wheat acres were in poor or very poor condition across all District states. Dry weather also continued to limit grass and feed supplies, resulting in higher costs for many cattle producers. Despite concerns about the potential for reduced profitability ahead, agricultural lenders continued to report strong credit conditions.\nFor more information about District economic conditions visit: https://www.kansascityfed.org/research/regional-research/\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2023/2023-07-ri

"July 12, 2023\nSummary of Economic Activity\nThe Fifth District economy grew slightly in recent weeks. Retailers and food service companies saw steady to increasing consumer spending, particularly for seasonal goods. Auto sales, however, were down slightly and inventory levels remained very low. Travel and tourism picked up, but travel shifted more towards larger city and international travel. Nonfinancial services firms reported stable demand, but some noted that clients were holding back capital due to economic uncertainties. Manufacturing activity slowed as new orders declined. District ports echoed that sentiment and noted that imports slowed as retailers and manufacturers still had elevated inventory levels. Loaded exports, particularly agriculture products, remained strong. Trucking firms also reported lower freight volumes this cycle. Residential real estate conditions softened as activity was still being restrained by a lack of available inventory. Commercial real estate markets were mixed as retail and industrial segments remained strong but multifamily activity leveled off and office vacancy rates rose. Commercial loan demand softened while consumer loan demand was little changed. Employment picked up moderately and wage growth eased slightly but wage pressures remained elevated amid a continued tight labor market. Price growth continued to ease but remained elevated compared to pre-pandemic inflation rates.\nLabor Markets\nEmployment grew moderately over the most recent reporting period. Businesses continued to face challenges finding workers, but those challenges were more isolated to specific industries and skill-levels. A software company reported that finding IT workers at reasonable rates has become easier. Conversely, a company that offers tour bus vacations struggled to find drivers and mechanical technicians, which was keeping them from operating at a higher level. Wage growth eased somewhat but there were some reports that wage pressures remained high. One contact, for example, reported that they were closely monitoring inflation and trying to adjust wages to ensure they were providing a living wage for their staff while remaining competitive in the market.\nPrices\nPrice growth continued to moderate in recent weeks, particularly for services. According to our most recent surveys, prices received by manufacturers declined sharply in June, falling below four percent year-over-year growth. Services firms also saw price growth moderate slightly in June, but the annual growth rate remained just above five percent. A few businesses remarked that the increased cost of capital was driving up their expenses and they were increasing their prices as a result. However, some added that they were not able to push the full cost through to customers, so margins were tightening.\nManufacturing\nFifth District manufacturing firms reported some slowdown in business activity during the most recent reporting period. Firms reported that rising interest rates and a pullback in consumer spending on goods led to declines in new orders. A dental laboratory reported not meeting their numbers for the past six months due to a significant slowdown in the dental market. A furniture manufacturer reported that they were having layoffs for only the second time in their forty-two-year history due to declining business conditions. Several contacts reported imbalances in inventory levels as finished goods inventories were creeping upwards. This is especially true in the retail manufacturing sector as retailers pulled back on new orders.\nPorts and Transportation\nFifth District ports stated that loaded import volume was down this period, but that volume was close to pre-pandemic levels. Many big retailers still have elevated inventory levels causing a decrease in imports of consumer goods. However, there was a slight increase in imports of machinery and parts. Loaded export volumes were strong mainly driven by agricultural products and lower value commodities. Spot prices remained low though still slightly higher than in 2019. Container dwell times shortened dramatically, and gate turn times were not an issue. In the last month, airfreight was soft compared to recent years but still above 2019 levels and was driven primarily by imports as exports were down drastically.\nTrucking firms reported that shipping demand remained soft this period as customers were still dealing with elevated inventories and reduced orders. However, food and pharmaceuticals shipping volumes were holding up well. Spot shipping rates were at low levels as there was a lot of excess capacity in the truck load segment. However, respondents indicated that they were able to get moderate increases with their contract rates despite customers being very price sensitive. Companies stated that drivers were more readily available. Trucking firms also remarked that the higher labor costs, as well as dramatically higher costs of parts and new equipment, were impacting profitability.\nRetail, Travel, and Tourism\nRetailers reported steady to modest growth in sales in recent weeks. Several of the businesses that saw increased sales noted that it was partly due to typical seasonal patterns as they were geared towards summer shopping. Restaurants and novelty food services reported strong sales and steady demand. Auto sales, on the other hand, declined slightly and dealers commented that limited inventory and elevated interest rates were impeding sales volumes.\nTravel and tourism increased slightly, on balance, but several contacts saw some shifts in consumer behavior. For example, travel picked up in Baltimore and Washington, D.C. while coastal areas of the district reported slightly lower occupancy and revenues in recent months; however, the expectation was for beach travel to pick up going into the summer months. An airport contact said that consumer travel was steady and saw more people taking international flights than in recent years.\nReal Estate and Construction\nResidential real estate respondents indicated that the inventory of homes for sale remained constrained with contract prices continuing to appreciate slightly. Overall, the number of sales decreased primarily due to the low housing inventory as well as the usual seasonal slowdown. In the last month, buyer traffic was steady and days on market continued to be low. Prospective buyers were not having any difficulties obtaining mortgages but there were some issues with appraisals not coming in at the escalated sales price. Residential construction firms noted a decrease in demand for their services as homeowners were less willing to plan for large remodeling or constructions projects.\nOverall market activity in the commercial real estate sector was mixed in the last month. Leasing remained strong for retail and industrial properties with rents escalating this period. In the office market, vacancy rates and space available for sublease increased due to companies downsizing. Rental rates in the office segment remained flat; however, landlords were offering more discounts and/or concessions to potential credit tenants. In multifamily, lease rates were starting to flatten out. Respondents stated that tighter credit availability was starting to negatively impact investments into new projects. Commercial contractors noted a continued lack of skilled labor, and also that the amount of work out to bid has slowed substantially.\nBanking and Finance\nLoan demand slowed slightly across most loan types, most notably in the commercial real estate and business loan portfolios. This slowing of demand continued to be attributed to rising interest rates and uncertain economic conditions. Consumer loan demand remained stable, with home equity loans showing moderate growth. Some banks reported declines in deposits as customers moved funds to higher yield products. Institutions also noted a slight degrading of borrower's credit quality due to their increased costs of conducting business. Loan delinquency rates remain stable, but institutions have been closely monitoring their portfolios.