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National Summary

/beige-book-reports/2023/2023-07-su

"Beige Book: National Summary\nJuly 12, 2023\nThis report was prepared at the Federal Reserve Bank of Minneapolis based on information collected on or before June 30, 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\nOverall economic activity increased slightly since late May. Five Districts reported slight or modest growth, five noted no change, and two reported slight and modest declines. Reports on consumer spending were mixed; growth was generally observed in consumer services, but some retailers noted shifts away from discretionary spending. Tourism and travel activity was robust, and hospitality contacts expected a busy summer season. Auto sales remained unchanged or exhibited moderate growth across most Districts. Manufacturing activity edged up in half of the Districts and declined in the other half. Transportation activity was down or flat in most Districts that reported on it, as some contacts reported reduced demand due to high inventory levels and others noted continued challenges from labor shortages. Banking conditions were mostly subdued, as lending activity continued to soften. Despite higher mortgage rates, demand for residential real estate remained steady, although sales were constrained by low inventories. Construction for both residential and commercial units was slightly lower on balance. Agricultural conditions were mixed geographically but softened slightly on balance, with some contacts expecting further softening for the remainder of 2023. Energy activity decreased. Overall economic expectations for the coming months generally continued to call for slow growth.\nLabor Markets\nEmployment increased modestly this period, with most Districts experiencing some job growth. Labor demand remained healthy, though some contacts reported that hiring was getting more targeted and selective. Employers continued to have difficulty finding workers, particularly in health care, transportation, and hospitality, and for high-skilled positions in general. However, many Districts reported that labor availability had improved and that some employers were having an easier time hiring than they were having previously. Employers also reported that the unusually high turnover rates in recent years appear to be returning to pre-pandemic norms. Wages continued to rise, but more moderately. Contacts in multiple Districts reported that wage increases were returning to or nearing pre-pandemic levels.\nPrices\nPrices increased at a modest pace overall, and several Districts noted some slowing in the pace of increase. Consumer prices generally increased, though reports differed in the extent to which firms were able to pass along input cost increases. Contacts in some Districts noted reluctance to raise prices because consumers had grown more sensitive to prices, while others reported that solid demand allowed firms to maintain margins. Input cost pressures remained elevated for services firms but eased notably in the manufacturing sector. Freight rates continued to decrease, along with the prices for many construction inputs, though concrete prices increased. Price expectations were generally stable or lower over the next several months.\nHighlights by Federal Reserve District\nBoston\nBusiness activity expanded at a slight pace. Employment gains were small and prices were stable. Consumer spending increased by a small margin. Manufacturers reported moderate revenue growth. Home sales were disappointing and life sciences leasing activity slowed dramatically. The outlook was optimistic outside of real estate, but remained neutral or became increasingly pessimistic among real estate contacts.\nNew York\nRegional economic activity stabilized after a period of weakness. Labor market conditions were strong, with some firming in recent weeks. Inflationary pressures eased noticeably. Consumer spending grew steadily. Housing markets were solid but low inventory continued to restrain sales activity.\nPhiladelphia\nBusiness activity continued to decline slightly during the current Beige Book period. Consumer demand ticked down, although elevated profit margins buoyed overall sales figures. Employment fell slightly despite improved labor availability. Wage growth and inflation subsided but continued at a modest pace. Expectations for economic growth remained subdued.\nCleveland\nThe Fourth District economy was generally stable in recent weeks as high interest rates continued to constrain households' big-ticket goods purchases and businesses' project plans. Bankers and transportation firms cited these effects as contributing to weaker demand for their own services. Nevertheless, contacts were generally more optimistic about the near-term outlook and less concerned that a U.S. recession would occur in 2023.\nRichmond\nThe regional economy grew slightly in recent weeks. Consumer spending on retail goods, as well as on travel and tourism, picked up modestly. Manufacturing and transportation sectors noted a slowdown in demand. Residential real estate was constrained by a lack of inventory. Commercial real estate activity and lending declined. Employment increased moderately and price growth eased slightly but remained robust, overall.\nAtlanta\nEconomic activity grew slowly. Labor markets became less tight, and wage pressures eased. Nonlabor costs moderated, on balance. Discretionary retail sales softened. Auto sales remained strong. Domestic leisure travel softened, and international and business travel rose. Housing demand remained strong. Transportation activity slowed. Energy demand was steady. Agriculture conditions softened.\nChicago\nEconomic activity was little changed. 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.\nSt. Louis\nEconomic conditions have remained unchanged since our previous report. Employers continued to struggle finding skilled workers, but turnover slowed and wage pressures lessened. Consumer spending was largely steady, but contacts reported a shift away from discretionary goods. Homebuying activity increased, but the commercial real estate sector saw worsening conditions.\nMinneapolis\nEconomic activity in the region grew slightly in recent weeks. Employment rose moderately as labor availability improved. Price pressures were mild and wages rose moderately. Consumer spending was flat. Professional services reported solid activity and a positive outlook. Residential construction and real estate remained low. Dry conditions have lowered the farm outlook. Minority- and women-owned firms reported steady activity.\nKansas City\nTotal economic activity across the Tenth District changed little during June. Though hiring was flat, expected employment levels at most businesses continued to point downward. Businesses predominantly reported they are relying on natural turnover and attrition to reduce their headcounts, rather than layoffs. Concerns about credit quality and credit access rose broadly, including among micro-businesses, consumers, and commercial real estate.\nDallas\nModest expansion continued buoyed by gains in the service sector and single-family housing. Factory output, drilling activity and loan demand declined, and credit conditions tightened further. Employment rose moderately, and wage growth remained high. Price pressures evaporated in manufacturing but stayed elevated in the service sector. Uncertainty continued to rise, and contacts cited diminishing demand, higher labor costs, rising interest rates, and inflation as their primary outlook concerns.\nSan Francisco\nEconomic activity softened modestly. Labor availability improved across sectors. Wage growth slowed notably while price increases persisted. Retail sales moderated, and activity in the services sectors eased somewhat. Manufacturing activity was solid but weakened slightly, while conditions in the agriculture and residential real estate sectors were mixed. Commercial real estate activity fell, and financial sector activity was largely unchanged.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/2023/2023-07-ph

"July 12, 2023\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to decline slightly. Consumer demand appeared to tick down as contacts detailed more cautious spending habits by consumers, including fewer visits and smaller purchases. High interest rates are continuing to limit listings of existing homes for sale, which has helped new home builders. Employment fell slightly despite improving labor availability. Wages and prices continued to grow at a modest pace. Firms also continued to indicate that wage and price pressures were subsiding. Overall, contacts reported relatively few supply chain disruptions \u2013 instead noting that the costs of many of their supplies had stabilized. Contacts continued to note tighter 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 appeared to decline slightly after rising slightly during the prior period. Although contacts noted relatively few cases of broad-based layoffs, they detailed targeted layoffs, more selective hiring practices, and fewer hours for employees. Of the firms looking to hire, most reported that hiring continued to be easier as labor availability improved. However, firms noted that shortages remained for certain positions, especially housekeeping staff and cooks in the leisure and hospitality industry and skilled trade workers in the construction and manufacturing industries.\nIn our monthly surveys, nonmanufacturing firms reported decreases in both full-time and part-time employment. The index for full-time employment in the nonmanufacturing sector turned negative and fell to its lowest level since June 2020. The share of nonmanufacturing firms that reported a decrease in the number of full-time jobs rose to over 25 percent. Manufacturing firms reported mostly steady levels of employment as nearly three-quarters of the firms reported no change in jobs. Staffing firms confirmed that the demand for labor declined from the prior period and that clients were no longer looking to immediately fill all open positions.\nFirms reported that wage inflation continued at a modest pace overall but is slowly subsiding. Multiple contacts across sectors indicated that year-over-year wage increases were back to pre-pandemic levels. Construction and manufacturing contacts noted wage pressures had not eased as much for specialty trades.\nIn our monthly surveys, the distribution of nonmanufacturing firms reporting higher or lower wage and benefit costs per employee was typical of the pre-pandemic era, when modest wage growth prevailed.\nPrices\nOn balance, firms reported that prices continued to rise modestly; however, they noted that the rate of price increases appears to be slowly abating. Contacts continued to report fewer supply chain disruptions but indicated that their firms were trying to maintain high profit margins for as long as possible.\nIn our monthly surveys, reported increases in prices paid and received were significantly less widespread than one year ago and were well below their historical averages. The prices paid and prices received indexes declined for nonmanufacturers, with the prices received index turning negative. Among manufacturers, the prices paid index was little changed, and the prices received index rose.\nThe indexes for future prices paid and future prices received continued to suggest that firms expect price increases over the next six months. However, both indexes edged lower and were below their long-run averages.\nManufacturing\nManufacturing activity continued to decline modestly in the current period. The index for new orders was little changed from the last period and was negative for the 13th consecutive month. The shipments index rose for the third consecutive month and turned positive for the first time since February.\nDespite the decline in manufacturing activity from the prior period, nearly half of the firms estimated increased total production growth for the second quarter of 2023 compared with the first quarter. Most firms reported labor supply and supply chains as slight or moderate constraints to capacity utilization.\nExpectations among manufacturers for growth in the next six months rose but remained tempered compared with historical averages. The indexes for future activity and future new orders turned positive, and the index for future shipments also rose. All three indexes improved to their highest level in over a year.\nConsumer Spending\nOn balance, consumer spending declined slightly in the current period \u2013 after holding steady, at best, in the prior period. Contacts indicated consumers became more careful in their spending. One retail contact reported a decline in the volume of goods sold but noted that year-over-year sales figures were buoyed by higher prices than last year.\nAuto dealers reported little change in sales from the prior period despite the continued growth of car inventories. Contacts reported that rising affordability concerns appeared to weigh on demand, keeping year-to-date auto sales in line with last year when sales were constrained by low inventories. Softening demand led some dealers to decrease prices and most dealers to increase incentives.\nTourism contacts continued to report slight growth \u2013 noting that the recovery was slowing. Business travel continued to recover, but leisure travel was flattening. Multiple contacts reported that the amount of money guests spend at their leisure destinations declined modestly in recent months. Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city.\nNonfinancial Services\nOn balance, nonmanufacturing activity continued to decline modestly. However, the decline appeared more widespread than in the prior period. The indexes for new orders and sales both turned negative, as the share of firms reporting decreases exceeded the share reporting increases for both categories. Expectations for growth over the next six months remained subdued.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew modestly during the period (not seasonally adjusted) \u2013 slower than the moderate growth observed in both the prior period and the same period last year.\nDuring the period, District banks reported strong growth in home mortgages and moderate growth in auto loans, other consumer lending, and commercial real estate loans. Home equity loans were flat. Credit card volumes grew at a moderate to strong pace after rising modestly last period, but the growth was slower than during the same period last year.\nBanks reported a moderate decline in commercial and industrial loan volumes after strong growth in the prior period. Most contacts continued to report tightening credit conditions following recent bank failures and described an environment of elevated caution in which most banks want to extend credit only to customers with whom they already have a relationship. Contacts also continued to report good credit quality.\nReal Estate and Construction\nReal estate brokers reported that inventories of existing homes for sale remained very low because homeowners have been reluctant to give up their low mortgage rates. Existing-home sales rose slightly in the current period but remained well below the sales observed in prior years during the normally busy spring housing market. Homebuilders once again described their modest sales as better than expected, and noted the industry continued to benefit from the dynamics of the existing-home market.\nHousing affordability remained low, and rents remained high in the current period. Requests for assistance with housing and utility bills rose slightly and continued to dominate the share of 211 requests in New Jersey and Pennsylvania. Over 30 percent of all requests in the two states were related to housing, while 28 percent of the requests involved utility bills.\nAccording to contacts, construction activity for commercial real estate held steady, but financing conditions for new projects became more difficult. Leasing activity continued to fall moderately as weakness in the office market continued to materialize.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis\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/2023/2023-07-sf

"Beige Book Report: San Francisco\nJuly 12, 2023\nSummary of Economic Activity\nEconomic activity in the Twelfth District softened modestly during the mid-May through June reporting period. Labor availability improved and overall labor market conditions eased moderately. Price increases persisted, while wage growth slowed notably across several sectors. Retail sales moderated, and activity in the services sectors eased somewhat. Demand for manufacturing goods was solid but weakened slightly, while conditions in agriculture and resource-related sectors were mixed. Residential real estate activity was mixed while that of commercial real estate eased further. Conditions in the financial sector remained generally unchanged over the reporting period and lending standards continued to tighten. Communities across the Twelfth District were challenged by a lack of affordable housing and small businesses' limited access to credit. Contacts expressed concern over a weaker outlook for the economy and increased overall uncertainty.\nLabor Markets\nLabor market conditions eased moderately during the reporting period. Labor availability improved, and employers across sectors reported receiving more job applications in recent weeks. Contacts highlighted that hiring for permanent, full-time positions was reportedly easier than for contract-based or part-time roles. In addition, hiring challenges persisted in health care and hospitality, where demand for workers continued to outstrip supply. Employee turnover generally improved but remained above pre-pandemic levels in retail and consumer services. Layoffs continued, albeit at a slower pace, in the financial services and technology sectors. Staffing levels in other sectors were generally steady, but employers adjusted their future hiring plans in response to overall economic uncertainty. Employers facing moderating demand favored reducing staff hours over layoffs.\nWage growth slowed notably across several sectors. Improved labor availability led to wage increases closer in line with historical rates, particularly for entry-level positions, in construction, manufacturing, retail, financial services, and technology. In contrast, contacts continued to report paying above-average salaries for experienced and skilled workers in consumer and business services. In addition to higher pay, some employers offered expanded benefits, training, and advancement opportunities to attract and retain workers.\nPrices\nPrice increases persisted at a steady pace relative to the last reporting period. Reports noted elevated inflation across several industries and products, including utilities, insurance, used vehicles, health care, pet care, and some construction materials, such as aluminum, concrete, and electrical equipment. However, prices of some goods and services were reportedly stable or down in recent weeks, including those for gasoline, fabricated materials, and banking services. One manufacturer reported significant reductions in input costs in recent weeks but also noted not planning to lower final prices because of the cumulative cost pressures incurred over the past three years.\nCommunity Conditions\nConditions in the community support and services sector remained mixed. Some contacts in education, housing services, and community support reported stable or improving conditions for funding and hiring. At the same time, representatives from small businesses and community banks mentioned more limited availability of funds. Contacts across the District reiterated difficulties meeting the demand for support services, and several continued to report the persistence of housing insecurity and homelessness. Contacts in Alaska highlighted ongoing shortages of police services and childcare providers.\nRetail Trade and Services\nOverall retail sales moderated in recent weeks. Fading fiscal stimulus at the state level and reduced excess savings reportedly weakened retail spending. Consumers continued to trade down to lower cost items and reduced their spending on nonessential goods. Contacts from Hawaii and Utah indicated strong demand for retail and services supported by robust growth in tourism and population levels. Additionally, online retail demand picked up with higher sales to consumer markets in Asia.\nActivity in the consumer and business services sectors eased somewhat. Demand for business and leisure travel in the District moderated despite the number of visitors and conventions remaining largely unchanged in recent weeks. Spending on legal and insurance services declined. Production activity in the entertainment and media industries remained strained by ongoing collective agreement negotiations between the writers' unions and major studios. Additionally, art galleries and institutions reported facing significant headwinds due to smaller audiences and declining donations.\nManufacturing\nManufacturing activity weakened slightly but remained solid overall. New manufacturing orders for apparel, electronics, and furniture softened, while demand for capital equipment, aerospace, and wood products strengthened. Conditions in metal production and the recycling industry remained largely unchanged. Capacity utilization inched down, consistent with overall lower demand. Shipping and some input costs decreased over the past few weeks as supply chains and availability of raw materials continued to improve.\nAgriculture and Resource-Related Industries\nConditions in agriculture and resource-related sectors were mixed. Expanded ocean freight capacity and lower shipping costs supported exports, but lingering backlogs, the war in Ukraine, and a strong dollar limited access to some international markets. Domestic retail demand for agricultural products softened and demand from the food services sector plateaued. Demand for timber rose. Produce yields across the District were broadly up, recovering from the wet winter and spring. However, inventories of some foods such as raisins and nuts declined. Major seafood stocks edged up. Rising labor and insurance costs put upward pressure on production expenses, while past rains somewhat offset irrigation costs. One contact noted that ongoing capital investments helped boost productivity and curtail labor costs in the agriculture sector.\nReal Estate and Construction\nResidential real estate activity was mixed in recent weeks. Demand for single-family homes was reportedly strong, but low inventories and high mortgage rates limited sales. Demand for multifamily housing remained solid, though a contact in Southern California noted that it has recently taken longer to rent out apartments. Rental rates edged up. Contacts across the district reported a slowdown in new construction, particularly for single-family homes, citing uncertainty over the economic outlook and high financing costs. The availability of materials continued to improve somewhat, though shortages persisted.\nActivity in the commercial real estate market was down on balance. Limited credit availability reduced demand for commercial space and curtailed construction slightly. However, contacts in Utah reported strong construction activity for industrial and retail spaces. Rental rates for industrial space reportedly plateaued, largely due to weaker demand amid ongoing economic uncertainty, while rents for retail space edged up. The office sector remained weak. One Northern California contact noted that muted brick-and-mortar sales, high operating costs, and safety concerns limited leasing demand for downtown office space.\nFinancial Institutions\nConditions in the financial sector remained generally unchanged over the reporting period. Loan demand was largely stable but some contacts at regional institutions reported slower loan origination in recent weeks, especially those focused on the residential and commercial real estate markets. Banks have reportedly faced less variance in deposit flows compared to the previous reporting period despite strong competition for deposits. Lending standards tightened, and credit quality remained strong despite some observed increase in delinquency rates. Reports also noted lingering liquidity concerns and general uncertainty both over the economic outlook and within the sector.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/2023/2023-07-da

"July 12, 2023\nSummary of Economic Activity\nThe Eleventh District economy continued to expand modestly buoyed by gains in the service sector and single-family housing. Manufacturing output and retail sales fell. Credit conditions tightened further, and loan demand continued to decline. Drilling activity dipped due to lower oil and gas prices, while recent rains boosted district agricultural conditions. Local nonprofits continued to cite higher demand for assistance. Employment rose moderately, and wage growth remained high. Input cost and selling price pressures were elevated in the service sector but largely subsided in manufacturing. Perceptions of business conditions continued to worsen as uncertainty rose, and contacts noted that diminishing demand, higher labor costs, the rising cost of credit, and inflation were weighing on outlooks.\nLabor Markets\nEmployment grew moderately over the reporting period. Hiring slowed to a crawl in manufacturing, while service sector firms added to payrolls at an average pace. While oilfield services firms were still hiring and noted significant challenges in recruiting workers, more layoffs were seen in natural gas regions due to weak outlooks. Scattered reports of layoffs also came from transportation services and manufacturing. Recruitment remained a challenge for several firms. Reports of labor supply constraints continued in the health care sector and there were mentions of worker shortages in some other sectors as well, including transportation and retail. In a June Dallas Fed survey of more than 350 executives, 44 percent of firms noted being understaffed and looking to hire while 12 percent said they were opting not to hire despite being shorthanded.\nWage pressures were little changed, remaining elevated. Higher labor costs continued to be a primary concern for many firms including nonprofits, though there were some mentions of easing in IT wages.\nPrices\nPrice pressures were mixed; still elevated in the service sector but fully subsided in manufacturing. Fuel and construction materials prices were flat to down over the reporting period. Oilfield services firms reported declines in day rates for drilling rigs but stable frac fleet costs. Several contacts cited higher borrowing costs. Airlines reported high ticket prices amid strong demand and constrained capacity.\nManufacturing\nTexas manufacturing output contracted slightly in June, following several months of largely flat activity. Output was flat to down in many industries, though increases were seen in fabricated metals, machinery and transportation equipment manufacturing. New orders fell at a fairly similar pace as in the prior reporting period, which a few manufacturers attributed to customer destocking and slowing construction activity. Reports from refineries and chemical producers were mixed. Overall, manufacturing outlooks worsened further, and uncertainty continued to climb.\nRetail Sales\nRetail sales dipped modestly in May and June after increasing in April. Auto dealers noted mixed activity, with some reporting strong demand for new vehicles and others noting declines. Pharmacies and building material and garden supply retailers continued to cite higher sales, while clothing, food and beverage, and nonstore retailers saw declines. Inventories increased on net. Overall outlooks were little changed but weak, and some contacts said it remained challenging to plan for the next six to 12 months.\nNonfinancial Services\nService sector activity continued to expand albeit at a rather modest pace in June. Revenue growth was led by transportation and warehousing services followed by miscellaneous service and professional, scientific, and technical service firms. Healthcare revenues declined, and demand for health services, though improving, remained below pre-pandemic levels. Accommodation and food services firms said revenues continued to weaken which they attributed to a slowdown in leisure spending stemming from economic uncertainty. Staffing firms noted mixed demand, with flat activity in manufacturing but persistent strong placements of white-collar workers in the service sector, particularly healthcare. Airlines continued to report strong demand, mostly for leisure travel. Business travel activity remained uneven, with solid demand from the public sector but declining activity from the technology and energy industries. Overall outlooks were flat, but several contacts said that heightened business uncertainty had put buying decisions and projects on hold.\nConstruction and Real Estate\nHousing demand rose during the reporting period. Existing-home sales increased, and builders noted solid demand, particularly of quick move-in or inventory homes, as buyers were hesitant to deal with the uncertainty surrounding mortgage rates. Dallas\u2013Fort Worth and Houston were characterized as the strongest markets. Incentives such as rate buydowns remained in place, and prices were largely stable, though there were reports of increases in selected areas. Construction cycle times have improved, though a shortage of transformers was dampening completions. Builders have reaccumulated their backlogs of build-to-suit homes, and housing starts are expected to increase in the second half of the year. Outlooks remained cautious, and contacts noted tighter lending for construction and development loans.\nActivity in commercial real estate was little changed since the last report. Apartment rents were flat to up, and leasing activity picked up moderately. Office markets continued to face headwinds, while industrial markets generally remained solid. Investment sales activity stayed subdued, and contacts said banks were raising the loan-to-value ratios on loans. Outlooks were mixed.\nFinancial Services\nLoan demand declined for the seventh period in a row, and most bankers expect a further deterioration over the next six months. Overall loan volumes continued to fall, with particular weakness seen in consumer lending. While commercial real estate and commercial and industrial loan volumes continued to see marked volume declines, residential real estate lending remained stable. Loan nonperformance increased, with the rise led by commercial real estate loans. Credit standards and terms continued to tighten, and loan pricing continued to rise. Bankers' outlooks remained pessimistic, with contacts expecting a further contraction in business activity and an increase in nonperforming loans over the next six months.\nEnergy\nDrilling activity for oil and gas wells declined over the past six weeks. The Eleventh District rig count fell moderately as lower prices for crude and natural gas made some projects uneconomical. Well completions were holding up better than drilling activity. Most contacts reported that tighter credit conditions since February have had slight to no impact on their firms, though a few independent producers said it had considerably reduced their ability to invest in new projects. Outlooks varied. The industry is still largely expected to increase oil-directed drilling and completion activities modestly through year end, while prospects on the natural gas side remained weak due to subdued prices.\nAgriculture\nDrought conditions eased substantially over the past six weeks, with now less than a quarter of the district in drought. Increased soil moisture broadly improved crop and pasture conditions, though heavy rains caused significant disruption to cotton planting in the Texas High Plains. A sizeable portion of cotton acreage in that area may not be harvestable this year, either because of prevented planting or crop flooding. Row crop prices generally moved up over the reporting period, and cattle prices increased dramatically, driven by steady demand for meat but reduced supplies of both cattle and beef.\nCommunity Perspectives\nNonprofits noted increased demand for their services. Housing instability and affordability remained a top concern, and several contacts said that inflation and gentrification of neighborhoods has made housing costs, including property taxes, unaffordable for low to moderate income households. As a result, some are doubling up and living with other families in the same home. Fundraising was a challenge for some nonprofits, and a contact noted that the American Rescue Plan Act (ARPA) funds were running low. A nonprofit said age restrictions on certain program funding was making it challenging to provide services to other age groups. House Bill 8 recently passed by the Texas legislature will add about $680 million in the state budget for community colleges.\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"

National Summary

/beige-book-reports/2023/2023-05-su

"Beige Book: National Summary\nMay 31, 2023\nThis report was prepared at the Federal Reserve Bank of Chicago based on information collected on or before May 22, 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\nEconomic activity was little changed overall in April and early May. Four Districts reported small increases in activity, six no change, and two slight to moderate declines. Expectations for future growth deteriorated a little, though contacts still largely expected a further expansion in activity. Consumer expenditures were steady or higher in most Districts, with many noting growth in spending on leisure and hospitality. Education and healthcare organizations saw steady activity on balance. Manufacturing activity was flat to up in most Districts, and supply chain issues continued to improve. Demand for transportation services was down, especially in trucking, where contacts reported there was a \"freight recession.\" Residential real estate activity picked up in most Districts despite continued low inventories of homes for sale. Commercial construction and real estate activity decreased overall, with the office segment continuing to be a weak spot. Outlooks for farm income fell in most districts, and energy activity was flat to down amidst lower natural gas prices. Financial conditions were stable or somewhat tighter in most Districts. Contacts in several Districts noted a rise in consumer loan delinquencies, which were returning closer to pre-pandemic levels. High inflation and the end of Covid-19 benefits continued to stress the budgets of low- and moderate-income households, driving increased demand for social services, including food and housing.\nLabor Markets\nEmployment increased in most Districts, though at a slower pace than in previous reports. Overall, the labor market continued to be strong, with contacts reporting difficulty finding workers across a wide range of skill levels and industries. That said, contacts across Districts also noted that the labor market had cooled some, highlighting easier hiring in construction, transportation, and finance. Many contacts said they were fully staffed, and some reported they were pausing hiring or reducing headcounts due to weaker actual or prospective demand or to greater uncertainty about the economic outlook. Staffing firms reported slower growth in demand. As in the last report, wages grew modestly.\nPrices\nPrices rose moderately over the reporting period, though the rate of increase slowed in many Districts. Contacts in most Districts expected a similar pace of price increases in the coming months. Consumer prices continued to move up due to solid demand and rising costs, though several Districts noted greater price sensitivity by consumers than in the prior report. Overall, nonlabor input costs rose, but many contacts said cost pressures had eased and noted price declines for some inputs, such as shipping and certain raw materials. Home prices and rents rose slightly on balance in most Districts, after little growth in the prior period.\nHighlights by Federal Reserve District\nBoston\nBusiness activity was flat on average. Modest revenue increases were reported among retail, restaurant, and manufacturing contacts. Labor demand weakened for a wide range of positions but headcounts declined only slightly. Wage and price pressures eased further on average but some sizable price increases were reported. The outlook was cautiously optimistic.\nNew York\nRegional economic activity declined at a moderate pace, with ongoing weakness in the manufacturing sector. Still, the labor market has remained solid, though there have been scattered signs of cooling due to heightened uncertainty. Inflationary pressures remained persistent. Conditions in the broad finance sector continued to worsen.\nPhiladelphia\nBusiness activity continued to decline slightly during the current Beige Book period. Contacts reported positive consumer sales, but that relatively high profit margins mean that volumes may be down. Labor availability improved, and employment grew slightly. Wage growth and inflation continued to subside. Contacts worried about the debt ceiling and bank failures but maintained positive expectations for growth over the next six months.\nCleveland\nEconomic activity and employment were generally stable in the Fourth District, while cost and price pressures were little changed. Most firms indicated they were somewhat concerned about the standstill in Congress over raising the debt ceiling; however, these concerns did not appear to impact firms' outlooks for activity in the coming months.\nRichmond\nThe regional economy was little changed in recent weeks. Consumer spending on retail goods declined slightly but spending on travel and tourism picked up moderately. A lack of inventory ordering by retailers was felt in the manufacturing and transportation sectors. Commercial real estate activity and lending softened. Employment increased modestly and price growth eased slightly but remained robust, overall.\nAtlanta\nEconomic activity grew gradually. Labor markets became less tight, and wage pressures eased. Nonlabor costs moderated, on balance. Retail sales softened. Sales of new autos were solid. Leisure travel softened to pre-pandemic levels, and business travel increased. Housing demand was strong. Transportation activity declined. Energy demand was robust. Agriculture conditions slowed.\nChicago\nEconomic activity was little changed. Employment increased moderately; nonbusiness contacts saw a small increase in activity; consumer and business spending were flat; and activity decreased modestly both for manufacturing and for construction and real estate. Prices and wages rose moderately, while financial conditions tightened modestly. Expectations for farm incomes in 2023 decreased some.\nSt. Louis\nEconomic conditions have remained unchanged since our previous report. Labor markets remained tight, but reports of easing increased. Firms reported margin compression due to an inability to pass on input price increases. Residential real estate was largely unchanged, but demand for commercial properties weakened. The outlook worsened slightly due to concerns about weakening demand and macro uncertainty.\nMinneapolis\nThe region's economy grew slightly since early April. Labor demand was healthy, and wage pressures were high, but there were also significant layoffs. Price increases were generally modest, but levels remained high. Some manufacturers said input costs decreased, but most reported no change. Consumer spending rose modestly, and travel was strong. Minority-and women-owned firms saw a slight decrease in activity.\nKansas City\nTotal economic activity across the Tenth District changed little during May. Job growth continued to slow, despite the number of job openings remaining elevated, as businesses were reportedly more selective in their hiring. Most businesses indicated price growth for finished products will likely moderate over the coming year. Growth in housing rental rates was also expected to moderate, even though it remains elevated in many parts of the District.\nDallas\nModest growth continued, with revenue gains in the service and retail sectors. Housing contacts noted a decent spring selling season and stable prices. Credit conditions tightened further, and loan demand continued to decline. Payrolls rose moderately, and wage growth remained stubbornly elevated. Outlooks continued to worsen, and contacts voiced concern over waning demand, rising interest rates, and the overall health of the economy.\nSan Francisco\nEconomic activity expanded somewhat. Employment levels were stable amid tight labor market conditions, while wage and price growth moderated further. Retail sales grew modestly, and activity in the services picked up somewhat. Manufacturing activity was robust, while conditions in the agriculture sector weakened slightly. Residential and commercial real estate activity fell, and conditions in the financial sector worsened modestly.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/2023/2023-05-ph