\nNonfinancial Services\nNonfinancial service providers continued to report that demand for their services as well as revenues had remained stable. One respondent noted they felt demand was still being driven by a pent-up demand for commercial printing services held over from Covid. Others noted that they have observed more clients preserving capital in anticipation of economic uncertainty. Labor shortages have begun to ease in certain industries, but wage pressures remained high. Respondents also noted a renewed focus on expense control at all levels of their businesses in light of higher wages, higher interest costs, and economic uncertainty.\nFor more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nJuly 12, 2023\nSummary of Economic Activity\nEconomic conditions have remained unchanged since our previous report. Although employers reported better employee retention, they continued to have difficulties finding workers, especially skilled ones. Wage pressures lessened slightly. Consumer spending was largely steady, though contacts reported a shift away from discretionary goods and declining demand for big-ticket purchases that require financing. The residential real estate sector saw activity increase, but the commercial real estate sector reported worsening conditions at non-premium office and retail spaces. Banking contacts reported moderate declines in loan demand and compressed net interest margins. Agriculture conditions declined moderately, and contacts expressed concern about commodity prices falling while input costs remain high. The overall outlook remains pessimistic but has improved slightly.\nLabor Markets\nEmployment has remained unchanged since our previous report. Employers continue to report tight labor markets. Unemployment rates remain low and hiring workers has remained a burden for several industries. Many contacts have reported using technology improvements to deal with labor shortages. A healthcare contact in Little Rock reported they have begun to examine how AI can help with paperwork to offset persistent labor shortages. A Louisville transportation contact noted that while companies are still competing for workers, there is less job switching than in previous months. A northwest Arkansas food service company reported receiving unsolicited resumes which hadn't happened in \"quite some time.\"\nWages have grown slightly since our previous report. Most contacts across the region reported either slight or no wage increases. Retail contacts in Little Rock have reported increasing their minimum wages in the past month to help fill labor shortages. A workforce contact noted that wage growth is still strong in construction trades due to high demand and a shortage of skilled workers.\nPrices\nPrices have increased modestly since our previous report. Although respondents' plans for future price increases varied, two comments were consistent. First, nearly all respondents reported higher labor costs. Second, many contacts reported an inability to fully pass on increased costs to consumers, which has compressed margins. A contact in the grocery industry reported that they would pass about 25-33% of higher costs to consumers. The same contact reported decreasing consumer demand and increasing consumer price sensitivity. A contact in the car industry plans to increase prices, but at a slower rate than before in order to maintain competition in the market. Other contacts reported little to no increase in non-labor cost pressures. A contact in the furniture industry reported that prices may decrease in the future after recouping previous losses from excess freight costs.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported mixed business activity and a slightly negative outlook. Retailers in St. Louis noted that business activity was mixed over the past month, and they are expecting interest rates to be a primary factor affecting consumer demand over the next quarter. An Arkansas retailer noted that profit margins had fallen in recent weeks due to consumers spending more on grocery essentials and less on higher-margin merchandise. A Little Rock auto dealer reported that business activity was down slightly as bank financing continues to tighten. An Arkansas contact reported that sales of high-end boats are steady and low-end boats are down slightly, but sales for middle-market boats have collapsed. Restaurants in Memphis expressed concern that crime might lead to faltering consumer demand. District hospitality contacts noted mixed business activity over the past month but expect to have a typical busy summer.\nManufacturing\nManufacturing activity has increased slightly since our previous report. Firms in Missouri and Arkansas have reported slight upticks in new orders and production. Congestion with supply chains and transportation continues to ease, while production schedules also remain steady. A new glass bottle manufacturing facility broke ground in Bowling Green, Kentucky, creating 140 new jobs and a capital investment of $240 million. Two furniture manufacturers in Lee County, Tennessee, added 130 new employees, with an increased payroll of $4.5 million. Firms remain optimistic that demand will remain consistent at least in the near term.\nNonfinancial Services\nConditions in the nonfinancial services sector have been largely unchanged since our previous report. Air traffic rose slightly across the District. Contacts reported that labor shortages have constrained public transit in St. Louis, leading workers to look for alternative transportation options. A Louisville contact reported continually improving conditions in the transportation sector. Little Rock contacts reported that rising healthcare costs and labor shortages have put a strain on the industry. The Little Rock bicycling industry has seen significant growth in recent quarters, generating more than $150 million in total economic impact from jobs to tourism to taxes. A St. Louis workforce contact reported an increase in informal childcare providers offering small-scale services.\nReal Estate and Construction\nResidential real estate has seen slightly increased activity since our previous report. Median sale prices for residential real estate in the Little Rock, Louisville, and Memphis MSAs rose slightly in May, while median sale prices remained unchanged in the St. Louis MSA. Inventory dropped slightly in the Little Rock, Louisville, and Memphis MSAs in the past month. In the Louisville and Memphis MSAs, pending sales have jumped by 20% since our previous report. In the four major District MSAs, rental rates for residential real estate have seen small increases since our previous report. A northwest Arkansas contact noted that home price growth has decelerated in recent weeks.\nMemphis-area real estate and construction contacts reported spillover effects from a major EV manufacturing project. Public construction elsewhere in the District has remained busy since our previous report, while private projects are starting to press pause for the moment. A Louisville commercial construction contact reported having 12-18 months of existing projects to complete but that some are aging out or being put on hold due to increased costs. A Louisville commercial real estate contact reported a trend of tenants moving from class \"B\" office spaces to class \"A\" spaces at reduced rates and noted that this shows no signs of slowing down in the future.\nBanking and Finance\nBanking conditions in the District have remained stable since our previous report, even as lending activity continues to soften. Year-over-year loan volume declined moderately. Contacts reported that small business lending in particular has been slow, due to higher interest rates. Total deposits growth, on the other hand, has seen a strong increase since the past quarter. Rising deposit interest rates continue to create a very competitive market for deposits, which is compressing net interest margins. Customer concerns regarding deposit safety remain relatively low in the aftermath of the Silicon Valley Bank and Signature Bank failures. Although delinquency rates have continued to rise toward pre-pandemic levels, contacts maintain a positive near-term outlook on credit quality. A retailer reported that credit card usage has risen sharply over the past few months, bringing credit utilization to its highest levels since 2019.\nAgriculture and Natural Resources\nDistrict agriculture conditions declined moderately relative to the previous reporting period. Between the end of May and end of June, the percentages of corn, cotton, rice, and soybeans rated fair or better saw slight to moderate decreases across the board. Compared with this time last year, overall crop conditions have declined moderately. Crop conditions both began lower and decreased more over the period when compared with this time last year. With the exception of cotton, which increased modestly, all other individual crop conditions were worse compared with last year. Contacts in the Little Rock region reported some anxiety about the expiring farm bill later this year. While commodity prices remain high generally, some have begun retreating while input and fuel costs remain high, leading to profitability concerns as we enter the second half of the year.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2023/2023-07-mi

"July 12, 2023\nSummary of Economic Activity\nEconomic activity in the Ninth District increased slightly since the previous report. Employment grew moderately, helped by summer demand. Wage pressures remained moderate, while price pressures were mild. Growth was noted in services, commercial construction, and manufacturing, while consumer spending was flat. Residential construction and real estate activity remained low, and agriculture weakened due to drought conditions. Energy exploration also fell slightly. Minority- and women-owned businesses reported steady activity and a positive outlook.\nLabor Markets\nEmployment grew moderately since the last report. Labor demand remained high overall, in part because of normal seasonal increases, according to internal surveys and most contacts. Labor availability remained tight, but improved according to some contacts, which had upsides for both employers and workers. A Minneapolis workforce development contact noted an increase in layoffs, but so far they \"haven't seen these layoffs turn into dislocated workers\" because the workers \"are doing OK finding new jobs on their own.\" Employers also continued adjusting their business and labor models. A restaurant in central Minnesota reported that it bought an apartment building to provide workers with nearby housing. A North Dakota staffing firm noted that demand for contingent work had fallen because \"most clients just want full-time help,\" and available workers preferred full-time jobs to temporary work. Counter-intuitively, he said, \"if the economy softens, we expect demand for temp staffing assignments to increase.\"\nWage pressures were moderate overall. A monthly survey of District firms showed persistent but moderate wage pressures. In Montana, temp jobs in office support and transportation have seen significant wage increases so far this year, while wages for construction and manufacturing temp jobs have been flat. A Minneapolis tech staffing firm reported that technical positions have \"completely reversed\" from a candidate market to a client market, with job seekers \"jumping at the first offer.\"\nPrices\nPrice pressures were mild overall since the previous report. Half of firms responding to the Minneapolis Fed's annual professional services survey reported that the prices they charged to customers had increased from a year ago, and nearly two-thirds said their nonlabor input costs increased. Manufacturing and other contacts reported that freight rates had declined substantially from a year ago. \"It feels like our vendors are squeezing the last increases out of us,\" said a manufacturer. Retail fuel prices in District states were little changed since the previous report. Prices received by farmers increased in May from a year earlier for barley, chickpeas, potatoes, hay, cattle, and turkeys; prices decreased from a year earlier for corn, wheat, soybeans, milk, hogs, chickens, eggs, dry edible beans, lentils, and canola.\nWorker Experience\nMost workers who responded to a recent Minneapolis Fed survey reported job stability. About a fifth were looking for a different job in hopes of increased income but were facing difficulties in hearing back from employers or finding a job that paid enough. A few professional workers in the Minneapolis-St. Paul area said they were considering a temporary move out of state to work remotely while their company's work-from-home flexibility was still in place. According to a Minnesota union contact, recently certified nursing assistants were choosing to work in retail instead of health care, where wages were similar but stress was much higher. A significant number of nurses were reportedly pulling back from traveling jobs as federal funding abated, and some hospitals offered up to $15,000 after taxes for an 18-month commitment to permanent positions.\nConsumer Spending\nConsumer spending was flat overall since the last report. Gross sales in South Dakota and Wisconsin have softened for several consecutive months year over year, and retail contacts have also reported lower sales. Tourism contacts were generally upbeat about overall activity levels but noted some pullback in travelers' average spending. Accommodations and lodging tax collections in Montana remained strong, and lodging sources reported strong bookings for the summer. Airline travel has continued to grow, though monthly increases have moderated a bit at some airports after steady double-digit gains. Recent new-vehicle sales have increased notably at some dealerships, thanks to stronger inventory from vehicle makers. Used car sales, however, have fallen. Sales of recreational and powersport vehicles improved with warmer weather but remained soft year over year.\nServices\nActivity in the professional services sector increased modestly. Respondents to the annual services survey reported increased sales and productivity over last year, while profits declined slightly. Firms' expectations were mildly positive for the coming 12 months.\nConstruction and Real Estate\nConstruction activity was slightly higher since the last report. Construction firms overall reported growth in recent revenues, with expectations of further growth this summer. Industry data and contacts suggested that infrastructure and energy sectors were seeing stronger activity than other subsectors. But inflated material costs continue to be a drag. A pavement source in Minnesota noted that the sector was slower than expected; public funding for construction projects has been \"eaten up by inflation.\" Reports of project cancellations also continued across different subsectors. A general contractor in northeastern Minnesota said, \"We are busy but there appears to be less opportunities than usual for this time of year.\" Several contacts noted that subcontractors remained busy, but projects tended to be smaller jobs. Residential construction remained low but there were modest signs of improvement in single-family permitting in some markets.\nCommercial real estate was down since the last report. Most subsectors showed little change. However, office property continued to struggle. Increased subleasing was compounding already-higher vacancy rates. Two Minneapolis office towers reportedly sold at steep discounts from their previous sale prices. Residential real estate sales remained stalled. A few regional markets showed modest improvement, but most continued to see much lower monthly sales compared with last year.\nManufacturing\nDistrict manufacturing activity increased slightly since the previous report. A regional manufacturing index indicated increased activity in Minnesota, North Dakota, and South Dakota in May from a month earlier. Sentiment among manufacturing contacts was more mixed. A metal fabricator reported that recent activity was strong and could be stronger if they could secure adequate workers. Reports from heavy equipment producers indicated orders had slowed significantly as more customers were choosing to repair rather than replace equipment due to higher financing costs.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions weakened slightly since the last report. Most of the District's corn and soybean crop was reportedly in good or excellent condition; however, wheat crops were in worse shape as the harvest approached. Persistent drought conditions in the eastern portion of the District, particularly in South Dakota, improved slightly with recent precipitation. District oil and gas exploration activity decreased slightly since the previous report.