"May 31, 2023\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to decline slightly. Although the consumer sector appeared to be growing, contacts suggest that higher sales, in part, reflect inflated prices rather than volume. High interest rates are limiting listings of existing homes for sale, which has helped new home builders. Employment edged up as labor availability improved. Wage growth and inflation continued to subside. Wages continued to grow within a modest range, while inflation cooled to a modest range for the first time since early 2021. Overall, contacts reported far fewer supply chain disruptions \u2013 instead noting that many sectors of the economy are enjoying unusually high profit margins. Contacts continued to note tighter credit standards, although credit quality remains very good. On balance, most firms noted no evidence of a recession, and most expect modest economic growth over the next six months. However, current sentiment is quite negative, as contacts worry about banking sector woes and the debt ceiling crisis.\nLabor Markets\nEmployment appeared to edge up after holding steady during the prior period. Contacts noted relatively few layoffs and observed that when layoffs or plant closings occur, other firms scoop up the workers. Most firms reported that labor availability continued to improve. A leisure firm noted shortages remain for housekeeping staff and cooks, but that was true before the pandemic.\nIn our monthly surveys, employment grew slightly as the share of nonmanufacturing firms that reported an increase in full-time jobs rose. This was offset, in part, by a rising share of nonmanufacturing firms reporting a decline in part-time jobs and by a rising share of manufacturing firms reporting a decline in overall jobs. Staffing firms confirmed that the demand for labor continued to be positive but had softened; clients are seeking more permanent placements rather than temporary positions.\nFirms reported that wage inflation remained at a modest pace overall but continued to slowly subside. Moreover, firms expected worker compensation to subside further over the coming year. A construction contact noted that wages rose about 2.5 percent for basic trades and about 4 percent to 5 percent for specialty trades.\nIn our monthly surveys, the distribution of nonmanufacturing firms reporting higher or lower wage and benefit costs per employee was typical of the pre-pandemic era, when modest wage growth prevailed.\nOn a quarterly basis, firms' expectations of the one-year-ahead change in compensation cost per worker fell to a trimmed mean of 4.6 percent in the second quarter of 2023, from 5.2 percent in the first 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 was essentially the same for manufacturers and nonmanufacturers.\nPrices\nOn balance, inflation subsided into a modest range \u2013 edging down from the moderate pace observed since October 2022. Moreover, reports of price increases were generally less widespread; however, expectations of future price hikes held steady this period.\nContacts reported that increases in prices received for their own goods and services over the past year were significantly lower in the second quarter of 2023 than in the first quarter. The trimmed mean for reported price changes as indicated by responses to our quarterly survey questions fell to 4.6 percent from 6.0 percent for all firms. Price increases fell to 3.7 percent from 4.7 percent among nonmanufacturers and fell to 5.8 percent from 7.8 percent for manufacturers. Reported price increases had peaked during 2022 at 5.6 percent for nonmanufacturers and at 10.7 percent for manufacturers.\nIn our monthly surveys, reported increases in prices paid and received were significantly less widespread than one year ago. While the price indexes remain somewhat elevated for nonmanufacturers, among manufacturers, the prices paid index is well below its nonrecession average and the prices received index is negative.\nLooking ahead one year, the increases that firms anticipated in the prices for their own goods held at a modest rate \u2013 the trimmed mean for all firms remained at 4.0 percent in the second quarter of 2023. It has fallen from a peak of 5.9 percent in the fourth quarter of 2021. The expected rate of growth remained at 3.9 percent for nonmanufacturers and near 4.1 percent for manufacturers.\nManufacturing\nManufacturing activity declined modestly \u2013 rebounding from a moderate decline in the prior period. The index for new orders rose from the last period but was negative for the 12th consecutive month. The shipments index also rose but remained slightly negative.\nContacts reported a mix of positive and negative perspectives for current activity and for expectations. Some firms noted that their recent growth reflected the easing of the supply chain problems that constrained their output last year. Several large firms with extensive linkages to the broader economy reported steady or improving demand and no signs of a recession.\nConsumer Spending\nConsumer spending held steady, at best. One retailer reported strong sales, although underlying volumes may have softened. Several contacts noted that their suppliers or their competitors are maintaining high profit margins \u2013 that competition has not emerged to drive prices down for the consumer. Auto dealers reported a modest increase in sales as new car inventories grew. However, the mix is weighted toward high-margin cars, including expensive electric vehicles. Consumer reticence has prompted an increase in incentives.\nTourism contacts continued to report slight growth \u2013 noting that the recovery was leveling out. Business travel and urban destinations continued to recover, while leisure travel and resort locations were flattening.\nNonfinancial Services\nOn balance, nonmanufacturing activity appeared to decline modestly for most of the reporting period, and then late-arriving reports began to show a slight uptick in new orders and sales or revenues. Many contacts expressed concerns about the debt ceiling and prospects for a recession, but few reported signs of a recession. Expectations for growth over the next six months have risen.\nFinancial Services\nThe volume of bank lending (excluding credit cards) continued to grow moderately during the period (not seasonally adjusted) \u2013 faster than the modest growth observed in the same period last year.\nDuring the period, District banks reported strong growth in home mortgages, auto loans, and commercial and industrial loans. The latter two segments represented a rebound from much weaker growth in the prior period in the wake of two prominent bank failures. Other consumer loans and commercial real estate lending grew modestly, while home equity loans were flat.\nCredit card volumes rose modestly after holding steady last period, but the pace was slower than the moderate growth during the same period last year \u2013 a potential sign of an ongoing pullback in consumer spending.\nBanking contacts reported good credit quality \u2013 noting only small upticks in loan delinquencies, which remain at very low levels. In the wake of recent bank failures, most contacts expressed concern about a credit crunch resulting from increased caution, whether from internal policies or external regulatory oversight. One contact described a one-page list of regional banks that had shut off the tap for new loans.\nReal Estate and Construction\nAccording to contacts, high interest rates have continued to dissuade existing homeowners from listing their house and losing their low interest rate. Existing home sales fell moderately, and prices resumed rising as the market heated up again. New home builders benefited with unseasonably modest sales, as the resale market slowed.\nMarket participants in commercial real estate reported a slight uptick in construction activity but noted that the pipeline for future work continues to diminish. Leasing activity fell moderately as weakness in the office market continued to emerge.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis\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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"May 31, 2023\nSummary of Economic Activity\nEconomic activity in the Sixth District grew at a slow pace from April through mid-May. Labor markets, while still tight, eased, reducing wage pressures. Nonlabor costs stabilized, on net, though property and liability insurance premiums rose. Low- to moderate-income consumers showed further signs of declining household financial health. Retail sales continued to moderate as consumers traded down; new auto sales were solid. Leisure travel softened, but business travel continued to rebound from pandemic levels. Demand for housing was strong even amid interest rate fluctuations. Commercial real estate conditions were mixed. Transportation activity weakened. Activity in the energy sector was robust. Agriculture conditions softened.\nLabor Markets\nSixth District contacts reported that labor markets remained tight, but pressures have eased since late last year. Most firms continued to backfill open positions; however, some noted that weaker demand for products and services was slowing the pace of hiring. Several contacts noted they were increasing hiring standards. The majority of firms indicated that most positions were easier to fill, and retention had improved. Some challenges filling certain roles persisted; labor shortages varied from market to market but were most acute in South Florida, where housing availability and affordability were cited as limiting the pool of candidates.\nMost contacts reported that wage pressures continued to ease, and the pace of increases was expected to moderate. However, wage pressure remained elevated for certain positions, particularly for skilled labor and those in retail/warehouse, accounting, and nursing.\nPrices\nNonlabor costs were largely reported as stabilizing over the reporting period. Construction inputs, particularly steel and other metals, moderated; freight and container costs were reported as back to pre-pandemic levels. Some contacts reported declining food costs. Various retailers implemented discounts amid slowing foot traffic and price pushback from consumers. Property and liability insurance costs rose markedly for firms in coastal areas threatened by storms. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth at 3.5 percent, on average, in May, unchanged from April. Firms' year-ahead inflation expectations were also relatively unchanged at 2.9 percent in May from April's 2.8 percent.\nCommunity Perspectives\nWorkforce training providers and banking contacts who serve low- and moderate-income individuals continued to see signs of declining household financial conditions. Regional bankers observed that consumer financial stress had intensified from a period of higher savings as delinquencies returned to pre-pandemic levels. While some employers noted slightly lower staff turnover, workforce development contacts affirmed that workers continued to leave jobs in search of higher wages to offset rising expenses, especially housing. Others said workers continued to report a need to work from home to cope with household demands. Some owners of small businesses who previously relied on traditional banks for loans, faced credit constraints, leading them to turn to Community Development Financial Institutions for financing.\nConsumer Spending and Tourism\nWhile consumer spending was still above pre-pandemic levels, District retailers reported some softening of sales since the previous report. Consumers continued to trade down and remained cautious with discretionary spending. Restaurants facing labor shortages continued to limit menu options or hours of operation. Automobile dealers reported further improvements in inventory levels along with continued strong demand for new and used vehicles.\nTravel and hospitality contacts noted persistent strong demand, and activity was described as normalizing from 2022 peaks. Leisure and business travel rebalanced back toward the pre-pandemic mix as demand for leisure travel softened, and business travel improved. Contacts expect further stabilization throughout the remainder of the year.\nConstruction and Real Estate\nHousing demand throughout the District remained strong despite interest rate and home price volatility. Though below year-ago levels, home sales in many markets increased on a monthly basis as buyer sentiment modestly improved. The supply of existing homes for sale remained low as homeowners showed increased hesitancy to list homes for sale, especially if they had financed at a low interest rate. Home prices remained down from peak levels but have recently shown month-to-month improvement. New home builders have responded to inventory shortages by increasing speculative inventory production and some have begun to reduce buyer incentives.\nCommercial real estate (CRE) conditions were mixed. The industrial sector remained healthy, while office, multifamily, and some segments of retail, slowed. Some contacts reported increasing expenses, especially property insurance, as an area of heightened concern. An increasing number of contacts reported worries about the availability of financing as some lenders reduced funding commitments and increased underwriting standards. Most CRE contacts noted increasing uncertainty and declining property values as a significant industry headwind.\nTransportation\nDemand for transportation services softened, on balance, over the reporting period. Trucking contacts noted significant year-over-year declines in freight volumes and revenue amid what some referred to as a \"freight recession.\" Activity in the warehousing sector remained robust; however, warehouse development transaction volumes fell substantially. Ocean carriers reported lower container import volumes as retailers worked to deplete elevated inventory levels. Inland barge companies reported stable demand. Transportation contacts' outlooks were mixed, but several downside risks were cited, including the potential for weaker consumer spending, rising interest rates, and persistent inflation.\nBanking and Finance\nLiquidity remained a top concern for financial institutions over the reporting period. Continuous variations in interest rates, along with some deposit flight to higher-yielding alternatives, put stress on liquidity. Financial institutions reported that the fair value of securities portfolios continued to stabilize but unrealized losses remained elevated compared with pre-pandemic levels. District banks also reported ongoing commercial real estate loan growth, albeit at a slower pace. Shifts in commercial real estate property values raised additional concerns about increasing credit risk as financial institutions began reevaluating the collateral values of underwritten loans.\nEnergy\nEnergy contacts reported continued robust activity in liquefied natural gas expansion projects, power infrastructure, clean energy manufacturing, and crude oil production. Global demand for oil and natural gas was steady over the reporting period. Contacts reported that crude oil and finished products refining continued at a high rate. Utility providers described growth across sectors, including strength in the industrial segment due to electric vehicle manufacturing, data center development, and plant expansion projects across the Gulf Coast, as well as sustained growth in residential from in-migration to the Southeast.\nAgriculture\nAgricultural conditions softened since the previous report. Demand for cotton remained weak, leading many farmers to plant less cotton than last year. Cattle demand was strong. Producers of poultry meat continued to struggle as limits on exports resulting from Avian Flu concerns have led to over-supply domestically. Domestic egg demand remained high. Dairy consumption declined. Demand for citrus remained strong amid lower production.\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"

Minneapolis

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"May 31, 2023\nSummary of Economic Activity\nEconomic activity in the Ninth District increased slightly since the previous report. Employment grew modestly with some volatility; labor demand remained healthy, but some firms reported significant layoffs. Wage pressures remained high, while price pressures were stable. Growth was noted in consumer spending and manufacturing, and agricultural conditions were solid. Commercial construction was flat and commercial real estate activity fell, while residential construction and real estate remained subdued. Minority- and women-owned business contacts reported a slight decrease in activity.\nLabor Markets\nEmployment grew modestly in the District since the last report, but with some volatility. Overall labor demand remained healthy. Several recent surveys of various sectors and geographies all found strong recent demand for labor. Businesses expected growing demand heading into the summer season but continued to report difficulty with turnover and finding labor. However, there were also some signs of softening labor demand. In April alone, Minnesota saw almost as many mass layoff events as in all of 2022, affecting more than 2,600 workers in total, a greater number than last year.\nWage pressures remained high. A survey of construction firms found that about 35 percent reported wage increases of 5 percent (annually), and a similar share increased wages by 3 to 5 percent. A survey of hospitality and tourism firms found that more than 40 percent gave annual wage increases of 5 percent or more. Firms in both surveys expected some easing in future wage pressures, even though they also reported strong labor demands and a lack of worker availability.\nPrices\nSince the last report, additional price pressures were minimal. Just over half of respondents to a Ninth District business conditions survey reported an increase in input prices in April relative to a month earlier, while a smaller share reported increases in final prices for products or goods sold. Most manufacturing contacts reported no change in recent nonlabor input prices, and about a quarter reported a slight decrease. Construction survey respondents indicated a mixed picture for materials costs, with an overall flattening in the pace of increases over the past three months. Lumber and certain steel prices decreased. Contacts in construction and agriculture reported that heavy equipment prices remained elevated despite some reduction in demand. Retail gasoline prices increased slightly since the last report, while diesel prices declined. Prices received by farmers increased from a year earlier for corn, potatoes, hay, cattle, turkeys, and eggs; prices decreased from a year earlier for soybeans, wheat, milk, hogs, chickens, sugar beets, dry edible beans, lentils, and canola.\nWorker Experience\nWorkers and job seekers in low- and middle-income households prioritized better pay and benefits as they looked for work, according to a recent survey. Food, gasoline, and household energy costs continued to tighten people's budgets. \"Gas is rising to a point where I cannot afford it,\" shared a South Dakota agricultural worker. A preschool teacher reported that his paycheck was barely sufficient to pay for necessities. He and others in similar situations were looking for second jobs to supplement their incomes. Young migrant workers at a Minnesota milk factory reported working 12 hours a day and having one day off every two weeks. Their hourly wages ranged from $10 to $13 for \"hard work that others don't want to do.\" They shared feeling as if they had no freedom because they spent most of their time working and resting for the next day.\nConsumer Spending\nConsumer spending rose modestly since the last report. Gross sales in April were flat in South Dakota year over year, and the Montana accommodation and lodging sector remained strong this spring. Air travel continued to grow at District airports, with several seeing double-digit passenger growth in April compared with last year. An airport contact said that leisure travel \"remains very strong,\" adding that business travel has continued to recover. A May survey found that Minnesota restaurants continued to see strong patronage, while hotels and entertainment venues reported mostly flat revenues compared with the same period last year. Businesses were optimistic regarding the summer season, particularly among restaurants and entertainment venues. A dealership with multiple locations in the western part of the District reported that new car sales in April were 23 percent higher year over year, thanks mostly to \"getting some vehicles out of railyards,\" but there remained significant pent-up demand.\nConstruction and Real Estate\nNonresidential construction activity was flat overall since the last report, with subsectors experiencing some variability. Firms in infrastructure and other heavy construction reported generally stronger activity, in part from federal infrastructure initiatives. Firms in industrial and commercial construction reported some softening. However, increases in project cancellations were seen across the industry, the result of high input prices, higher financing costs, and general uncertainty about the economy. New projects out for bid, as well as project backlogs, were also reported to be lower than this time last year. Smaller firms reported some unwillingness to commit to longer-term projects, or doing so only with elevated work bids, due to the volatility of material costs. On the positive side, supply chains reportedly improved overall, though they have not yet had a material effect on project completion times, in part because of labor shortages. Residential construction remained subdued. Single-family permitting in April was more than 40 percent lower year over year in the Minneapolis-St. Paul region; most other large markets in the District saw even bigger declines. Discounts have started to appear for some speculative developments. A Wisconsin homebuilder said the \"majority of the work comes from people who have cash and not from people taking out loans.\"\nCommercial real estate fell since the last report. Industrial and multifamily markets remained strong, and new construction has slowed recently in both sectors, helping keep vacancy rates low and rents healthy. Office real estate was seeing real strain from continued low levels of worker occupancy. Incentives to retain tenants were common because many were looking to downsize their office footprint. Those purchasing buildings with debt faced a tightening market for refinancing. Residential real estate remained subdued. Closed sales in April fell notably year over year across the District, with many larger markets seeing declines of 30 to 50 percent. Median sale prices declined in western and central Montana and were flat in several other markets.\nManufacturing\nManufacturing activity increased modestly since the previous report. A regional index of manufacturing conditions indicated that activity expanded in April from a month earlier in Minnesota, North Dakota, and South Dakota. Contacts in agricultural equipment and processing mostly reported growth in recent activity. Other manufacturers gave mixed reports on recent demand, with roughly similar numbers reporting increased or decreased sales.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions were solid heading into planting season. About half of respondents to a survey of agricultural credit conditions reported that farm incomes increased in the first quarter from a year earlier. Lenders noted improvements in liquidity and in the financial condition of producers, but they were concerned about commodity price volatility and rising interest rates. Heavy snow over the winter and persistent cold weather will significantly delay spring planting in some areas, contacts reported. District oil and gas exploration activity decreased slightly since the previous report.\nMinority- and Women-Owned Business Enterprises\nMinority- and women-owned business contacts reported a slight decrease in activity over the last month. Higher nonlabor input costs were narrowing profit margins for some entrepreneurs, who said that they were hitting a limit in their ability to increase final prices. Compensation was mostly unchanged and finding applicants remained a challenge for those hiring. Entrepreneurs expected to see some improvement in sales but remained wary in their profit forecasts. A contact who provides technical assistance to women entrepreneurs said she has seen an increase in demand for services, including among working mothers. She warned that higher interest rates \"scare new entrepreneurs\" and presented additional challenges to some who already struggled with financial literacy and access to capital.\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

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"Beige Book Report: Kansas City\nMay 31, 2023\nSummary of Economic Activity\nTotal economic activity across the Tenth District changed little during May. Consumer spending at restaurants and for travel picked up in recent weeks, but most contacts did not expect the surge in spending to persist into coming months. Job growth continued to slow. However, the number of job openings remained elevated as businesses indicated they recently became more selective among potential candidates. Worker retention improved substantially, supporting the more cautious recruiting practices among businesses. Prices rose at a moderate pace. Growth in housing rental rates remained elevated in several western District states, but the pace of increases declined broadly and swiftly from the growth rate experienced during the past year. Although many businesses indicated some persistence in their ability to pass on higher costs, they also reported slower expected growth in costs ahead. Corn and soybean prices declined slightly since April based on reports of ideal planting conditions throughout most states and early projections that production could hit record levels due to historically strong yields. Banking customers continued to diversify account balances among multiple banking institutions. Overall, deposit levels remained stable across the District, with continued rotation of balances toward time deposits.\nLabor Markets\nAlthough the overall pace of hiring in the Tenth District continued to be modest, most businesses indicated they had just as many, or more, job openings over the past month as they did at the beginning of the year. Contacts indicated they became much more selective in their hiring recently even as the number of applicants increased, partly explaining the disparity between the number of jobs posted and the level of hiring. Contacts reported that worker retention improved further in recent weeks. Several businesses also noted that competition for talent from businesses in different industries became less prevalent recently. Most businesses indicated that some of the slowness in hiring activity was also due to ongoing labor shortages, particularly for skilled workers in jobs with limited education requirements.\nAlthough businesses reported ongoing wage pressures, most contacts indicated they expect the pace of wage growth to slow further during the second half of the year. The reported expectations of moderate wage growth in coming months were a marked downshift compared to the beginning of the year, when businesses had indicated they expected robust wage growth at the same levels they experienced last year.\nPrices\nPrices continued to rise moderately across the District. Businesses were mixed in their ability to pass along higher costs to their customers. Regardless, the pace of input price growth slowed broadly, suggesting easing cost pressures. Accordingly, most businesses indicated that price increases for finished products will likely soften over the coming year. Housing rents rose at a moderate pace generally, increasing somewhat faster in western District states. However, rents were growing much more slowly across the District than the accelerated pace witnessed over the previous year. \"Since peaking in September of last year, growth in rental rates is returning to the pre-pandemic trend,\" one contact reported.\nConsumer Spending\nConsumer spending at restaurants, in hotels and at entertainment venues rose at a robust pace in several District cities over the past month. Some of this surge in spending was tied to success of certain professional sports teams, which led to inbound travel and activity for post-season games and for a highly attended player draft event. Notably, both hotel occupancy and daily rates picked up recently. However, several contacts reported that spending for personal care services continued to decline at a moderate pace.\nCommunity Conditions\nOrganizations serving low-to-moderate income (LMI) communities reported increased demand for their services compared to six months ago. The growth in demand was noted across food assistance, housing assistance, and care economy segments of the non-profit space. As consumer prices have increased, organizations noted clients were more likely to be experiencing depleted savings and high credit card utilization, suggesting LMI populations are struggling to accommodate the recent growth in the costs of living. Non-profit leaders indicated they anticipate adverse effects of tightening credit availability on the communities they serve over coming months.\nManufacturing and Other Business Activity\nManufacturing contacts reported little change in overall production volumes. However, most contacts indicated the number of new orders and the length of their production backlogs declined modestly over the past month. In characterizing the downshift in new orders, one contact stated, \"things are slowing, but no cliff in demand seems to be coming.\" Certain premium and specialty manufacturing activities, namely high-tech manufacturing and agricultural equipment production, reported ongoing strength in demand. The majority of contacts at manufacturing businesses indicated little difficulty in securing financing for their operations and planned capital expenditures. Services contacts broadly reported a moderate increase in business activity, with leisure and hospitality and health care establishments indicating especially strong sales growth over the past month. Although activity among services businesses picked up, expectations for growth over the next six months declined modestly. Some contacts at services businesses suggested access to credit slightly worsened over the last few weeks, primarily for funding large capital spending projects, but most businesses reported no change in their access to financing.\nReal Estate and Construction\nSeveral contacts in commercial real estate reported worsening conditions associated with higher refinancing costs over the past month. Heightened requirements for additional equity to reduce loan-to-value ratios were making refinancing deals difficult to close. Challenges in valuing properties reportedly exacerbated headwinds for refinancing activity. Some office property managers indicated assessing tenet quality became more difficult because the large companies that are historically stable renters have become more footloose, asking for shorter lease terms, or are reducing their demand for space altogether.\nCommunity and Regional Banking\nLoan demand weakened modestly in the past month as higher interest rates and the uncertain economic environment deterred loan growth, particularly for commercial real estate. Contacts expected loan demand to remain at current levels over the next six months. Rate pressures remained elevated in the deposit market. Customers continued to diversify account balances among multiple banking institutions in response to volatility in the banking industry. Overall, deposit levels were stable across the District during the past month, with continued rotation of balances toward time deposits. Given that funding costs are growing faster than new loan growth, net interest margins were projected to compress. Credit standards remained unchanged, and contacts noted stable credit quality and low past-due levels. However, contacts expected credit standards to tighten somewhat further due to concerns about future deterioration in asset quality, as higher borrowing costs adversely affect repayment capacity.\nEnergy\nEnergy activity declined slightly over the last month. Though oil production increased slightly, and natural gas production stayed flat, District rig counts declined in the face of depressed price levels. Still, there was some divergence among District states. The number of active rig counts held steady in New Mexico and Colorado but fell moderately in both Oklahoma and Wyoming. Furthermore, as an additional sign of slowing energy activity, the number of drilled but uncompleted wells continued to increase in the District and contacts expect an additional reduction in well completions going forward. Lastly, while access to credit is generally not an issue for most energy firms, companies with a heavy concentration in natural gas have seen tightening credit conditions due to sustained lower natural gas prices.\nAgriculture\nConditions in the Tenth District agricultural economy remained strong through early May but showed signs of moderating. Corn and soybean prices declined slightly since April and were moderately lower than a year ago. Prices moved down recently based on reports of ideal planting conditions throughout most states and early projections that production could hit record levels due to historically strong yields. Wheat prices increased slightly since April, but poor yields caused by drought could limit revenues, particularly in Kansas and Oklahoma. Profits among cattle producers continued to be pressured by high feed costs and drought that damaged pasture conditions throughout the region.\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"

Boston

/beige-book-reports/2023/2023-05-bo

"May 31, 2023\nSummary of Economic Activity\nBusiness activity in the First District was about flat on balance. Retail sales increased modestly and restaurants enjoyed a seasonal uptick in activity in early May. Manufacturers posted mixed results, averaging modest revenue growth. Residential real estate sales were held back by inventory constraints, even though buyer demand strengthened moving into the spring season. Commercial real estate activity slowed moderately further, with new weakness in the suburban office market. Employment fell slightly amid broad declines in labor demand, and wage growth slowed somewhat. Prices increased at a modest pace on average, but some sizable price increases were noted. The outlook was cautiously optimistic on average, but the commercial real estate forecast weakened further on credit concerns.\nLabor Markets\nEmployment was down slightly amid muted hiring activity, and wage pressures eased a bit on balance. According to staffing industry contacts, labor demand slowed for a wide range of positions, including legal support and talent acquisition roles, as client firms trimmed hiring plans\u2014though they so far have enacted no major layoffs. However, one manufacturing contact engaged in moderate layoffs related to receding demand for COVID-related products, and other manufacturers reduced labor by shedding temporary workers. Among restaurant industry contacts, hiring of waitstaff improved while back-of-house positions (e.g., chefs and managers) remained very hard to fill, resulting in further upward wage pressure for those roles. Retail headcounts were roughly steady, reflecting a combination of limited hiring and moderately lower attrition. According to staffing contacts, wage growth remained stable but workers seemed to lose bargaining power, as some employers at least partly rolled back flexible work arrangements. Contacts anticipated that selected wage pressures would persist but that average wage growth would decline considerably moving forward and that starting wages for some roles might even see slight declines through the end of 2023.\nOn the labor supply side, a workforce development contact continued to see many potential job candidates struggling with persistent barriers to labor force engagement. The barriers included childcare and eldercare responsibilities, housing and transportation instability, and health challenges.\nPrices\nPrices increased modestly on average as cost pressures eased further. Pricing activity was mixed among manufacturers, as some held prices steady and others enacted sharp price increases with little pushback from consumers. Retail prices were flat or down slightly as a result of increased promotions. Manufacturers and retailers alike said that freight and shipping costs declined further. Nonlabor cost pressures were mixed for restaurant owners, as wholesale food prices were flat in recent months but other costs such as rent, utilities, and health insurance increased further. The pricing outlook for the rest of 2023 was mixed, as most contacts expected to hold prices steady but some planned to post additional, above-average price hikes in response to ongoing cost pressures.\nRetail and Tourism\nAmong First District contacts, retail and restaurant sales increased modestly in recent weeks. An online retailer experienced an uptick in sales volume that was attributed in part to increased sales of outdoor furniture. Two discount retailers saw further modest improvements in sales volumes, pointing to their lower price points as a source of strength. A Massachusetts restaurant industry contact reported pockets of softer sales in April that were followed by broad improvements in recent weeks from Mother's Day and graduation celebrations, as well as from seasonal increases in outdoor dining. Despite growth in restaurant sales volume, profits continued to lag due to upward wage pressures and selected increases in nonlabor costs. Retail and restaurant contacts alike were cautiously optimistic for sustained modest growth for their own businesses in the near-term, but nonetheless cited concerns about the broader economy moving forward.\nManufacturing and Related Services\nReports from First District manufacturing contacts were mixed, but revenues increased modestly on balance. One manufacturer reported an abrupt decline in sales linked to the recent downturn in the semiconductor industry. A manufacturer of testing equipment said that sales were stable but short of expectations, in part related to slumping smartphone sales. A contact serving the scientific and life sciences industries said that revenue growth had returned to robust, prepandemic levels, in part owing to strong demand from China, although some of the firm's customers became more cautious in their spending. None of our contacts reported revisions to their capital expenditure plans. However, one contact heard that smaller peer firms were pulling back on spending on concerns about financing in the wake of recent bank failures. Looking ahead, contacts ranged from cautiously optimistic to very optimistic.\nStaffing Services\nFirst District staffing contacts reported modest declines in revenue on balance through the second quarter of 2023, driven by decreased labor demand across many roles. Nonetheless, one firm reported sharply higher revenues from hiring for skilled manufacturing and engineering positions. Contacts described the recent slowdown in demand for staffing services as the continuation of a trend that began in late 2022 and that is expected to continue through the end of 2023. Contacts described the overall environment as one of caution, as firms anticipated a modest contraction in the economy. One contact noted further that demand for legal support roles had decreased, suggesting (in their view) that mergers and acquisitions might be slowing. Regarding the outlook, staffing firms expected their own revenues to hold relatively steady even with the anticipated further contractions in hiring.\nCommercial Real Estate\nIn the First District, the commercial real estate market experienced a moderate decline in activity since April. In the industrial class, rents continued to level off and leasing began to slow due to a lack of available space. The office class saw a further slowing of deal flow, now impacting both the suburban and urban markets. Office rents were mostly stable but tenant allowances and other concessions increased further. The retail class was reportedly experiencing mixed conditions, with grocery-anchored and big-box retail spaces performing the best and the worst, respectively. On average, however, retail rents and leasing activity were unchanged since April. Across property types, investment sales slowed to a trickle and there was no new construction of note, facts attributed largely to financing difficulties. Looking ahead, contacts expected further declines in leasing and investment activity in both the office and retail property markets, with the office sector having the weaker outlook of the two. The industrial class is expected to see relatively stable activity, other than experiencing limited access to credit to finance new construction.\nResidential Real Estate\nFirst District residential real estate sales ticked up slightly in March and April (the latest months for which data were available) in line with seasonal patterns, but continued to fall well short of year-earlier levels. Contacts around the District attributed the still-low sales numbers more to low inventories than to weak demand, as slightly lower mortgage rates helped bring more buyers to the market. Indeed, the Boston area enjoyed an above-average surge in single-family sales in March thanks to an uptick in inventories, and contacts reported a rise in instances of multiple offers and buyer concessions such as the waiving of inspections. Inventories were otherwise quite mixed, falling significantly from a year earlier in Massachusetts (outside of Boston) and Vermont, and down more modestly or flat elsewhere in the District. House price appreciation slowed on average but remained slightly positive, with the exception that home prices in Massachusetts (not including Boston) experienced modest declines from a year earlier. The modest price growth in the Boston area marked a reversal of trend from the preceding few months. Contacts anticipated that, despite healthy buyer demand, home sales would likely experience only a modest seasonal increase moving forward, owing to extremely low inventory levels.\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"

Richmond

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"May 31, 2023\nSummary of Economic Activity\nEconomic activity in the Fifth District was little changed, on balance, in recent weeks. Manufacturing activity was unchanged as new orders from retailers softened while orders from industrial clients were strong. District ports saw a moderate decline in total volumes as import activity fell; however, export volumes held strong. Trucking firms also reported declines in demand and shipping rates and put a pause on hiring as a result. Retail spending declined slightly overall, although some goods categories saw gains. Consumer spending on travel and tourism, on the other hand, increased moderately. Residential real estate activity picked up slightly amid historically low levels of existing home inventory. New home sales slowed, however, and builders offered incentives to close deals. Commercial real estate activity declined modestly, but some segments such as medical, industrial, and retail leasing remained strong. Overall, loan demand declined across commercial loan types, deposit levels declined, and delinquencies rose but were still near historically low levels. Meanwhile, nonfinancial services saw modest growth in demand and steady revenue growth. Employment rose modestly amid a tight labor market; however, wage growth moderated. Inflation remained high despite a slight slowdown in the pace of price growth in recent weeks.\nLabor Markets\nFirms continued to grow their employment levels modestly over the most recent reporting period. Several firms reported having multiple open roles they were not able to fill due to a tight labor market. A textile manufacturer was struggling to hire the \"next generation\" of workers to replace retiring workers, as the average age of new hires is in the fifties. Many other firms, on the other hand, were adequately staffed and held employment levels unchanged. Firms reported already having gotten through their large wage increases and are feeling okay with the current level of moderate wage growth. A craft beer manufacturer reported that wage growth, although still somewhat high for the skill set of workers, has stabilized from last year.\nPrices\nPrice growth eased slightly in recent weeks, but overall inflation remained elevated. According to our surveys, year-over-year growth in prices received by services slowed slightly while growth in prices received by manufacturers was little changed. In both sectors, price growth remained well above historical levels. A small appliance manufacturer, however, said that costs had fallen as shipping costs from China returned to pre-covid levels. As a result, combined with pressure from big box retailers that were looking to cut prices to consumers, the firm was lowering its prices.\nManufacturing\nManufacturing activity was mixed in the most recent reporting period. Finding and retaining workers remained a significant concern. A packaging manufacturer purchased two pieces of equipment so they could grow their business through productivity-enhancing technology rather than with new employees. A steel manufacturer increased the frequency and amount of bonus payments to maintain a stable workforce. New orders, on balance, were down compared to the previous reporting period. Several contacts reported that their clients had excessive inventory, resulting in lower levels of business. Contacts reported that retailers have \"right sized\" their inventory levels, resulting in new orders returning to pre-pandemic levels.\nPorts and Transportation\nFifth District ports reported a moderate decline in loaded import volume this period. Imports of consumer goods and automobiles were down. However, with the growth of investments in manufacturing, there was an increase in imports of machinery and parts. Loaded export volumes were strong and mainly driven by agricultural products and lower value commodities, as well as rolling stock. Container dwells have shortened dramatically and there were no issues with empty containers causing backups at the port. Spot rates were low relative to the last two years, but transatlantic spot rates are still slightly above their pre-pandemic level mainly due to some blank sailings and carriers removing capacity. There was a return of some purchasing power back to the shipper.\nTrucking firms reported a sharp decline in freight volume this period with excess capacity in the system. Respondents indicated that there was a freight recession, and it was more difficult to find loads. Weakness in demand was primarily in consumer and industrial segments. Spot prices have declined primarily due to more price sensitivity by shippers and competition for freight. Consequently, trucking firms stated that they had implemented a pause in hiring and were anticipating decreasing the number of drivers by attrition. Trucking firms also said that the supply chain had improved with better availability of equipment and parts.\nRetail, Travel, and Tourism\nRetail spending softened slightly, on balance, but sales growth varied by market segment. For example, a couple of furniture stores said sales were down because home sales were low. Additionally, sales were reportedly down for some consumer durables\u2014like household appliances, sports equipment, toys, and games\u2014whereas some apparel and cosmetic products sales were up. Retailers continued to work down inventories and were hesitant to make new orders.\nTravel and tourism increased moderately this cycle. Hotel performance remained strong with increased room nights sold and strong revenue per room amid continued, but slight, room rate growth. Sports and entertainment venues also reported increased demand and steady revenues in recent weeks.\nReal Estate and Construction\nResidential real estate respondents indicated that the spring market was off to a good start with sales prices continuing to appreciate but not at the same pace as last year. Inventory of homes for sale remained constrained due to a fewer people putting their homes on the market after locking in a low interest rate during the pandemic. Buyer traffic was steady and days on market increased slightly in the last month. However, fluctuations in mortgage interest rates caused buyers to pull back, with pending sales and closed sales both down this period. Builders were offering strong incentives to close deals. Some residential renovation firms noted a steady decline in closing sales due to the cost of those services and the consumer's lack of funding.\nOverall commercial real estate market activity slowed in the last month, except for retail, medical and industrial/flex space leasing, which remained robust. Class A office vacancy/subleases increased this period in most markets. Rental rates remained flat; however, landlords were offering higher incentives and/or concessions to potential credit tenants. Respondents stated there was very little new construction activity and limited credit availability for commercial real estate deals, especially in the office sector. Additionally, respondents cited some cases of commercial real estate loan defaults. Commercial contractors noted a continued shortage of labor despite increased wages. As well, they reported that requests for new work had slowed down considerably.\nBanking and Finance\nLoan demand was down slightly across all commercial loan types, including commercial real estate, where rising interest rates and increased underwriting scrutiny kept growth muted. Consumer lending continued to be stable, with moderate demand for both new and used auto loans. Deposit levels continued to drop but have started to stabilize. Institutions noted that they were working closely with customers to maintain deposit balances and tailoring products to meet their needs due to rising rates and increased competition in the overall marketplace. Loan delinquencies continued to rise, but at rates that were still near historically low levels.\nNonfinancial Services\nNonfinancial service providers reported modest growth in demand for their services and stable revenues. Firms continued to work through their backlogs and backorders of work, and they noted those streams were what was keeping revenues stable for now. Firms continued to struggle with finding qualified employees and noted the labor markets were still \"tight\", even with large technology firms announcing layoffs. They also noted that external costs continued to rise as well. One respondent noted that the future has never been \"so foggy and murky\" for their firm as well as their customers when it comes to expected revenues and growth.\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"