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned business contacts remained steady, and their outlook for the following months was positive overall. While contacts still perceived prices as being high, they expected prices would remain flat in the coming months. Hospitality and retail business owners were still able to pass higher costs down to consumers but were skeptical of their ability to continue doing so. Demand for workers was strong, and the ability to hire remained challenging. While some contacts were making downward revisions to their planned capital expenditures because of higher interest rates, many others were reportedly moving forward with investing. A supplier of restaurant equipment shared that demand was even higher this year among minority-owned restaurants because they tend to rely less on financing.\nFor more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"July 12, 2023\nSummary of Economic Activity\nThe Sixth District economy grew at a measured pace from mid-May through June. Labor availability and retention improved, and wage pressures eased. On balance, nonlabor costs continued to moderate and pricing power was mixed. Retail sales softened for discretionary items, but consumer spending on essentials remained solid. Auto sales were strong. Domestic leisure travel declined while business and international travel rose; cruise demand was robust. Housing demand remained durable; home inventories fell, and house prices rose. Commercial real estate conditions were mixed. Transportation activity slowed. Manufacturing experienced strong demand. Loan volume continued to rise, but deposit growth slowed. Activity in the energy sector was stable. Agriculture demand slowed.\nLabor Markets\nThe majority of Sixth District contacts reported that labor availability and retention improved, and most firms continued to hire. However, challenges filling corporate roles, skilled construction, and healthcare positions were noted while, for some firms, entry-level hourly service roles were easier to fill. A number of manufacturers remained extremely short-staffed and utilized overtime to run at capacity, while other manufacturing firms reported stabilized employment levels and reduced overtime to align with softer demand. Among those firms experiencing weaker demand, most remained reluctant to lay off staff that they had endeavored to attract and retain, but several slowed the pace of hiring except for exceptional candidates or relied on attrition to shrink their workforce.\nOverall, wage growth remained higher than pre-pandemic levels. Most contacts reported that wage pressures continued to ease, and the majority said the pace of increases had begun to moderate, in line with expectations.\nPrices\nNonlabor costs continued to stabilize over the reporting period. However, several Florida contacts noted significant increases in insurance costs. The cost of food products moderated, aided by decreases in freight and overland delivery costs. Construction input costs also declined, with commodities like steel and lumber falling to or near pre-pandemic levels. While wholesalers increasingly reported pushback from clients on price increases, consumer prices remained elevated as retailers saw minimal impact to demand. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth was 3.1 percent, on average, in June, down significantly from 3.5 percent in May. Firms' year-ahead inflation expectations also decreased in June to 2.7 percent, on average, from 2.9 percent in May.\nConsumer Spending and Tourism\nRetailers described consumers as more value conscious since the previous report. Discretionary spending on items such as clothing, electronics, and recreation has moderated amid a behavior shift to fewer store visits and less impulse buying. However, spending on food and beverages, household essentials and healthcare necessities rose. Retailers expect that demand will stabilize in the second half of 2023. Automobile dealers reported that sales remained resilient, although consumers have begun to trade down to lower price-point models.\nTourism and hospitality contacts reported further softening demand for domestic leisure travel, while international, group, and business travel strengthened year over year. Hotel occupancy across most destination beach resorts fell since the previous report and those hoteliers reported some diminished pricing power. Demand for cruise travel and on-board spending remained robust.\nConstruction and Real Estate\nHousing demand remained strong throughout the District amid declining existing home inventories. Home sales in many metro areas rose to near seasonal norms, creating persistent supply shortages. Home prices experienced steady upward pressure on a monthly basis as a result of low supply. Limited existing home inventories drove demand for new home construction. Though down from last year, the share of builders offering incentives to attract homebuyers, such as interest rate buydowns, remained high. Home ownership affordability throughout most markets in the District worsened as home prices and mortgage rates trended higher.\nContacts reported mixed conditions in the commercial real estate (CRE) sector. While modestly decelerating, general retail and industrial activity remained at healthy levels. The multifamily sector cooled as demand for luxury/higher-priced units deteriorated. While declining overall, office sector conditions were mixed; activity in newer buildings was solid, while occupancy in older buildings declined as tenants vacated to newer structures. Additionally, some older buildings have incurred sizeable declines in value. More contacts reported concerns regarding financing, as some banks heightened underwriting standards and reduced funding commitments. Contacts also noted more uncertainty amid declining CRE values.\nTransportation\nTransportation activity slowed further over the reporting period. Ocean carriers and ports reported declines in container traffic, owing to inventory destocking by retailers and weaker global demand. District railroads reported significant decreases in year-over-year freight volumes, including double-digit decreases in intermodal shipments. Logistics firms reported revenues from warehousing were flat compared with 2022; higher prices helped to offset volume declines.\nManufacturing\nMany manufacturers reported healthy business conditions over the reporting period. Some contacts noted a slight decrease in demand, which many characterized as a normalization, and most firms reported robust pipelines of orders. While lead times and availability of many inputs have improved, firms noted lingering shortages of some inputs, particularly electrical switchgears. Auto manufacturers saw strong demand but noted signs of trade-downs to less expensive vehicles and expect to see some slowing in the coming months.\nBanking and Finance\nOn balance, growth slowed at District financial institutions, led by a slight decline in the deposit base in recent months as interest rate increases continued to encourage customers to move deposits into higher-yielding alternatives. To help offset slowing deposit growth on a year-over-year basis, institutions steadily increased interest rates on deposits. Institutions reported continued loan growth, primarily residential, construction, and development, which was offset by a decline in securities portfolios. Many of the financial institutions have yet to report significant increases in delinquencies, though performance varied widely. Contacts expect asset quality to normalize over the coming quarters.\nEnergy\nContacts reported that most energy segments were flat or up over the reporting period. While oil and gas production continued, regional output was generally unchanged. Refiners described high utilization to meet summer demand for gasoline. Chemical producers noted strong demand for products that support the renewables sector, which continued to experience considerable growth in the manufacturing of batteries, solar cells, turbines, renewable fuels, and more. Utility providers reported commercial segment growth across the District, although industrial segment growth was concentrated in regions that experienced gains from commodity production.\nAgriculture\nAgricultural conditions were soft over the reporting period. Oversupplies of cheese kept demand for milk low. With fewer avian flu outbreaks, chicken exports increased somewhat, but overall demand for chicken remained down. Citrus growers experienced good returns on sales but weak profits because of low yields. Row crops were generally healthy, although severe storms damaged crops in some parts of Mississippi and Alabama. Demand for cotton continued to fall. The cattle market remained strong as demand for beef remained high amid low supply.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics.aspx\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/2023/2023-07-ch

"July 12, 2023\nSummary of Economic Activity\nEconomic activity in the Seventh District was little changed overall in late May and June. Contacts generally expected a small decline in demand over the next year and many expressed concerns about the potential for a recession. Employment increased moderately; nonbusiness contacts saw little change in activity; consumer spending was flat; business spending and construction and real estate activity declined slightly; and manufacturing decreased modestly. Prices and wages rose moderately, while financial conditions tightened slightly further. Expectations for farm incomes in 2023 decreased some.\nLabor Markets\nEmployment rose moderately in late May and June and contacts expected a similar rate of increase over the next 12 months. Many contacts continued to have difficulty finding workers, particularly higher skilled labor, though many also said that hiring had become easier, and several noted they were fully staffed. One program administrator observed that some manufacturers were managing changing labor needs by briefly laying off workers and then rehiring them, sometimes repeatedly. Wage and benefit costs rose moderately. A few contacts noted wage increases in the 3 to 5 percent range in recent labor union contract agreements. Some indicated healthcare costs had risen significantly.\nPrices\nPrices rose moderately over the reporting period and contacts expected a similar rate of increase over the next 12 months. Nonlabor costs were up modestly, with rising raw materials and energy costs contributing to the increase. Contacts continued to note that growth in shipping costs had slowed noticeably. One contact in finance reported improved margins for his manufacturing clients, who saw input costs come down but were able to maintain higher selling prices. Consumer prices generally increased moderately due to the continued elevated level of demand and the passthrough of higher costs.\nConsumer Spending\nConsumer spending was little changed in late May and June. Nonauto retail spending was flat overall, with contacts highlighting increased sales of furniture and lawn and garden products but declining sales at convenience stores and in the electronics and building materials segments. Spending further shifted toward essential items and away from discretionary ones, and for many products, consumers continued to trade down in quality or convenience. Light vehicle sales were unchanged but at a higher level than had been expected earlier in the year. Leisure and hospitality spending was also flat but at a strong level, with contacts reporting a small increase in spending at amusement parks and tourist attractions but less air travel. Contacts indicated that consumers were less likely to trade down in their leisure and hospitality purchases compared with other spending categories.\nBusiness Spending\nBusiness spending declined slightly in late May and June. Capital expenditures were unchanged on balance, with several contacts reporting purchases of new equipment or software. Freight volumes declined further. Demand for industrial, commercial, and residential energy increased slightly. Inventories for most retailers were a little higher than desired, with one contact noting elevated stocks of apparel, beauty items, and sporting and outdoor goods. Auto inventories rose slightly but remained below pre-pandemic levels, with contacts noting that railcar shortages were slowing deliveries of vehicles to dealers. In manufacturing, inventories increased modestly, and contacts said that supply chain issues, while still arising at times, had returned to pre-pandemic norms.\nConstruction and Real Estate\nConstruction and real estate activity decreased slightly over the reporting period. Residential construction ticked down, reflecting a slowdown in single-family development. New home sales decreased slightly, while new home prices increased slightly. Residential real estate activity was little changed. An Iowa contact said that cash transactions continued to be a larger proportion of sales than they have been historically as high interest rates were pushing borrowers out of the market. Existing home prices were down some, while rents were flat. Nonresidential construction activity slowed overall as high interest rates, elevated cost pressures, and shortages of key inputs such as electrical components weighed on activity. Nonresidential construction prices remained at elevated levels. Commercial real estate activity decreased modestly. Prices decreased slightly, rents fell modestly, and vacancy rates were up slightly.\nManufacturing\nManufacturing demand decreased modestly in late May and June and backlogs were down moderately. Steel orders were up slightly, supported by solid demand from the auto and construction industries. Fabricated metals orders decreased slightly, in part due to weaker demand in the aerospace sector. Machinery sales also decreased slightly, with contacts highlighting less demand from the auto industry. In contrast, auto industry contacts said production was steady on balance. Heavy truck orders increased slightly amidst very low inventories.\nBanking and Finance\nFinancial conditions tightened slightly further on balance during the reporting period. Bond and equity market values edged up, while volatility edged down. Business loan demand decreased modestly, as borrowing rates rose and standards tightened some. One contact said weak demand was concentrated among clients in the consumer discretionary, durable goods, and retail sectors, which were seeing slowing sales. Business loan quality deteriorated a bit. Consumer loan demand decreased slightly overall, but several contacts noted greater credit card usage. Consumer loan quality decreased slightly, while borrowing rates rose modestly and lending standards were somewhat tighter.\nAgriculture\nExpectations for Seventh District farm incomes for 2023 deteriorated some as drought expanded throughout the District. One contact said, \"It is time to be concerned, but too soon to panic.\" Crops were behind normal growing progress. Expectations for this year's corn crop worsened more than for soybeans because corn is more sensitive to drought at this growth stage. Crop prices were volatile during the reporting period; while corn prices ended down, soybean prices were up, and wheat prices were about the same. Some input costs were lower. Prices for milk were down once again, extending losses for dairy farms. Although hog prices moved up some, producers continued to struggle to turn a profit. Egg prices edged up. Cattle prices made further gains, as drought limited water and forage availability, forcing farmers to trim their herd sizes.\nCommunity Conditions\nCommunity, nonprofit, and small business support contacts reported little change in activity, which was at a robust level. That said, there were signs the economy was cooling. State government officials saw slowing growth in tax revenues and a small increase in demand for unemployment insurance. High interest rates were challenging Community Development Finance Institutions' efforts to lend at affordable rates to low- and moderate-income borrowers, including small businesses and prospective homeowners. Contacts offering small business services, in particular to small manufacturers, reported that a lack of workers remained an important issue and was holding back production. At the same time, contacts engaged with low wage workers stressed that wages were too low to meet daily needs in the face of rising costs, particularly for housing.\nFor more information about District economic conditions visit: https://www.chicagofed.org/research/data/cfsec/current-data\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2023/2023-07-bo