Dallas

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"May 31, 2023\nSummary of Economic Activity\nThe Eleventh District economy continued to expand modestly. Manufacturing output was flat while revenue in the service and retail sectors grew. Energy reports were mixed with oilfield activity steady, but declines seen on the natural gas side. Housing contacts noted a decent spring selling season and stable prices. Credit conditions tightened further, and loan demand continued to decline. Agricultural conditions improved in some areas but remained strained by drought in others. Local nonprofits cited higher demand for assistance. Overall payrolls rose moderately, and wage growth remained elevated. Outlooks continued to worsen as uncertainty remains on the rise, and contacts voiced concern over waning demand, rising interest rates, and the overall health of the economy.\nLabor Markets\nEmployment growth rebounded slightly to a more moderate pace over the reporting period. Hiring resumed in the service sector in April after stalling in March, and manufactures continued to add to payrolls at an average pace. Oilfield services firms were still hiring, though some layoffs were seen in natural gas regions. Scattered reports of layoffs also came from transportation services and manufacturing. In an April Dallas Fed survey of 370 Texas business executives, more than half were currently trying to hire. Forty percent said the availability of applicants improved over the past month, significantly higher than the 14 percent share reporting a worsening. Reports of binding labor constraints continued in the energy sector, and mentions of worker shortages came from a few other sectors as well, including healthcare and retail.\nWage pressures remained elevated. The notable wage deceleration seen last year seems to have largely flattened out this year. A few contacts said they were unable to pay the required wage rate to attract workers.\nPrices\nInput cost inflation remained below average for manufacturers but was still elevated in the service sector. Fuel costs declined over the reporting period, though a few contacts noted that continued increases in labor costs offset any relief in input costs (fuel or otherwise). Several contacts noted an increase in borrowing costs, in some cases significant. Selling prices remained elevated in the service sector. Airlines reported high ticket prices amid strong demand and constrained supply (pilots and aircrafts).\nManufacturing\nTexas manufacturing experienced lull in output growth in April, continuing the pattern seen so far this year of bouncing between little to no expansion. New orders continued to fall, though not as fast as the prior couple of months. One contact said customer inventories were high from overstocking last year. Durable goods demand is holding up better than nondurable, led by fabricated metals and transportation equipment. Reports from refineries and chemical producers were mixed. Overall, manufacturing outlooks worsened further, and uncertainty continues to climb.\nRetail Sales\nRetail sales increased modestly in April after holding steady in March. Auto dealers reported a decline in sales. They cited low consumer confidence and noted that higher interest rates were starting to affect profitability due to increased costs to finance new-vehicle inventories. Wholesalers and pharmacies noted particular strength over the past six weeks. Overall outlooks were more pessimistic than other sectors.\nNonfinancial Services\nService sector activity continued to grow at a fairly modest pace in April. Revenue growth was led by health care followed by professional, scientific, and technical services. Notable revenue declines were seen in leisure and hospitality, with contacts citing a slowdown in spending by customers due to economic uncertainty. Some services firms noted a decreased availability of equity and debt capital, but the majority continued to note no difficulty obtaining financing for either short- or long-term use. Staffing firms reported stable demand, with more optimism for placements of white-collar workers than manufacturing workers. Multiple contacts said one source of strong demand is IT workers\u2014connecting small to mid-size firms with workers laid off by large firms. Overall outlooks continued to worsen in April, though pessimism waned slightly.\nConstruction and Real Estate\nHousing demand broadly held up during the reporting period, though sales continued to be weaker than a year ago. Contacts noted a decent spring selling season, with prices largely stable, and builders were able to raise prices slightly in selected areas. With housing starts notably below year ago levels, building cycle times and labor availability has improved. New land and lot development remained subdued. Outlooks were cautious with some voicing concern about whether demand would hold up beyond the spring selling season.\nActivity in the apartment and retail market was little changed since the last report. Apartment rents were flat, and a contact noted an uptick in evictions in some areas. Office markets continued to face headwinds, with rising vacancy and subdued demand. Outlooks were mixed, with concern about the uptick in office commercial mortgage-backed securities delinquency and loans coming up for renewal this year.\nFinancial Services\nLoan demand declined for the sixth period in a row amid further loan price increases and worsening general business activity. Overall loan volumes continued to decline as well, though at a slower pace. Residential real estate loan volumes stabilized after falling for several months, and consumer loan volume declines slowed notably. Significant volume declines continue to be seen in commercial and industrial and commercial real estate lending. Credit conditions tightened further; 48 percent of bankers in the Dallas Fed Banking Conditions Survey said they tightened credit standards and terms over the past six weeks, the highest share since the survey began in 2017. Loan nonperformance continued to increase slightly. The banking outlook continues to deteriorate, with contacts expecting a further contraction in business activity and loan demand and an increase in nonperforming loans over the next six months.\nEnergy\nDrilling and frac activity for oil wells was essentially flat over the past six weeks, while natural gas-directed drilling declined amid low natural gas prices that have been pressured by swelling inventories and mild weather. Overall, the Eleventh District rig count fell by 14 rigs over the reporting period. Outlooks were mixed. The industry is still expected to increase oil-directed drilling and completion activities modestly through year end, while prospects on the natural gas side have worsened.\nAgriculture\nRecent rainfall improved drought conditions in the eastern part of the district while severe drought persisted in much of the western part. Grain prices generally decreased over the reporting period, amid a positive outlook for U.S. crop production this year. Drought will hamper crop production in Texas, however, and, in particular, contacts expect a below average cotton crop this year. A bright spot for agricultural producers is on the livestock side, where cattle prices rose notably over the past six weeks and are significantly above last year's prices, supported by tighter supplies and solid demand for beef.\nCommunity Perspectives\nNonprofits continued to see increased demand for their services. Food insecurity remains a rising concern for lower-income families, and some nonprofits report record use of their food pantries. Contacts pointed to inflation and the cessation of pandemic-era expanded SNAP benefits in March. Housing affordability was also a primary concern, and one contact said low housing inventory has made their provision of housing vouchers difficult. The nonprofit has sufficient funding for the vouchers but cannot find enough landlords willing to accept them, often because they believe they can get a higher rent from other perspective tenants. Multiple contacts mentioned consequences of the digital divide\u2014a struggle with digital literacy and access to technology is a barrier to employment for lower-income individuals, as well as a barrier to credit access given the decline in brick-and-mortar banks.\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\nMay 31, 2023\nSummary of Economic Activity\nEconomic conditions have remained unchanged since our previous report. Contacts continued to report difficulty hiring workers, but generally had a slightly easier time finding and retaining workers. Wages and other input costs increased modestly, which led to margin compression, as firms were unable to pass on these cost increases as sales prices. Consumer spending was mixed: Some firms noted they had lowered expectations due to weaker overall economic conditions while others were limited by their ability to meet strong demand due to labor shortages and supply chain issues. The residential real estate sector was largely unchanged, but commercial real estate contacts reported softer sales and concerns over looming vacancy and debt issues. Banking contacts noted loan demand softened and delinquencies continued to tick up. Overall, the outlook was slightly weaker due to concerns about future demand and broader concerns about weakening macroeconomic conditions in the second half of the year.\nLabor Markets\nEmployment has improved slightly since our previous report. Unemployment rates remained low, and hiring and retaining workers has remained a challenge in several industries. However, more contacts have been reporting an ability to hire and retain workers to meet demand over the past few reports. A healthcare contact in Louisville reported that the labor market has improved to where only lower paid jobs are left to fill, and a St. Louis startup reported that they have been able to hire new talent more quickly than was the case a year ago.\nWages have grown slightly since our previous report. A majority of contacts reported an overall net increase in wage costs. Agriculture contacts in Memphis reported wages were still rising, and financial services contacts in St. Louis had an increase in wages for employees and in overall labor costs.\nPrices\nPrices have increased modestly since our previous report. Half of District survey respondents reported higher or slightly higher prices since the first quarter, 31 percent reported similar prices, and 19 percent reported 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. Just under half of survey respondents projected that third quarter prices will be higher than in the previous year. Respondents reported that consumers continued to become more price sensitive, which prevented businesses from fully passing on increasing costs to consumers. A contact in the automobile industry reported that wage pressures, higher interest rates, and increased inventories industry-wide have decreased profit margins. A contact in the retail industry reported softening demand due to higher prices, causing them to lower prices and decrease their margins.\nConsumer Spending\nGeneral retailers, auto dealers, and hospitality contacts reported mixed business activity and a slightly weaker outlook. April real sales tax collections increased in Kentucky, Missouri, and Arkansas relative to March and decreased in West Tennessee. Retailers in Memphis noted that business activity met their expectations; however, they had lower expectations for future business activity due to rising interest rates and broader economic uncertainty due to the looming decision on the debt ceiling. A St. Louis auto dealer reported that business activity was relatively unchanged from the previous month and noted that they have lowered expectations for upcoming sales because they do not have enough product to meet demand. Restaurants in Little Rock that were impacted by the tornado at the end of March were preparing to start reopening. According to contacts, economic activity linked to the Kentucky Derby rose more than 10 percent from the previous year, and contacts estimated that the event surpassed pre-pandemic numbers.\nManufacturing\nOverall, manufacturing activity has slightly increased since our previous report. Firms have reported moderate increases in new orders, while production has moderately increased for firms in Missouri and modestly decreased for firms in Arkansas. Relative to last year, average work hours have risen and wages have increased by over 5 percent. Contacts reported that retaining workers also remains an ongoing issue. On net, firms expect slight increases in productivity, capacity utilization, and new orders, but a minority are concerned about weakening demand going forward.\nNonfinancial Services\nActivity in the nonfinancial services sector has remained stable since our previous report. Air traffic remained stable, and a transportation contact in the St. Louis region reported that their clients' desires to replenish shrinking inventories have led to higher demand for transportation and logistics services. Transport contacts reported delaying capital investment projects due to increased labor and input costs. Healthcare contacts reported that conditions worsened due to increased input costs and lower-than-expected sales.\nInvestment in workforce education and development by both nonprofit and for-profit firms increased across the District. In the St. Louis region, an energy firm invested in summer programs for high school students to provide them with training in the hope they would return as full-time employees in the future. In the Little Rock region, universities received grants from local businesses to invest in manufacturing, engineering, automation, design process, and technology programs, and a nonprofit-run education and community center began offering classes, transportation, and childcare for adults to earn high school diplomas and receive career services.\nReal Estate and Construction\nThe residential real estate market has remained unchanged since our previous report. Rental rates for residential real estate increased slightly. The number of new listings in residential real estate has dropped sharply in Louisville since our previous report, while new listings in the Memphis and Little Rock regions have remained unchanged. Seasonally adjusted home sales have remained unchanged since our previous report. Residential real estate contacts reported that sales met expectations in recent months.\nCommercial real estate has slowed slightly since our previous report. One commercial real estate contact reported concern over \"shadow vacancies\" \u2013 offices that are still leased due to longer-term leases, but not actually used due to remote work. The contact expressed concern that the majority of the leases on these office spaces will not be renewed. Construction contacts were most worried about shortages of labor, followed by a slowdown in demand for new projects. A majority of construction and commercial real estate contacts reported sales falling short of expectations.\nBanking and Finance\nBanking conditions in the District have remained unchanged since our previous report. Contacts surveyed reported that overall loan demand across all loan types softened in recent months. Contacts expect loan demand to further weaken in the upcoming quarter and noted recent increases in consumer credit use, particularly for everyday purchases, due to higher prices. Meanwhile, high interest rates have held down demand for business credit. Contacts reported that clients have been taking distributions from their portfolios to pay off loans and avoid new borrowing. Credit standards were largely unchanged from the previous quarter, but delinquency rates saw a slight uptick, a continuation of an ongoing slow rise over the past several quarters.\nAgriculture and Natural Resources\nOverall conditions have remained unchanged, but the outlook has weakened slightly since our previous report. Most agriculture contacts surveyed reported that their costs, including labor, have increased, which has contributed to the slightly worsening outlook. The percentage of row crops planted has increased as expected since the previous reporting period and is up slightly from this time in 2022. The progress of acres planted is mixed across the District: Some states, such as Missouri and Illinois, have improved strongly over last year, and the other District states have fared slightly to materially worse.\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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"May 31, 2023\nSummary of Economic Activity\nFourth District contact reports suggested little change in aggregate business activity, though conditions continued to vary by sector. Retail sales were relatively flat as a seasonal uptick in consumer services spending, such as at restaurants and tourist locations, was offset by weaker goods spending. Some manufacturing and freight contacts suggested that customers were drawing down inventories, a situation which constrained demand for their own goods and services. Housing markets stabilized with the start of the peak sales season. However, interest rates remained elevated and were reported to be constraining nonresidential construction. Bankers noted declines in commercial and consumer lending. A majority of contacts expressed some concern about the impasse in Congress over raising the debt ceiling, but, on balance, this issue did not appear to alter their expectations for business activity in the near term. Employment was stable in recent weeks. Wage growth remained elevated, particularly for bankers and manufacturers troubled by persistent hiring challenges. Nonlabor input cost pressures and price pressures changed little in recent weeks.\nLabor Markets\nEmployment was stable in recent weeks. Some manufacturing and construction firms reported delaying hiring because of economic uncertainty, while others were reducing \"noncritical\" staff to cut costs in preparation for future softer demand. In contrast, leisure and hospitality contacts reported a seasonal increase in staffing, as did one manufacturing contact who also mentioned that hiring was less difficult than in the recent past. That said, hiring remained challenging for many firms across industries. Most firms generally planned to hold headcount steady in coming months.\nOn balance, wage pressures changed little from those in the prior period. In banking and manufacturing, where hiring difficulties persisted, contacts continued to raise pay to attract and retain workers. However, several contacts were holding wages steady because hiring had become less difficult, while others mentioned that wage increases were no longer sustainable. One manufacturer was considering a one-time bonus rather than a pay increase to keep workers \"happy and loyal\" without embedding long-term labor-cost increases.\nPrices\nNonlabor input cost pressures changed little in recent weeks. Manufacturers and retailers reported relief from increasing input costs, in particular for fuel, freight, and some raw materials. By contrast, contacts highlighted higher costs for steel and utilities and for electronics and electrical equipment that have been in short supply. Multiple contacts said that costs for business services continued to increase, and some posited these increases were linked to higher labor costs. On balance, contacts expected similar nonlabor input cost pressures to persist in coming months.\nOn balance, selling-price pressures were relatively unchanged, as well. Some contacts raised prices modestly to account for higher input costs, while others raised prices simply because strong demand allowed for it. One nonresidential builder said, \"We're working to be as opportunistic as we can be.\" However, some manufacturers and restaurateurs reported that increased price sensitivity from customers limited their ability to raise prices. Multiple freight haulers reported a drop in rates because of weakened demand.\nConsumer Spending\nConsumer spending was mostly unchanged from that of the previous reporting period, though activity varied by sector. The arrival of spring boosted sales for tourist attractions and restaurants, with some restauranteurs describing better activity year over year. However, non-auto retailers generally experienced weaker sales. One department store contact reported a sharp sales decline in his stores that he said had \"worsened throughout March and April.\" Another contact suggested that some retailers had begun \"reducing future orders and current inventory levels\" in response to slowing sales. Reports from auto dealers indicated continued pressure on sales because of higher interest rates, historically high vehicle prices, and an ongoing lack of manufacturer incentives. Industry contacts generally expected consumer spending to remain soft in the coming months.\nManufacturing\nOverall demand for manufactured goods was relatively stable. Demand remained strong for aerospace-related products and heavy trucks and trailers, and some manufacturers reported benefitting from an increase in international orders. Multiple contacts reported that slower end-market demand had resulted in fewer orders for their products as their customers sought to rein in inventories. One manufacturer indicating weaker demand said that customers were still \"working off excess inventory stockpiled during pandemic.\" On balance, however, manufacturers expected demand to remain stable in the months ahead.\nReal Estate and Construction\nDemand for residential construction and real estate stabilized, and contacts attributed this stabilization to the arrival of spring and to flattening interest rates. One homebuilder indicated that potential homebuyers had been afraid that rates would continue to rise before they could close on a home, but the recent stabilization of rates had helped to increase activity. A couple of homebuilders reported an increase in speculative construction projects because many individuals want to purchase and move into homes immediately, in part to avoid further rises in interest rates.\nNonresidential construction and real estate activity softened on balance. One general contractor noted that clients have started to \"put the brakes\" on projects because of high interest rates and general economic uncertainty. Several commercial real estate brokers also noted that elevated interest rates were negatively impacting leasing activity. However, a contact who specializes in industrial space indicated there had been an increase in construction activity from manufacturing clients in recent weeks that he attributed to an uptick in reshoring projects.\nFinancial Services\nOverall, loan demand continued to decline this reporting period. Bankers posited that increased interest rates along with economic uncertainty contributed to a slowdown in borrowing from households and businesses. One lender suggested that small businesses were beginning to use available cash in lieu of borrowing because of high rates. Delinquency rates remained low; however, one banker indicated that he expected delinquencies to increase in coming months. Core deposits continued to decline for a variety of reasons, most notably because of deposit-rate competition. Looking forward, bankers expected loan demand to weaken further in the coming months.\nNonfinancial Services\nFreight activity remained relatively weak this reporting period. One logistics company contact said that the persistent weakness was because many \"customers have 'paused' projects and inventory builds.\" Moreover, haulers anticipated that demand would remain soft in the months ahead. Overall, professional and business services contacts reported slower growth. A management consultant mentioned that clients were pulling back on spending as economic uncertainty grows. Looking forward, contacts anticipated that demand would decline in the coming months.\nCommunity Conditions\nNonprofit contacts indicated that housing affordability remained a challenge and had recently worsened for low- and moderate-income households. Contacts cited rising housing costs, low inventory, and purchases by institutional investors as factors contributing to the affordability issue. A community stakeholder reported that two outside investors purchased more than 500 units of affordable housing in one community, and the residents, all of whom were low-income tenants, were asked to vacate the property with minimal notice. Another contact reported that all-cash transactions limited access to first-time homebuyers, particularly those looking to purchase homes in lower-priced markets. To help counter these trends, one public agency acquired more than 190 properties from a private investment company and was recently working with renters to keep the units as affordable housing.\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"

San Francisco

/beige-book-reports/2023/2023-05-sf

"Beige Book Report: San Francisco\nMay 31, 2023\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded somewhat during the April through mid-May reporting period. Employment levels were stable and overall labor market conditions remained tight, accompanied by wage increases that showed some signs of leveling off. Price increases persisted, although at a slower pace than in the last reporting period. Retail sales grew modestly, and activity in the services sectors picked up somewhat. Demand for manufacturing goods was robust, while conditions in agriculture and resource-related sectors weakened slightly. Activity in residential and commercial real estate markets eased further. Conditions in the financial sector changed little over the reporting period and lending standards have tightened. Communities across the Twelfth District were challenged by a shortage of specialized professionals and small businesses' limited access to credit. Contacts expressed concern over a weaker outlook for the economy and increased overall uncertainty.\nLabor Markets\nEmployment levels were largely unchanged during the reporting period. Labor supply remained tight across several sectors, including health care, hospitality, food services, and aviation. However, contacts from retail, manufacturing, transportation, finance, and business services reported fewer issues filling positions. Although some employers are still facing difficulties finding skilled workers, reports across the District indicated improvements in employee turnover and retention rates. Furthermore, contacts from both the agriculture and hospitality sectors mentioned better success in hiring seasonal workers this year. One contact from Alaska, however, expressed concerns over attracting enough seasonal workers for this summer. Labor market conditions in the technology and financial services sectors continue to soften. A report from the Pacific Northwest highlighted a surge of unionization efforts in the retail and distribution sectors.\nWage growth moderated across many sectors. The recent layoffs and hiring freezes in financial services and technology eased wage pressures in these sectors. Contacts in the health-care, retail, and manufacturing sectors, as well as non-profit organizations, reported pay increases that are closer to historical rates. However, some industries, including the gaming industry and insurance companies, are continuing to pay above-average salary increases to attract and retain qualified workers.\nPrices\nPrice increases persisted, although at a slower pace than in the last reporting period. Production costs increased due to higher expenditures on labor, utilities, and shipping. Firms reported that they generally passed on these higher costs to consumers. Nevertheless, some contacts reported some demand pullback, which in some instances resulted in a reversal of price increases. Prices of some goods and services were reportedly stable or down in recent weeks, including those for residential rentals, lumber, insurance, business services, and banking services. Prices rose for agricultural products such as apples and seafood.\nCommunity Conditions\nConditions in the community support and services sector were mixed. Some contacts mentioned increased availability of resources for addressing homelessness issues in areas of the Pacific Northwest, as well as assistance from philanthropic foundations and online fundraising in Nevada and California. Nonetheless, reports also highlighted the challenges in meeting the demand for housing services and accessing funds for small businesses. In addition, contacts reported difficulties hiring specialized professionals, which have contributed to staff burnout and turnover at institutions including those supporting children's health, education and training, and local journalism.\nRetail Trade and Services\nRetail sales grew modestly in recent weeks largely driven by strong spending on food and beverages and steady demand for furnishings, appliances, and apparel. Reports also indicated that elevated inflation and economic uncertainty led consumers to be more selective with their purchasing decisions. Consumers continued to trade down to lower cost items. Spending at small grocery stores and gas stations in suburban and rural areas was reportedly up. Conversely, food establishments and retail stores in downtown urban areas that traditionally relied on foot traffic from office workers continued to report weak sales as hybrid work arrangements persisted.\nConditions in the services sectors picked up somewhat. Demand for professional services remained strong, particularly for consulting, talent acquisition, catering, and janitorial services. Providers of legal and insurance services reported mixed conditions by type of service. Contacts noted weaker demand for elective medical procedures and surgeries in recent weeks. Consumer spending on pet care reportedly increased. Major tourist hubs across the District experienced a pickup in leisure and business travel as convention attendance and international travel continued to recover. Conversely, smaller tourist destinations saw lower-than-expected traveler volumes during spring break and Easter. Activity in the entertainment and media production industries slowed significantly due to ongoing collective agreement negotiations between the major studios and writers' unions.\nManufacturing\nManufacturing activity was robust during the reporting period. Demand was notably strong for food manufacturing, metal fabrication, and heavy machinery. Manufacturers generally reported lighter order backlogs, due mainly to softening demand. Supply bottlenecks, especially those related to ocean freight, eased significantly in recent weeks. Nevertheless, contacts continued to highlight limited availability and extended delivery times for products and equipment that rely on semiconductor chips.\nAgriculture and Resource-Related Industries\nConditions in agriculture and resource-related sectors weakened slightly. Reports on exports were mixed as ocean freight costs eased somewhat, while the war in Ukraine continued to contribute to shipping disruptions. Contacts in California noted that wet weather conditions lowered yields for brassicas and berries. Rains also disrupted pollination for tree and vine crops, which is anticipated to reduce yields. Seafood stocks were reportedly stable in the Pacific Northwest. Contacts noted lower costs for transportation and irrigation water and higher costs for other inputs such as for packaging, fertilizer, and energy.\nReal Estate and Construction\nActivity in residential real estate slowed further over the reporting period. Contacts across the District reported stable demand for single-family homes, although high mortgage rates restrained prices. Inventories of existing single-family homes were low, and owners appeared hesitant to forego their existing low-rate mortgages. Asking rents were largely stable, and one contact in Southern California noted that new multifamily construction put downward pressure on rents in some areas. Despite reported improvement in the availability and cost of materials, construction of new homes was flat to down as developers responded to higher financing costs.\nConditions in commercial real estate were weaker overall. In the face of changing workplace needs, leasing activity for downtown office space remained weak, and new office construction stalled. Demand for retail and industrial spaces remained stable. Contacts around the District noted that plans for new projects stalled, which has led to more competitive construction bids.\nFinancial Institutions\nConditions in the financial sector changed little over the reporting period, and uncertainty remained high. Contacts cited higher interest rates, tighter lending standards, ongoing uncertainty in the banking sector, and lower overall confidence as the main dampeners of activity in the sector. Depository institutions mentioned tighter competition for deposits. Lending institutions observed reduced demand for residential loans and uneven demand for commercial loans. Contacts reported that recent stresses in the regional banking sector negatively affected access to credit, particularly for smaller businesses. Reports also noted increasing delinquencies in consumer loans, including for auto and credit card debt.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/2023/2023-05-ch

"May 31, 2023\nSummary of Economic Activity\nEconomic activity in the Seventh District was little changed overall in April and early May. Contacts generally expected slow growth in the coming months, though many expressed concerns about the potential for a recession over the next year. Employment increased moderately; nonbusiness contacts saw a small increase in activity; consumer and business spending were flat; and activity decreased modestly both for manufacturing and for construction and real estate. Prices and wages rose moderately, while financial conditions tightened modestly. Expectations for farm incomes in 2023 decreased some.\nLabor Markets\nEmployment increased moderately over the reporting period and contacts expected a similar rate of growth in the coming year. Many contacts continued to have difficulty finding workers, especially when hiring for skilled trades positions. However, more contacts said that hiring had become easier or that they were fully staffed. Wages and benefit costs rose moderately, with several contacts noting continued wage pressures.\nPrices\nPrices rose moderately in April and early May, and contacts expected a similar rate of increase over the next 12 months. Producer prices increased modestly, with contacts highlighting higher costs for some raw materials and for energy. However, several contacts said that growth in many raw materials prices had slowed. In addition, a number reported that increases in shipping costs had slowed noticeably, particularly for trucking and ocean freight. Consumer prices generally increased due to solid demand and the passthrough of higher costs. That said, a retail industry observer said price growth was moderating across categories.\nConsumer Spending\nConsumer spending was unchanged on balance over the reporting period. Nonauto retail sales were flat, as strong demand for essentials was offset by relatively weak spending on discretionary items. For example, contacts highlighted solid demand for groceries and household items, but lower sales of furniture and jewelry. Unseasonably cool weather reportedly hurt lawn and garden sales. Light vehicle sales increased slightly. Several vehicle dealers said that high prices were putting a damper on demand. Leisure and hospitality spending fell slightly\u2014notably sales at restaurants were down\u2014but overall activity remained at a high level, with contacts reporting strong spending on cruises and at travel agencies.\nBusiness Spending\nBusiness spending was little changed overall in April and early May. Capital expenditures increased slightly, with several contacts reporting purchases of new software. Transportation demand edged down, and one contact noted that truck freight activity had slowed enough that some trucking capacity was no longer on the road. Demand for industrial, commercial, and residential energy decreased slightly. Inventories for most retailers were a bit above desired levels. In manufacturing, inventories stayed slightly elevated, and many contacts indicated that they were no longer experiencing supply chain disruptions.\nConstruction and Real Estate\nConstruction and real estate activity declined modestly on balance over the reporting period. Residential construction activity was down modestly. Contacts reported that high interest rates had led some projects to be postponed or cancelled, and that while construction costs had fallen, the decline wasn't enough to offset higher financing costs. Contacts in the multifamily sector were more sanguine, noting that many projects were moving forward despite tighter financial conditions. Residential real estate activity decreased modestly. Prices and rents declined, and contacts said that the low inventory of homes for sale helped prevent larger declines. Nonresidential construction moved down slightly, though warehouse building remained a bright spot. Contacts also noted that school construction was robust, supported both by American Rescue Plan funding and the passage of state and local referendums. Commercial real estate activity decreased moderately, with contacts pointing to high interest rates as a key factor behind the slowdown. Prices and rents were down, and the availability of sublease space increased. However, there were reports of rising retail rents in some areas because of a lack of high-quality new construction.\nManufacturing\nManufacturing demand decreased modestly in April and early May. Manufacturing backlogs were down moderately, and inventories were slightly elevated. Contacts reported fewer supply chain problems, though some items were still difficult to find. Steel orders increased slightly. One contact noted that steel service center inventories were low, in part because high interest rates made it expensive to hold inventory. Fabricated metals orders were down modestly, with contacts pointing to the aerospace and construction sectors as reasons for the decline. Machinery sales were down slightly, and contacts also cited weaker demand from the aerospace sector. Auto production was steady on balance.\nBanking and Finance\nFinancial conditions tightened modestly over the reporting period. Bond and equity market participants saw little change in asset values or volatility. Business loan demand was flat overall, though one banking contact noted that clients manufacturing or selling discretionary consumer items had increased their credit line utilization in response to lower demand. Loan quality deteriorated some, but a few contacts noted that delinquencies remained below pre-pandemic levels. Business lenders reported slightly tighter standards, while borrowers said that credit conditions had tightened moderately. In the consumer market, new loan demand decreased slightly, with contacts highlighting a slower mortgage market. Consumer loan quality was flat, while standards tightened slightly.\nAgriculture\nExpectations for Seventh District farm incomes in 2023 fell some as prices for key products moved lower. Corn and soybean prices decreased, as rapid fieldwork and planting progress heightened expectations for a large harvest. Soft red wheat prices remained weak, but hard wheat prices rose due to drought affecting much of the U.S. wheat crop and uncertainty surrounding another extension of the agreement allowing exports out of Ukraine. There were lower prices for eggs and dairy products, especially cheese. Hog prices increased from a low level and cattle prices moved higher. In light of higher interest rates, contacts expected farmers to conserve working capital to minimize the need to take out farm operating loans. There were reports of slower farm machinery sales but also shortages of some types of equipment. Prices for farmland were higher again as demand remained solid and inventories of farms for sale were limited.\nCommunity Conditions\nCommunity development organizations and public administrators reported a small increase in overall economic activity in April and early May. State government officials said tax revenue continued to grow but at a slower pace. Unemployment insurance claims remained low, though one contact noted a rise in claims from workers at temporary help firms. Demand for social services was elevated; contacts said that the need for food assistance had been exacerbated by the recent end of Covid-19 benefits. Tight labor market conditions were again a challenge for small businesses and community-serving organizations, as employees were reportedly willing to change jobs for modest increases in pay and were less swayed by benefit options. Elevated interest rates continued to be a factor limiting the supply of affordable 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"

New York

/beige-book-reports/2023/2023-05-ny

"Beige Book Report: New York\nMay 31, 2023\nSummary of Economic Activity\nEconomic activity in the Second District declined at a moderate pace in the latest reporting period. Still, the labor market has remained solid, though the pace of hiring has slowed slightly, and wage growth was little changed. Inflationary pressures have remained persistent, with the pace of selling price increases picking up slightly in the service sector. Supply availability, while still constrained, continued to improve, though goods production was sluggish. Consumer spending continued to increase at a steady clip, and tourism in New York City is nearing pre-pandemic peaks. The home sales market and rental market have been strong, with record-high rents in New York City. Commercial real estate markets were mostly unchanged. Conditions in the broad finance sector continued to worsen. Regional banks reported ongoing tightening in credit conditions and declining loan demand. Amid heightened uncertainty, businesses expect little improvement in the months ahead.\nLabor Markets\nLabor market conditions have remained solid, though there have been scattered signs of cooling as heightened uncertainty has made some businesses more cautious. While employment has continued to increase, on net, the pace of hiring has slowed slightly. Moreover, businesses in the construction, transportation, and finance sectors reported a significant decline in employment in recent weeks. Nonetheless, layoffs have generally remained concentrated in large companies outside the region. Though still challenging, it has become slightly easier to find workers\u2014particularly for smaller businesses that have struggled to do so through much of the recovery. Still, a contact at a New York City employment agency indicated that labor demand has remained strong and that recent stress in the banking sector has not had broader impacts in the local labor market. A contact at an upstate New York employment agency noted strong demand for workers with leadership and technology skills. Contacts report that attrition rates remain exceptionally low.\nWage growth has been little changed in the latest reporting period. Although some contacts expressed concern about ongoing increases in New York State's minimum wage, most businesses plan to hire in the months ahead.\nPrices\nInflationary pressures have remained persistent. Businesses reported that the pace of input price increases has held steady in recent weeks, though there has been some abatement in the prices of raw materials such as steel and aluminum. The pace of selling price increases in the manufacturing sector was also little changed, while selling price increases picked up slightly in the service sector and more noticeably among retailers. Businesses generally expect pricing pressures to remain fairly widespread in the coming months.\nConsumer Spending\nConsumer spending continued to increase at a steady clip in the latest reporting period. Though spending on travel-related services declined somewhat from exceptionally high levels since the last report, this decline was offset by strong spending at apparel and department stores, hardware and home furnishing stores, and at restaurants and bars. Auto dealers in upstate New York reported that sales of new vehicles increased slightly as inventory continued to steadily improve, while sales of used vehicles softened. With elevated prices and more limited inventory of used vehicles, contacts noted that some consumers have opted instead for a new vehicle.\nManufacturing and Distribution\nManufacturing activity fell sharply in recent weeks, continuing a prolonged period of weakness. New orders and shipments have been erratic but sluggish. Supply availability improved, delivery times shortened somewhat, and inventories declined. Businesses in transportation & warehousing also reported falling activity, while wholesalers saw activity increase. Manufacturing and distribution firms generally do not expect conditions to improve much in the months ahead.\nServices\nService sector activity declined moderately in the latest reporting period. Businesses in the personal services sector reported a particularly sharp contraction, while activity reportedly held steady for leisure & hospitality and education & health providers. On balance, businesses in the service sector expect little improvement in the coming months.\nTourism activity in New York City has remained strong and is nearing pre-pandemic peaks. Business travel has continued to pick up, particularly domestic travel, despite competition with destinations in warmer parts of the country. For the first time in three years, graduation season has brought many international visitors to New York City. European tourists are returning in large numbers but lags in visa processing have continued to constrain visitors from China and parts of South America. Hotel performance has remained on a strong upward trend, and New York City has had the highest hotel occupancy rates of all the major markets in the country in recent weeks.\nReal Estate and Construction\nThe residential sales market has been strong across the District in the latest reporting period. A New York City-area contact reported that the sales market in and around New York City has picked up strongly in recent weeks after a brief pause in early April due to uncertainty related to stress in the banking sector. After a slow start to the year, housing markets in upstate New York have also started to pick up, with bidding wars and multiple offers becoming more common. Inventory remains exceptionally low and is restraining sales activity in much of the District. A key factor suppressing new listings is the prevalence of homeowners with historically low interest rates on their existing mortgages, reducing the incentive to sell and move.\nResidential rental markets have continued to firm. Rents are at all-time records in Manhattan, Brooklyn, and Queens and vacancy rates remain exceptionally low. Rents remain at a high level in much of upstate New York as well. A strong economy and relatively high mortgage rates have pushed some movers to the rental market, boosting demand.\nCommercial real estate markets were little changed in recent weeks. Office vacancy rates were steady at elevated levels across the District and rents were mostly flat. New York City's retail market weakened, with increases in vacancy rates and rents trending down. 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, Long Island, and upstate New York. Industrial construction activity was little changed across the District, with some new space coming to market in the second and third quarters of this year. Multi-family residential starts increased in New York City and parts of upstate New York but remained weak elsewhere.\nBanking and Finance\nConditions in the broad finance sector continued to worsen in recent weeks at a similar pace to the last reporting period. Small to medium-sized banks reported lower loan demand across all loan segments, including refinancing. Credit standards tightened for all loan types, and loan spreads continued to narrow. Most banking contacts reported higher deposit rates. Delinquency rates increased on all mortgage and loan types.\nCommunity Perspectives\nCommunity leaders reported that heavy congestion and long commute times make transportation difficult for many people, particularly those living in the New York City area. Employers noted that transportation is especially challenging for lower-wage workers, who often face extended travel times. Though hybrid working arrangements have reduced the number of workers commuting to city centers in the region, there has been an influx of younger remote workers residing in these areas to take advantage of urban amenities and conveniences.\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"

Philadelphia

/beige-book-reports/2023/2023-04-ph

"April 19, 2023\nSummary of Economic Activity\nOn balance, business activity in the Third District appears to have declined slightly after a small increase last period. Consumer demand appeared to tick down, as contacts detailed slower traffic and smaller purchases by customers. Inflation and higher interest rates continued to weigh on demand for big-ticket items, including homes and autos. Employment held steady as the demand for labor cooled. Wage growth eased to a modest pace, and inflation continued to subside but remained moderate. Overall, firms continued to report less difficulty in hiring and fewer supply chain disruptions. Bank lending to businesses declined, as contacts within the banking industry reported a tightening of lending standards. On balance, expectations for economic growth over the next six months remained subdued, as both manufacturing and nonmanufacturing firms continued to expect slight growth.\nLabor Markets\nEmployment held steady following a modest rise in the prior period. Contacts reported instituting hiring freezes, cutting overtime, and conducting layoffs. Other firms communicated they were not filling positions left open by employee departures. Multiple contacts, including staffing firms, noted that hiring continued to be easier, with more applicants, lower turnover, and less wage pressure. In our monthly surveys, employment growth appeared to be negligible, with most firms reporting no change in employment levels in March. The index for employment in the manufacturing sector turned negative and fell to its lowest level since May 2020.\nHowever, firms still described staffing as one of their primary challenges. Contacts continued to report difficulty staffing night and weekend shifts. Firms revealed the need to frequently move workers along the production line or overstaff shifts to accommodate the ongoing high number of employees calling out.\nFirms reported that wage inflation has continued to subside since the prior month and grew at only a modest pace \u2013 down from a moderate rise in each of the eight prior periods. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee dropped to 30 percent \u2013 its lowest level since March 2021; the share of firms reporting lower compensation levels was just under 5 percent. Contacts noted warehouses have started to cut hours and jobs, which has led to lower wage pressure for other businesses in the area.\nPrices\nOn balance, firms reported that prices continued to rise moderately; however, they noted that the rate of price increases appears to be slowing. In our monthly surveys, the prices paid and prices received indexes declined for both manufacturing and nonmanufacturing firms in March and are below nonrecessionary historical averages, except for the index of nonmanufacturers' input prices. On balance, contacts also noted fewer supply chain disruptions.\nTwo-fifths of the manufacturing contacts expected to pay higher prices over the next six months, while slightly less than one-quarter expected to receive higher prices for their own goods.\nManufacturing\nManufacturing activity declined moderately \u2013 after declining modestly in the prior period. The index for new orders fell from last period and was negative for the 10th consecutive month. Moreover, the shipments index dropped sharply and turned negative. Contacts confirmed that demand continued to slow and backlogs continued to fall.\nDespite the decline in manufacturing activity from the prior period, nearly half of the firms estimated increased total production growth for the first quarter of 2023 compared with the fourth quarter of 2022. Most firms reported labor supply and supply chains as slight or moderate constraints to capacity utilization.\nExpectations among manufacturers for growth in the next six months remained subdued. The index for future activity turned negative, and the future indexes for new orders, shipments, and employment were little changed. The index for future capital expenditures turned negative for the first time since 2009.\nConsumer Spending\nOn balance, retailers (nonauto) and restaurateurs reported a slight decline in sales in the current period \u2013 after those grew slightly in the prior period. Contacts reported sales grew on a year-over-year basis because of higher prices but described a slowdown in customer traffic and fewer items purchased per visit. One contact also noted the expiration of supplemental SNAP benefits was a drag on sales in March.\nTourism contacts reported an uptick in activity, particularly in urban areas, after reporting steady activity in the prior period. Auto dealers again reported a slight increase in sales as manufacturers continued to deliver more new cars. However, contacts noted some softening of demand because of higher financing costs. The increased inventory and softer demand has prompted some dealers to lower prices and reintroduce incentives.\nNonfinancial Services\nOn balance, nonmanufacturing activity appeared to decline slightly after growing slightly last period. The index for general activity at the firm level fell to a near-zero reading, and the new orders index turned negative as the share of firms reporting decreases exceeded the share reporting increases. The index for sales also declined from the prior period but remained positive.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew moderately during the period (not seasonally adjusted) \u2013 faster than the prior period but comparable with growth in the same period last year. Inflationary effects on big-ticket items continued to boost loan volume growth during the current year relative to past years.\nDuring the period, District banks reported moderate growth in home mortgages and modest growth in auto loans, other consumer lending, and commercial real estate lending. Home equity lines declined modestly. Credit card volumes were essentially flat after rising moderately during the same period last year \u2013 a sign of a potential pullback by consumers.\nBanks reported a strong decline in commercial and industrial loan volumes. Most contacts within the banking industry confirmed a tightening of lending standards or that discussions were ongoing regarding a change in lending behavior, following the failures of Signature Bank and Silicon Valley Bank. Furthermore, multiple contacts noted they focused on lending to existing customers and became more prudent in lending to new customers.\nReal Estate and Construction\nHomebuilders reported steady sales following an unexpected uptick in the prior period. Contacts continued to attribute the recent improvement to incentives, discounts on older inventory, and new homes built with smaller footprints and lower-cost features.\nExisting home sales fell slightly from already low levels in most markets \u2013 following a moderate decline in the prior period. Contacts noted that the lack of new listings and the continued decline in housing affordability meant the normally busy spring housing market may fail to materialize.\nRequests for assistance with housing and utility bills fell but continued to dominate the share of 211 requests in New Jersey and Pennsylvania. Almost 32 percent of all requests in the two states were related to housing, while 27 percent of the requests regarded utility bills.\nMarket participants in commercial real estate continued to report steady current construction activity but noted that more projects in the pipeline have been delayed or canceled. Leasing activity continued to slow modestly. Rent growth in multifamily housing eased slightly, and landlords started to offer leasing incentives in some markets. Demand for life sciences space remained strong, but demand for warehouse space softened.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2023/2023-04-ri