"July 12, 2023\nSummary of Economic Activity\nBusiness activity expanded at a slight pace in recent weeks, with modest increases in employment and roughly even prices. Consumer spending increased by a small margin, as retail sales increased modestly and tourism was flat. Manufacturers reported mixed results but sales growth was moderate on average. Software and IT services firms enjoyed stable demand and modest revenue gains. Residential home sales increased slightly in May from the previous month but remained below seasonal norms. Commercial real estate markets weakened further, with abrupt declines in life sciences leasing and financial distress showing up for office properties. The outlook was mostly optimistic among contacts outside of real estate. Residential real estate contacts expected sales to remain muted and commercial real estate contacts braced for declines in activity and property values moving forward.\nLabor Markets\nEmployment increased modestly and wage growth continued to moderate as labor market imbalances eased further. Among retail and tourism contacts, labor demand remained healthy but showed signs of moderating, and there were modest improvements in the available labor supply. Some airline contacts continued to struggle to fill positions but said that hiring and training were underway to improve the situation. A clothing retailer noted that it had taken several months to fill 200 warehouse jobs, but they were nonetheless able to fill all positions. Following two summers of worker shortages on Cape Cod, some restaurant and hotel owners there have achieved efficiencies enabling them to operate with a smaller staff. In manufacturing, the labor market remained tight, although contacts said that it had improved over last year, and headcounts increased modestly. Headcounts at software and IT firms were up slightly, and hiring plans were mixed. Contacts noted that turnover had either stabilized (albeit at above-average rates) or decreased in recent months, and reductions in turnover and absenteeism reduced the need for hiring at some firms. Wage pressures were described as stable or, in most cases, declining, as wage growth rates continued to fall back to more moderate levels.\nPrices\nPrices were mostly stable, with some exceptions, as cost pressures abated further. A clothing retailer said that input cost growth had ceased altogether and that their output prices were flat. Manufacturing contacts reported a very benign pricing environment, with one even mentioning the possibility of deflation. Prices were slightly higher among IT contacts, but with no further price increases anticipated. Hotel room rates in Greater Boston increased in excess of seasonal patterns, rising 12 percent on a year-over-year basis. Cape Cod rental prices increased yet again, but at a much more modest pace than in recent years. The outlook called for further moderation of pricing pressures moving forward.\nRetail and Tourism\nFirst District retail contacts reported a modest uptick in sales relative to earlier this year, while tourism contacts saw mixed results that were about flat on average. A clothing retailer enjoyed a slight uptick in demand this spring after a soft first quarter. Mainstreet retailers on Cape Cod experienced a strong start to the high season, but hospitality contacts on the Cape said that occupancy rates for hotels and especially short-term rentals were down by modest to large margins from their record highs of the past two years, though still above 2019 levels. Airline passenger traffic through Boston further increased in recent months, reaching 96 percent of pre-pandemic levels in the first quarter of 2023, and international passenger traffic alone reached 99 percent of pre-pandemic levels, although travel to and from Asian markets remained depressed. The Greater Boston hotel occupancy rate increased relative to seasonal trends, with occupancy climbing ever closer to 2019 levels. Scheduled convention activity and cruise bookings for the remainder of the year are set to increase further, exceeding 2019 levels.\nManufacturing and Related Services\nManufacturing contacts were generally positive, reporting moderate gains in sales on balance. A pharmaceutical company reported lower sales that were nonetheless in line with their expectations, owing to increased competition from generics. A frozen fish producer said that sales were down year-on-year due to higher prices. Other contacts reported very strong sales. A furniture producer recorded its best second-quarter results ever, up markedly from a weak first quarter. A semiconductor manufacturer said that, despite an industrywide slump, their own sales were up 12 percent from a year earlier, an outcome attributed to the firm's heavy exposure to the automotive industry and the transition to electric cars. One contact said they had revised their capital expenditure plans to take advantage of tax credits, although this mostly involved moving existing projects forward rather than adding investments. The outlook was positive across the board. The semiconductor manufacturer in particular expected that 2024 would bring demand increases linked to upgrades of phones and PCs as well as from the diffusion of AI products.\nIT and Software Services\nContacts in IT and software services posted modest revenue gains on average, and demand was steady over the first two quarters of 2023. Profits and margins were up slightly, although Q2 expenses increased above expectations at one firm. Capital and technology spending was unchanged or down somewhat. One firm expected to slow its capital spending further moving forward amidst an ongoing transition to the cloud. Outlooks were generally optimistic, with expectations of ongoing stability in demand. One contact expressed confidence that their business would hold up well moving forward even if the broader economy turned down. However, one contact was concerned the presidential election might disrupt the stability of the business environment.\nCommercial Real Estate\nCommercial real estate activity in the First District was moderately weaker in recent months. Office leasing was stable or down slightly, with very few leases signed. Office rents were roughly stable and vacancy rates were said to be either flat or rising slowly. A contact in Connecticut reported a high-quality urban office building being forced into foreclosure due to tenants giving back space upon lease expiration. Life sciences leasing activity slowed dramatically, a fact attributed to the drying up of venture capital and other funding sources to would-be tenants. Contacts reported a somewhat quieter industrial market than in the past two years, although industrial rents remained high and vacancy rates historically low. Grocery-anchored retail continued to perform well, but other retail vacancies ticked up due to the failure of some non-grocery chains. Across sectors, contacts' expectations turned more pessimistic. High borrowing costs are expected to continue to deter investment, sales, and construction. Multiple contacts expected the market to fare better in New England than in other regions of the country, but nonetheless expected activity in the region to slow and property valuations to fall accordingly.\nResidential Real Estate\nFirst District home sales increased a bit in May from the previous month on average, and some areas reported a healthy uptick in activity, but May's sales were nonetheless described as weak relative to historical norms. Across markets, home sales continued to post very steep declines on a year-over-year basis, for single-family dwelling as well as condos. According to contacts, activity was held back yet again by further declines in inventory (on a year-over-year basis) and persistently high mortgage interest rates. High rates also exacerbated the low-inventory problem, as current homeowners were reluctant to swap their existing, low-rate mortgages for higher-rate loans, leading to fewer homes going up for sale. Despite tepid sales, the dearth of inventories relative to demand meant that prices continued to rise, even as the pace of appreciation slowed gradually in recent months. Median prices for single-family homes rose modestly relative to May 2022, by six percent or less depending on the area. However, median condo prices increased by double-digit margins in some states, as buyers priced out of the single-family market looked increasingly to condos. Contacts expected no meaningful changes in market dynamics until interest rates declined.\nFor more information about District economic conditions visit: https://www.bostonfed.org/in-the-region/economic.aspx\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/2023/2023-07-ny