"April 19, 2023\nSummary of Economic Activity\nThe Fifth District economy contracted slightly since our previous report. Manufacturing activity softened as new orders fell and more customers started pushing back on price increases. District ports and trucking companies reported declines in freight volumes, particularly a sharp decline in import volumes, leading to lower shipping and trucking spot rates. Consumer spending on retail goods and autos slowed slightly; however, spending on tourism and travel increased moderately. Residential real estate markets softened as closings and pending sales declined while listing prices held flat. Commercial real estate activity declined, on balance. The retail and industrial real estate segments remained strong; however, the remaining segments, particularly office, softened. Financial institutions continued to report modest declines in loan demand. Deposit levels also declined, on balance, despite some institutions reporting an inflow of deposits from new clients. Demand for nonfinancial services was unchanged in recent weeks. Employment rose slightly and wages increased moderately, due in part to recent minimum wage increases in some Fifth District jurisdictions. Price growth remained robust; however, there were several reports that customers were starting to reject further price increases or insist on reduced prices.\nLabor Markets\nEmployment increased slightly in the Fifth District over the most recent reporting period. Contacts continued to report a lack of qualified workers as a significant issue for their business. A Maryland construction contact reported better than expected demand, but projects were slowed by a shortage of skilled labor. A South Carolina staffing firm said that demand for engineering and skilled trades workers has been consistently high and doesn't show signs of slowing. Wages picked-up moderately, due in part from increases in the minimum wages in Maryland, Virginia, and the District of Columbia. A Virginia retailer reported that the minimum wage increase resulted in wage increase for all workers, not just those making the minimum.\nPrices\nPrices continued to grow at a strong rate, particularly for services. According to our recent surveys, manufacturers reported average price increases around 5.5 percent, but this was down considerably from the peak set in 2022. Services sector firms, on the other hand, saw prices continue to rise at a near-peak rate of about 6.5 percent. There were some reports by firms in both sectors that customers were starting to push back on further price increases. One manufacturer said that they were under pressure to cut prices, which would compress margins as input costs were still rising.\nManufacturing\nManufacturing activity in the Fifth District softened modestly in recent weeks. Overall, manufacturers reported a decline in new orders. A fabric manufacturer that produces products for retail stores said that they were working through an inventory glut, and were hoping that as inventories clear, new orders would increase. Manufacturers also reported more push-back from clients on price increases. A label printer reported increased pressure from purchasing teams to reduce pricing this year. With supply chain pressures easing, purchasing teams were \"raging back and shopping the business.\" Finding workers remained an issue. An aluminum producer cited that growth is limited severely by availability of skilled labor and administrative workers.\nPorts and Transportation\nFifth District ports reported a sharp decline in loaded import volumes this period. Imports of retail goods and household related items were down. Additionally, due to the extended Chinese New Year, there was an increase in blank sailings. Loaded exports were stronger and driven by auto and machine parts as well as rolling stock. Empty containers were dwelling slightly longer at the port. Shipping carriers had excess availability this period. Spot rates fell to pre-pandemic levels or below and were significantly under current contract rates. Air cargo demand continued to soften with airfreight rates stabilizing as airlines pulled back on freight capacity.\nTrucking firms reported a moderate decline in freight volumes this period. Respondents indicated that there was excess capacity in the truck load segment but less-than truckload demand was not down as much. Spot market rates decreased slightly with carriers experiencing some push back from customers on further rate increases. Trucking firms stated that in response to lower freight volumes, they were still adding drivers, but they had scaled-back recruiting and were being very selective in hiring. Availability of new tractors and trailers from manufactures continued to improve and there was a glut of used trucks on the market due to a few regional trucking companies going out of business.\nRetail, Travel, and Tourism\nFifth District retailers reported a slight pull back in sales and demand in recent weeks. An auto dealer said that sales were down and customers seemed skittish about making big ticket purchases. Similarly, an appliance and electronics store saw a slowdown in demand and customer traffic. A couple of retailers, however, noted that their typical busy season doesn't start until April, so they were expecting business to pick up soon.\nTravel and tourism increased moderately in recent weeks. Hotels in the Fifth District reported increases in the number of rooms sold and because room rates were higher than last year, revenue growth was strong. One hotel in South Carolina said that their business was highly tied to events in the area and volumes were up in recent weeks because of sports tournaments. Lastly, a regional airport saw a rebound in air traffic but to a level still slightly below 2019 levels; however, they expected to surpass 2019 levels by this summer.\nReal Estate and Construction\nResidential real estate respondents noted that so far it hasn't been the typical robust spring market, evidenced by a decline in both sales and pending sales. Days on market have increased, but still not above the historic average; housing inventory has decreased year-over-year with substantially less new listings. Sales prices have remained flat for this period, but new contracts were starting to come in at less than list price. Many potential home buyers were priced out and sellers were having to offer concessions to close deals. Higher mortgage rates have made finding affordable homes even more of a challenge. Construction costs were down, but overall, home builders are no longer acquiring new building lots due to economic uncertainty.\nOverall commercial real estate market activity decreased in the last month, particularly in the office sector. Retail and industrial/flex space leasing remained robust this period. The industrial market continued to be strong with higher rental rates and good absorption rates. However, rents were moderating in other commercial real estate sectors and landlords were increasing their incentives and concessions. Rising interest rates slowed sales and commercial real estate capital markets activity was negligeable. Some banks had stopped lending for new commercial construction projects and/or had tightened underwriting standards; many equity lenders also had left the market. Many respondents cited a looming issue of certain CMBS loans that are coming due in 2023 being unable to qualify for refinancing.\nBanking and Finance\nLoan demand continued to slow modestly across almost all loan types, with the most weakness seen in the commercial loan portfolio. Consumer loan demand was mixed, with home equity and used auto loans showing some increased demand over the last few months. Consumer mortgage demand, especially refinancings, have slowed, which contacts attributed to rising rates. Deposit levels declined slightly, on balance, however a few banks did see an inflow of deposits following the failure of Silicon Valley Bank. Loan delinquencies continued to increase, albeit slightly and still not to pre-covid levels. Financial institutions expected moderate declines in loan and deposit levels for the remainder of the year.\nNonfinancial Services\nNonfinancial service providers continued to report steady demand for their services along with stable revenues. Providers also continued to express concerns over their ability to attract and retain employees. Common themes that were noted were the higher wages demanded by applicants, a lack of qualified employees, and retaining new hires employed after they arrive on the job. Firms reported getting push back from clients and customers over price increases and some were considering looking for lower cost alternatives or to cut costs elsewhere in their business to offset these higher prices.\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

/beige-book-reports/2023/2023-04-sl

"Beige Book Report: St Louis\nApril 19, 2023\nSummary of Economic Activity\nEconomic conditions have remained unchanged since our previous report. Although labor markets remain tight, contacts reported further improvement in their ability to hire and retain workers. Firms struggled to pass on higher costs to customers, which resulted in wage growth compressing profit margins. Consumer spending was mixed, with reports of weaker demand among low-income consumers but more robust demand among high-income consumers. Construction and manufacturing contacts reported that supply chains continued to improve. The real estate sector saw home sales increase and inventory continue to decline, though rental rates remained flat. The banking sector saw loan growth slow and deposits fall, but expressed confidence in their overall position.\nLabor Markets\nEmployment has increased slightly since our previous report. Although labor markets remain tight overall, reports of easing have increased since our previous report. While unemployment rates remain low and hiring workers is still a challenge, more contacts have been reporting an ability to hire and retain workers to meet demand than in recent months. A railroad contact in Louisville reported reaching full capacity in employment for the first time post-pandemic. A St. Louis staffing company, although still reporting hiring challenges and churn in the market, has seen these issues begin to relax compared with last year. A Memphis contact reported labor shortages and retention problems are no longer widespread and are primarily affecting the service industry.\nWages have continued to grow slightly since our previous report. Companies reported slow wage growth due to difficulties transferring labor costs onto consumers and slightly improved labor supply. An insurance contact in Louisville reported rising wages cutting into their profit margins, and a home building contact in Little Rock reported margins being down 15-20 percent due to increased wages for employees.\nPrices\nPrices have increased modestly since our previous report. Overall, contacts project increasing prices, but at a slower pace compared with the previous few quarters. Despite increasing input costs, business contacts reported a decreased ability to pass on costs to consumers due to increased price sensitivity of consumers and the desire to maintain competitive pricing. Of businesses that reported the ability to increase prices, the projected change in prices varied. A contact in the car industry indicated only slight increases in prices, while a contact in the hospitality industry estimated a larger 6-10 percent increase in prices.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported mixed business activity and a mixed outlook. In Little Rock, some stores saw less and more-volatile foot traffic, whereas others reported that higher-income consumers are starting to spend more again. A St. Louis auto dealer reported that business activity did not change over the past month, and they have a positive outlook for spring and summer. This dealer also noted that sales of luxury cars have not decreased, since the people who buy luxury cars are typically cash buyers and they are less affected by interest rates. A restaurant contact in Memphis reported that business has been stable, and they are careful about increasing prices to avoid driving away customer demand. The hospitality industry in Louisville is pessimistic about the tourism industry's chances of returning activity to pre-pandemic levels.\nManufacturing\nManufacturing activity has slightly decreased since our previous report. Firms in Missouri have reported a slight uptick in new orders, while firms in Arkansas have reported a slight decrease in new orders and a small rise in production. Raw material prices continue to decrease, with products from Asia returning to pre-pandemic levels. Supply chains continue to improve but remain suboptimal relative to before the pandemic. The manufacturing industry continues to expand in the region: Two companies in Lee County, Mississippi, added over 60 employees, which represents $2 million in each of their payrolls.\nNonfinancial Services\nActivity in the nonfinancial services sector has remained stable since our previous report. While air passenger traffic has increased, freight traffic has slightly decreased. In Northwest Mississippi, access to rural healthcare continues to be affected by rising costs and low Medicare reimbursements, which have caused hospitals to delay investment in new structures and services. Investment in technical training increased across the District. A community college in Tennessee has partnered with local businesses to provide customized work-centered training and short-term credentials to address student concerns about the rising cost of education and local business concerns about the lack of qualified workers. Similarly, community colleges in the St. Louis area are investing in advanced manufacturing training programs by procuring high-end equipment, building new facilities, and developing new curriculums to accommodate more students. Memphis-area nonprofits reported that volunteer engagement has increased since our previous report.\nReal Estate and Construction\nHome sales in all four major District MSAs have increased since our previous report. The median sale price of listings in Memphis has increased significantly, and other major District MSAs have seen small increases in median sale price. Inventory has dropped in all four major District MSAs since our previous report. However, rental rates remain unchanged.\nCommercial real estate continues to see low demand for large office spaces. In Northwest Arkansas, one contact reported high demand for commercial warehouses, which has resulted in a vacancy rate of less than 1 percent. Construction demand remains steady despite high interest rates. Contacts reported opportunities to bid on jobs if they have available capital. One St. Louis construction contact reported increased delays in project start times since our previous report. An Arkansas contact reported that, due to labor shortages, construction firms are winning bids and finding smaller subcontractors to bid on the jobs they have been awarded.\nBanking and Finance\nBanking conditions in the District have remained stable since our previous report. Loan growth in the commercial, industrial, and consumer lending sectors all declined slightly\u2014a continuation of the cooldown in loan demand since the beginning of 2023. Real estate loan growth, on the other hand, saw an uptick. Total deposits fell. Contacts expect net interest margins to begin contracting if they have not already, as deposit costs are still increasing. Asset quality remains good, and bankers in the District are closely monitoring debt that will be renewed at higher interest rates this year. Memphis banking contacts reported a renewed focus in the industry on liquidity in light of recent bank failures, while expressing confidence in their diverse and strong deposit base. One Memphis-area contact reported inflows from local residents who had previously held deposits in distressed West Coast banks.\nAgriculture and Natural Resources\nDistrict agriculture conditions have seen little change since our previous report. The number of acres planted in the District for corn, cotton, rice, and soybeans increased around 1 percent compared with last year; outcomes were similar for all District states. The composition of the crops has changed; cotton and soybeans were planted in lesser quantities compared with last year, while corn and rice increased in acreage. Southern parts of the District have planted significantly fewer acres of cotton and replaced it with corn and rice.\nNatural resource extraction conditions declined moderately from February to March, with seasonally adjusted coal production decreasing 9 percent. March production was also down moderately compared with a year ago, falling over 5 percent.\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\nApril 19, 2023\nSummary of Economic Activity\nEconomic activity in the Twelfth District grew slightly during the mid-February through March reporting period. Employment levels were stable, while labor market conditions remained tight overall. Elevated wage and price levels persisted though grew at a slower pace relative to the last reporting period. Sales of retail goods softened slightly, while activity in the consumer and business services sectors maintained strength. Demand for manufactured products was steady, while conditions in the agriculture and resource-related sectors continued to slow slightly. Residential and commercial real estate markets weakened. Lending activity decreased substantially. Communities across the Twelfth District faced heightened challenges in their ability to provide food, shelter, and services due to credit constraints and reduced philanthropic giving. Looking ahead, contacts had a weaker overall economic outlook and expressed uncertainty in their business planning amid current market conditions.\nLabor Markets\nLabor market conditions remained tight overall despite reported softening in some sectors such as financial services and technology. Employment levels remained mainly stable, although hiring challenges continued in most sectors due to skill mismatch and limited labor supply. Contacts reported difficulty finding workers across all skill and experience levels. There were some signs however of easing, which several contacts attributed to an increase in labor supply from recently laid-off workers seeking employment. Several contacts noted improved worker retention in recent months, although job turnover remained generally elevated. While employers in leisure and hospitality continued to hire, which alleviated ongoing staff shortages, businesses in the financial services, technology, and entertainment sectors reduced head counts in response to waning demand.\nWage growth moderated during the reporting period, but wage levels remained high. Although wage pressures eased somewhat, workers continued to demand higher pay, and employers maintained offers of higher wages to attract and retain workers in the face of consumer price inflation and high housing costs. Contacts noted that with stiff competition for labor, firms attracted talent with pay increases and better benefits.\nPrices\nOverall price levels rose during the reporting period, though at a somewhat slower pace. Reports indicated higher final prices for goods and services in several sectors, including manufacturing, leisure and hospitality, consumer services, legal services, and agriculture. One contact in California noted that produce prices rose following supply disruptions due to recent flooding in the state. Firms largely continued to experience rising input costs, such as transportation, food, some construction materials, and insurance, though the pace of these increases moderated. Changes in energy prices were reportedly mixed, and a few contacts observed some softening in steel and aluminum prices.\nCommunity Conditions\nConditions in the community support and services sector worsened in recent weeks. Nonprofit organizations reported that heightened uncertainty in the banking sector limited their access to credit and delayed ongoing affordable housing and community support projects. Nonprofit organizations noted that recent banking developments led many corporations to cut back on charitable donations, which further constrained their ability to meet demand for basic needs, including shelter, rental and food assistance, and mental health services. Employers across the District reported increased burnout and mental health strain among workers, particularly low-wage earners, due to higher living costs.\nRetail Trade and Services\nRetail goods sales softened slightly, as reduced savings and rising household debt hampered consumption expenditures. Food spending decreased somewhat as households continued to trade down to lower cost items. One contact from Washington noted that sales of organic produce weakened relative to conventional products. However, home improvement and do-it-yourself projects continued to support strong sales at home centers.\nConditions in the consumer and business services sectors remained strong. Demand for health-care services continued an upward trend. Demand for air travel was strong, while that for leisure and hospitality moderated somewhat in parts of the District, including Southern California, due to consumers' concerns about economic uncertainty. At the same time, the tourism industry in Hawaii and Nevada remained strong. Record rain and snowfall across the West Coast had a mixed effect. While the hospitality sector in Southern California saw a significant slowdown, Northern California saw higher demand for outdoor recreation.\nManufacturing\nActivity in the manufacturing sector was steady. Some reported softness in orders from the construction industry was offset by strength in metal production, engineering, and food manufacturing. Demand for capital equipment and metal recycling products increased in recent months, while demand for wood products weakened as rising mortgage rates and bad weather slowed down residential construction. Production costs remained above historical averages, and labor tightness persisted. While supply disruptions continued to improve, contacts across the District reported delays in getting various electrical components.\nAgriculture and Resource-Related Industries\nActivity in agriculture and resource-related sectors decelerated slightly. Exports of agricultural goods weakened, and domestic demand for agricultural products was mixed. While growers in the Pacific Northwest reported weaker sales overall, producers in California noted strong, stable demand for fresh produce and other agricultural goods. Persistent rains and flood conditions in California affected plant pollination, delayed the planting of crops like tomatoes and cotton, and cast doubt on the viability of some orchard crops. One contact in Central California reported that the recent rains made large portions of grazing lands unsuitable for cattle. Seafood output in the Pacific Northwest remained stable. Sales of harvested timber cooled further, while investor demand for timberland remained elevated.\nReal Estate and Construction\nConditions in the residential real estate sector worsened over the reporting period. Demand for single-family homes softened, and homes stayed on the market longer. Selling prices fell below initial asking prices, and the cancellation rate for purchase agreements reportedly increased. Multifamily housing demand was stable to weaker, depending on the region, and asking rents or the rate of rent increases fell. Uncertainty and high financing costs dampened new construction, but some reports indicated stronger activity in the lower-cost home category. Ongoing projects continued to be developed as planned across the District, but builders highlighted shortages of electrical equipment as a constraint to construction activity in the region.\nActivity in the commercial real estate market weakened. Demand for office and health-care space continued to wane. Office vacancies rose as leases expired and occupants reduced their need for space due to hybrid and remote work arrangements. Demand for warehouse and industrial space remained generally strong, as did the demand for new data centers. One contact in Oregon highlighted local government's ongoing plans for continued development in downtown areas.\nFinancial Institutions\nLending activity fell significantly in recent weeks amid higher interest rates and elevated uncertainty in the banking sector. Lending standards tightened notably, and several depository institutions opted to reduce loan volumes, especially for new clients, despite reporting ample liquidity. Reports indicated that existing and planned projects across sectors were delayed or cancelled due to higher funding costs, heightened uncertainty, and more limited access to credit. Following recent volatility in deposit levels at regional and community banks, outflows have reportedly stabilized since late March.\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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"April 19, 2023\nSummary of Economic Activity\nThe Eleventh District economy continued to expand modestly. Manufacturing output rose slightly following a mild contraction in the previous period. Growth in the service sector continued at a modest pace, and retail sales and energy activity were flat. Loan demand weakened further, loan volumes fell, and credit conditions tightened. Agricultural conditions remained strained by drought in some areas. Home sales rose. Local nonprofits cited higher demand for assistance. Overall payrolls rose modestly, though hiring slowed sharply in the service sector. Wage growth remained elevated, while price pressures eased notably. Outlooks worsened, and uncertainty surged, partly due to heightened apprehension about the recent banking sector issues and high interest rates, and their spillover effects on the broader economy.\nLabor Markets\nEmployment increased modestly during the reporting period. The pace of hiring picked up in manufacturing but slowed in energy and nearly stalled out in services. Difficulty hiring workers remained a top concern for many firms, though a few reported some improvement. Airlines cited capacity constraints due to pilot shortages, and a workforce development contact said some employers were taking a closer look at non-traditional talent pipelines to fill positions. In contrast, staffing firms noted clients were taking longer to make hiring decisions in part due to the increased economic uncertainty, and there were scattered reports of layoffs in construction-related manufacturing and upstream energy.\nWage pressures remained elevated, though they have stabilized or moderated in some industries. A food manufacturer noted having issues finding workers despite offering a starting salary that was more than twice the minimum wage, while construction contacts noted some easing in pricing for certain trades.\nPrices\nWhile input costs continued to rise, the pace of increases moderated in energy, construction, and manufacturing. Freight costs dipped. Some manufacturers noted continued price pressures from supply chain constraints, and a few firms said higher borrowing costs were slowing down expansion plans. Selling price pressures decelerated broadly, bringing price growth close to or below its historical average in manufacturing and services. Homebuilders continued to use incentives and discounts to close sales. Airlines said ticket prices remained elevated, while energy firms reported declining rental rates for drilling rigs and said they expect cost inflation to continue slowing. More than a third of firms responding to a March Dallas Fed survey of nearly 400 Texas business executives cited inflation as a primary outlook concern over the next six months.\nManufacturing\nTexas factory output expanded slightly in March after declining in February. New orders for manufactured goods continued to contract, however. Weakness in demand was most pronounced in primary metals and plastics, though construction-related and computer manufacturers cited declines in new orders as well. In contrast, demand for fabricated metals and machinery rose, and chemical and refinery utilization rates increased. Overall, outlooks weakened, with just under two-thirds of contacts noting waning demand and/or recession as a key concern. Other headwinds cited were elevated input costs, labor shortages, and higher labor costs.\nRetail Sales\nOverall retail sales held steady in March. Auto sales rose strongly, though one contact noted a pullback in demand due to high interest rates. Clothing and health and personal care retailers cited higher sales. In contrast, electronics and appliance store sales dipped, which some contacts attributed to slow activity in the housing market. Nonstore retailers reported sluggish activity in part due to more people traveling this spring break.\nNonfinancial Services\nModest expansion continued in the service sector. Revenue growth was the strongest in leisure and hospitality, and activity in professional and business services, education, and transportation services rose as well. Small parcel and air cargo shipments were flat to down, while sea cargo volumes remained robust and were up notably compared with year-ago levels. One contact noted that the recent train derailments had increased supply chain delays. Airlines saw continuing solid demand for leisure travel and some contacts expect business travel revenues to reach pre-pandemic levels this spring. Demand for staffing services was mixed, with firms making white-collar placements seeing continued strong activity while those filling blue-collar positions citing weakness. Health care and real estate rental and leasing firms noted declining revenues on net.\nConstruction and Real Estate\nSingle-family housing demand improved further during the reporting period partly due to lower mortgage rates. However, the level of activity remained well below year ago levels. Most contacts reported a solid spring market, with sales, particularly in popular locations at or above plan. Buyer traffic held up, and contract cancellations dipped. Housing starts remained subdued. Outlooks improved but uncertainty remained elevated particularly considering the recent banking challenges. Apartment leasing picked up slightly. Rents were flat and occupancy continued to dip as supply outpaced demand.\nDemand for office space was lackluster, and heightened levels of sublease space remained an impediment to market recovery. Activity in the industrial market stayed solid, but vacancy edged up due to the arrival of new properties. The higher cost of capital, tighter lending standards, and financial uncertainty has made it challenging to price deals, diminishing investment sales activity. Some contacts voiced concern regarding the renewal of commercial real estate loans, particularly those secured by office properties.\nFinancial Services\nLoan demand continued to decline in March as bankers reported worsening business activity. Loan volumes fell, driven largely by a sharp contraction in consumer loans. Loan performance worsened slightly overall. Credit standards and terms tightened sharply, and marked increases in loan pricing were noted. Banking outlooks continued to deteriorate, with contacts expecting a contraction in loan demand and business activity and an increase in nonperforming loans over the next six months. Increased uncertainty and lack of confidence resulting from the recent banking issues were cited as concerns.\nEnergy\nEnergy activity was essentially flat over the past six weeks. The rig count was unchanged as activity shifted between and within basins in part due to lower natural gas prices. Oil and natural gas production increased in the first quarter, and expectations are for drilling and completion activity to rise moderately through the year. Outlooks worsened, however, partly due to uncertainty about the economy.\nAgriculture\nDrought conditions persisted in the western part of the district while soil conditions were quite favorable elsewhere. The La Ni\u00f1a weather pattern has ended, and rainfall is expected to increase moving into summer and fall. Cotton acres are expected to be down significantly this year, with farmers favoring crops with a relatively higher price and drought tolerance. On the livestock side, cattle prices increased dramatically over the past six weeks and were up from this time last year, and demand was solid.\nCommunity Perspectives\nNonprofits saw increased demand for their services, with one contact citing higher activity compared with pre-pandemic levels. Utilization of housing assistance or temporary shelters increased notably, and some nonprofits said that housing assistance was the fastest growing need among their clients. Contacts cited growing financial difficulties for low- to moderate-income families in part due to the recent reduction in SNAP benefits. One nonprofit noted that more middle-class families were seeking financial help as their wages had not kept pace with rising living costs. High or rising operating costs remained a challenge for many nonprofits, and some were concerned that with many companies downsizing, they would not meet their fundraising goals.\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"