"Beige Book Report: New York\nJuly 12, 2023\nSummary of Economic Activity\nEconomic activity in the Second District stabilized in recent weeks following a period of moderate weakness. Labor market conditions were strong, with ongoing modest employment gains and steady wage growth. Inflationary pressures eased as both input and selling price increases slowed noticeably. Supply availability continued to improve, particularly for manufacturers, and manufacturing activity edged slightly higher. Consumer spending grew steadily and tourism in New York City remained strong. While housing markets were solid, exceptionally low inventory remained a challenge and there were some signs of a pullback in demand in parts of the District. Commercial real estate markets remained mostly unchanged, with persistently high office vacancies. Conditions in the broad finance sector continued to deteriorate, though at a more subdued pace than in recent months. Regional banks reported ongoing declines in loan demand, tighter credit conditions, and narrowing loan spreads. Looking ahead, businesses expect economic conditions to improve, though optimism remained muted.\nLabor Markets\nLabor market conditions were strong, with several contacts pointing to some firming in recent weeks. On balance, employment increased modestly, though there were stronger gains reported by personal service providers and wholesalers. While firms in the construction sector reportedly shed workers, layoffs generally remained concentrated in large firms outside of the region. A contact from the Adirondacks reported that J-1 visa seasonal workers have arrived following a pandemic pause, providing a much-needed seasonal boost to the strained workforce as the tourism season gets into full swing. Though it has become slightly easier to hire, finding skilled workers remains a major challenge.\nWhile hiring plans remained solid, a few employers pointed to scattered signs of easing in labor demand. Contacts reported that the use of temporary workers has declined noticeably. Further, attrition rates have continued to fall at many businesses and are in some cases below normal levels, reducing the need to hire replacements. With signs that the labor market may start to cool, some employers are beginning to require workers to come to the office more often. Indeed, a New York City employment agency focused on financial services noted that roughly half of open roles were now fully in-person.\nWage growth has remained modest and steady since the last report. Several contacts noted that candidates' wage demands have become more reasonable and are now inline with pre-pandemic expectations.\nPrices\nInflationary pressures eased noticeably in recent weeks. Businesses reported that the pace of input price increases has slowed considerably, and one construction contact noted softening in the prices of inputs, such as doors and windows. Still, the high cost of many inputs remains a major challenge for businesses in the region. The pace of selling price increases also moderated, especially among goods producers and retailers, though businesses in leisure & hospitality noted growing price pressures in travel services and entertainment. Manufacturers generally expect continued easing in price increases in the months ahead, while firms in the broader service sector anticipated more persistence.\nConsumer Spending\nConsumer spending grew steadily in the latest reporting period. Consumers have continued to shift their spending away from goods toward experiences, such as travel, entertainment, and restaurants. Indeed, amid higher prices and changing preferences, department store contacts reported sagging sales. Increasingly discerning shoppers eschewed purchases of seasonal items in favor of high-quality basics during a cool spring season, leaving an inventory surplus of certain summer wear. Still, auto dealers in upstate New York reported that new car sales have been strong as pent-up demand has been satisfied by ongoing improvements in inventory, while used car sales remained subdued.\nManufacturing and Distribution\nManufacturing activity edged higher. Supply availability improved, delivery times held steady, and inventories moved lower. Businesses in transportation & warehousing reported modestly increasing activity, but activity for wholesalers was unchanged. Manufacturing and distribution firms have become more optimistic about the six-month outlook.\nServices\nService sector activity generally edged lower in the latest reporting period, though businesses in the information and professional services sectors reported increasing activity. Looking ahead, businesses in the service sector anticipated some improvement in the coming months.\nTourism activity remained strong in New York City and is on track to reach pre-pandemic levels this summer. The recent air quality problems from wildfire smoke had only minor effects on tourism, with the biggest blows to outdoor attractions. The recovery of business travel has been slower, hindered by a shift to virtual events and a budget-driven reduction in attendance at in-person meetings.\nReal Estate and Construction\nWhile the home sales market has remained solid, there has been some cooling in parts of the District. In particular, demand softened in much of upstate New York as discouraged buyers frustrated by low inventory increasingly stepped aside. Meanwhile, home sales markets in and around New York City remained resilient as potential buyers were undeterred by low inventory. Home prices were steady to up slightly; bidding wars were common across the District, though at reduced intensity.\nResidential rental markets have continued to firm, as a strong economy and relatively high mortgage rates have continued to boost demand by pushing some potential homeowners into the rental market. In New York City, vacancy rates were below historic norms and rents reached new highs, and rents also edged up in much of upstate New York.\nCommercial real estate markets were mostly unchanged. Office vacancy rates held steady at elevated levels across the District and rents were mostly flat, though some businesses reduced their footprints and opted for higher-quality office space. Of note, the prolonged weakness in office markets has begun to spillover to architecture and engineering firms, who noted negative impacts on business activity. New York City's retail market was flat, with no change in vacancy rates, rents, or leasing activity in recent weeks. By contrast, vacancy rates remained at low levels in the industrial market and rents trended up modestly, except in northern New Jersey, where vacancy rates increased somewhat.\nOverall, construction contacts reported that conditions continued to weaken since the last report. Office construction remained steady at a low level in most of the District, though there were some new starts in northern New Jersey and upstate New York. Industrial construction activity was little changed across most of the District. Multi-family residential starts increased in Long Island and Westchester but were flat elsewhere.\nBanking and Finance\nConditions in the broad finance sector continued to deteriorate, though at a more subdued pace than in recent months. Small to medium-sized banks in the District reported ongoing declines in loan demand across all loan segments. Credit standards continued to tighten for all loan types, loan spreads narrowed, and deposit rates moved higher. Delinquency rates edged up. Contacts cautioned that the average loan-to-value ratio on outstanding used car loans has risen to about 120 percent, presenting potential risks to the auto finance market.\nCommunity Perspectives\nContacts noted that shortfalls in community services are worsening food insecurity, homelessness, and public safety. Community leaders expressed concerns about the inadequacy of the region's mental health care system. Contacts expressed the need for supportive housing units that are integrated with social services and medical support for addiction treatment and mental health care. Non-profits reported working with hospitals that own large real estate portfolios to develop sites for middle-income and supportive housing, though elevated construction costs and strained supply chains have hindered progress on this front.\nFor more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2023/2023-07-cl

"July 12, 2023\nSummary of Economic Activity\nOverall, Fourth District business activity changed little since the prior reporting period. While consumer spending on services remained solid, higher interest rates continued to constrain households' big-ticket purchases. Meanwhile, several contacts suggested that higher interest rates led many businesses to delay projects. Accordingly, bankers reported lower loan volumes for both household and business loans. Manufacturers reported little growth in orders, but many continued to work through solid backlogs. Contacts have recently become more optimistic about the near-term outlook for their firms, and many have lowered their expectations for a US recession in 2023. Still, uncertainty remained elevated and was likely reflected in cautious capital spending plans and slower employment growth. Wage pressures continued to ease somewhat as labor demand lessened and labor availability improved for many firms. Input cost pressures also eased, and the share of firms reporting increased selling prices dipped to its lowest level since late 2020.\nLabor Markets\nContact reports suggested modest employment growth in the Fourth District during the most recent reporting period, with demand for labor varying by industry segment. Demand was particularly strong among manufacturers that continued to report solid backlogs for their goods. Still, a few manufacturers (and contacts in other industries) reported that they were only hiring to fill key production positions while leaving others unfilled (such as those in support). The hesitance to fill support roles was mainly a function of general economic uncertainty or expectations for weaker demand for goods and services.\nOn balance, wage pressures eased slightly during this reporting period, with the share of contacts holding wages steady (67 percent) at its highest in more than two years. Some bankers, transportation firms, and restauranteurs reported that they did not need to increase wages because workers were more readily available. By contrast, several manufacturing and construction firms reported that wage pressures remained high amid continued difficulty filling key openings.\nPrices\nNonlabor input costs pressures eased since the previous report. About a third of contacts said that costs had increased in the prior two months, the smallest share since September 2020. Construction contacts noted that steel and lumber prices were falling but concrete prices were rising. On balance, these contacts suggested that costs were \"stabilizing.\" Manufacturers reported meaningful relief from input cost increases, as well, with one plastics manufacturer stating that suppliers were raising prices less often and by a smaller percentage than in the past. Looking forward, contacts expected further relief from nonlabor input cost pressures.\nPrice pressures eased, as well. Less than 40 percent of firms recently raised selling prices, the lowest share recorded since the end of 2020. Several goods producers raised prices to maintain margins or to \"catch up\" to past cost increases. However, many also said they did so cautiously. One manufacturer said it couldn't raise prices \"without hurting demand or damaging customer relationships.\" Similarly, a logistics contact noted that customers were increasingly resistant to any price increases and that freight prices fell further. Consumer prices continued to increase on balance, but one discount retailer said that its prices eased somewhat as it passed along \"the disinflation\u2026seen from some suppliers.\"\nConsumer Spending\nConsumer spending was mostly unchanged. Warmer weather and resilient consumers bolstered sales for restauranteurs and some non-auto retailers. Still, one large general merchandiser noted that household budgets had tightened because of reduced SNAP benefits and high inflation. He added that sales for discretionary items, such as televisions and video game systems, had declined and that some customers had begun to choose less expensive store-brand food items over national brands. Some auto dealers said that sales rebounded despite higher interest rates, while others stressed that interest rates and elevated vehicle prices remained the primary deterrents for potential customers. Contacts generally expected consumer demand to hold steady in the coming months.\nManufacturing\nOn balance, demand for manufactured goods was stable. Orders remained strong for aerospace-related products and for heavy trucks and trailers, and strengthening international markets continued to bolster activity for some firms. However, orders softened or remained weak for some firms tied to consumer products as inventory corrections continued. Steel manufacturers said that orders were steady or slightly lower compared to those in recent months, and industry contacts generally expected demand for their products to pick up in the second half of July following an expected seasonal slowdown earlier in the month. Likewise, manufacturers across industry segments were notably optimistic and expected demand for their products to increase in the coming months.\nReal Estate and Construction\nDemand for residential construction and real estate changed little in recent weeks. Contacts reported that higher interest rates and elevated home prices continued to hinder demand. One homebuilder noted, \"we're getting sales, but on the slow side.\" Going forward, contacts were optimistic that demand would improve. One homebuilder noted that the limited supply of existing homes would help to boost demand for new home construction.\nNonresidential construction and real estate activity remained soft. Several general contractors indicated that high borrowing costs were dampening demand for construction, and several commercial real estate contacts noted slowing in the commercial real estate investment market.\nFinancial Services\nLenders reported weaker activity amid economic uncertainty and higher interest rates. Loan demand decreased, with declines noted for both household and business lending. One banker said that many businesses were putting projects on hold because of economic uncertainty unless the project is being subsidized by the government. On the funding side, deposits were generally flat to down as banks continued to face competition for deposits, particularly from entities such as money market funds. On balance, delinquency rates remained low by historical standards and were little changed in recent weeks, with one lender describing the delinquency rate environment as \"benign.\" Looking forward, lenders expected further declines in loan volumes and little change in deposits.\nNonfinancial Services\nDemand for nonfinancial business services generally declined recently. Contacts in professional and business services noted that demand had flattened. Transportation services firms reported declines in activity, in large part because firms continued to work down inventories, some of which had been built up as a hedge against supply chain disruptions earlier in the recovery. Looking forward, firms in professional and business services generally expected demand to rebound in the months ahead. By contrast, logistics and freight contacts anticipated further declines, though one freight contact was optimistic that \"the bottom is in the not-too-distant future.\"\nCommunity Conditions\nCommunity organizations reported a sharp increase in the number of families seeking food assistance recently, with one noting that it had seen a 35 percent jump since March. Multiple contacts said that the loss of pandemic-era Supplemental Nutrition Assistance Program (SNAP) benefits in March, along with elevated food prices, contributed to the increase. One food pantry operator said, \"people are experiencing food insecurity more now than I have seen in my seven years with the organization.\" Some organizations were forced to limit the frequency of visits and quantity of food provided to households, exacerbating the strain on struggling families. Looking forward, some contacts expected food insecurity to rise further during the summer as families whose children received free and reduced lunches during the school year seek additional support.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"