New York

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"Beige Book Report: New York\nApril 19, 2023\nSummary of Economic Activity\nEconomic activity in the Second District was little changed in the latest reporting period. The labor market has remained solid: employment increased slightly despite ongoing difficulty finding workers, wages continued to increase, and many businesses plan to add staff in the months ahead. Inflationary pressures eased somewhat but remained widespread. Supply availability, while still constrained, continued to improve, and goods production picked up noticeably. Consumer spending was flat to up slightly in recent weeks, while tourism has continued to strengthen. The home sales market has continued to pick up and the rental market has been steady. On balance, commercial real estate markets were mostly unchanged. Conditions in the broad finance sector deteriorated sharply, coinciding with recent stress in the banking sector. Regional banks continued to report widespread declines in loan demand, ongoing credit tightening, and modestly rising mortgage delinquency rates. Amid heightened uncertainty, most businesses do not expect economic conditions to improve in the coming months.\nLabor Markets\nLabor market conditions have remained solid. On balance, employment increased slightly in the latest reporting period despite ongoing difficulty finding workers across the region. However, businesses in the manufacturing, construction, and education & health sectors indicated that employment declined in recent weeks. Even so, contacts at two major employment agencies noted ongoing strong labor demand and continued to indicate that worries of widespread weakening in the labor market have not materialized. Indeed, thus far, layoffs have been concentrated in large companies, and mostly among their workers who are outside of the region. Further, a New York City employment agency indicated that the broader local labor market has yet to experience noticeable ripple effects from recent stress in the banking sector. Looking ahead, on net, businesses plan to add staff in the coming months.\nWages continued to increase, though at a somewhat slower pace than earlier in the year as major compensation adjustments tend to be concentrated at the beginning of the year for most workers. Businesses expect wage increases to continue to moderate.\nPrices\nInflationary pressures moderated somewhat but remained widespread. Businesses reported that the pace of input price increases slowed slightly in recent weeks. Still, the costs of transportation, energy, and many raw materials remained high. The pace of selling price increases also eased somewhat, especially in the service sector though not among retailers or leisure & hospitality firms. Fewer businesses than in the last report expect prices to increase.\nConsumer Spending\nConsumer spending was flat to up slightly in recent weeks as consumers continued to face pressure from high inflation and heightened uncertainty. Nonauto retailers indicated that business was sluggish and down slightly in recent weeks, while spending on travel-related services, recreation, and in restaurants and bars has remained strong. Auto dealers in upstate New York reported that sales of new vehicles were steady with ongoing improvements in inventory levels, while sales of used vehicles firmed. Consumer confidence in the region rose to a nearly two-year high in March, driven by growing optimism among New York City residents.\nManufacturing and Distribution\nManufacturing activity picked up in recent weeks, following several months of contraction. New orders and shipments surged, and businesses indicated that supply availability, while still constrained, continued to improve. However, businesses in wholesale distribution and transportation & warehousing reported declining activity. While manufacturers remain mildly optimistic, distribution-related businesses have turned pessimistic.\nServices\nOn balance, service sector activity rose modestly, though conditions varied across sectors. Personal services businesses reported moderate weakening, while providers of business & professional, education & health, and leisure & hospitality services noted some growth in activity after a sustained period of weakness. Businesses in the service sector generally expect little change in economic conditions in the months ahead.\nTourism activity in New York City continued to strengthen and is nearing pre-pandemic levels. While domestic travel remains strong, international travel continues to lag. Visitors from Asia\u2014especially China\u2014remain noticeably absent, in part due to long wait times for visas. Though business travel has yet to fully bounce back, it has picked up beyond expectations in recent weeks. Demand for hotel rooms continued to increase with advance bookings trending up as people have grown more comfortable traveling. Even with the steady uptick in visitors to New York City, the reduction in daily commuters continues to exert pressure on the City's retailers and entertainment-related businesses.\nReal Estate and Construction\nResidential sales have picked up with the start of the spring selling season, with prices steady at a high level. Sales activity in and around New York City has continued to increase beyond the seasonal norm. By contrast, real estate contacts in upstate New York indicated that the spring selling season has gotten off to a slower start in part due to unseasonably harsh weather, though demand remains strong for homes in the middle of the region's price range. While listings have increased, the inventory of available homes has remained exceptionally low across the region except in Manhattan. Contacts pointed to heightened uncertainty and the prevalence of homeowners with mortgages locked in at historically low rates as key factors keeping some people from listing their homes and moving.\nResidential rental markets have been steady. After peaking last summer, rents including concessions have been little changed near record highs in Manhattan, Brooklyn, and Queens and rental vacancy rates have remained exceptionally low as people gradually continue to return to New York City. Rents have also plateaued at a high level in much of upstate New York.\nCommercial real estate markets were little changed in recent weeks. Office vacancy rates edged up slightly in and around New York City and were steady across upstate New York, while office rents were mostly flat across the District. New York City's retail market weakened somewhat, with vacancy rates up slightly and rents trending down. Vacancy rates remained at low levels in the industrial market and rents trended up modestly.\nOverall, construction contacts reported weakening conditions in March and early April. Office construction remained steady at a low level in most of the District, though there were some new starts in northern New Jersey, Long Island, and upstate New York. Industrial construction was solid, but little changed across the District. Multi-family residential starts picked up from low levels in Manhattan and parts of upstate New York but remained weak elsewhere.\nBanking and Finance\nConditions in the broad finance sector deteriorated sharply coinciding with recent stress in the banking sector. Small to medium-sized banks in the District reported widespread declines in loan demand across all loan segments. Credit standards tightened noticeably for all loan types, and loan spreads continued to narrow. Deposit rates moved higher. Finally, delinquency rates edged up on residential and commercial mortgages.\nCommunity Perspectives\nCommunity leaders noted that economic challenges for lower-income families have been increasing as pandemic-era assistance programs wind down. With the temporary boost in SNAP benefits and Medicaid supplementation being phased out, community organizations are stepping up their efforts to support the increase in vulnerable families facing difficulty affording food and healthcare. Contacts expressed concern that state and local budgetary pressures may impede the provision of community services. Labor shortages and understaffing in the not-for-profit sector have just begun to ease, with increases in the number and quality of applicants.\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

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"April 19, 2023\nSummary of Economic Activity\nThe Sixth District economy grew at a modest pace from mid-February through March. Labor markets improved, and wage pressures diminished slightly amid increasing labor availability. Some nonlabor costs such as shipping, eased, while others, like construction materials, remained volatile. Retail sales softened, but demand for new autos was robust. Tourism activity remained healthy. Demand for housing improved amidst lower mortgage interest rates and declining home prices. Demand for commercial real estate remained mixed. Transportation activity was unchanged, on balance, from the previous report. Manufacturing activity was mixed with consumer confidence cited as a risk. Loan growth at banks remained strong despite concerns about liquidity. Activity in the energy sector was mostly healthy. Agriculture conditions remained mixed.\nLabor Markets\nLabor market conditions continued to improve. Contacts noted that many positions were easier to fill, and most indicated retention had improved. However, businesses continued to cite challenges including acute shortages of various positions (for example, in hospitality, accounting and transportation), confronting an aging labor force, and facing sustained demand for flexible work arrangements by employees. Most firms have been hiring to back-fill open positions while a small number were hiring to grow business. Several firms noted efforts to move away from underperforming lines of business by downsizing through both attrition and layoffs while staffing up more profitable lines. Contacts noted turning to automation to fill repetitive, understaffed roles, and some have begun to leverage the use of artificial intelligence in lieu of hiring for certain professional positions.\nMost contacts noted some relief from wage pressures and expressed certainty that wage growth would moderate further this year.\nPrices\nContacts reported continued improvement in supply chain issues and shipping capacity, which has helped ease transportation cost pressures. Even though contracts still carried elevated escalation or contingency clauses, some degradation in pricing power at the wholesale level was reported. Buyers were reportedly winning more concessions compared to the last two years of a take-it-or-lose-it price environment. However, various other nonlabor costs like food inputs and construction materials saw continued volatility and this, coupled with elevated labor costs, kept firms from passing easing cost pressures on to customers. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth at 3.8 percent, on average, in March, up significantly from 3.5 percent in February. Firms' year-ahead inflation expectations increased to 3.1 percent, on average in March, up significantly from 2.9 percent in February.\nConsumer Spending and Tourism\nRetail sales softened over the reporting period but remained above pre-pandemic levels. Retailers continued to report that inflationary pressures have caused lower-income consumers to be more selective with discretionary spending. However, automobile dealers reported strong demand for new vehicles as inventory levels improved. Contacts were cautiously optimistic for the remainder of the year in spite of continued inflationary pressures and rising interest rates.\nTravel and tourism activity was little changed from the previous report. Demand for leisure travel remained healthy and was described as normalizing from unsustainably high year-earlier levels. Business travel continued to recover. Hotel average daily rates remained above pre-pandemic levels and travelers' spending on experiences continued to be robust.\nConstruction and Real Estate\nThough still weaker than a year ago, housing demand throughout most of the District was boosted by lower mortgage interest rates and continued declines in home prices. A higher percentage of homes have sold below asking price and median home prices in many metro areas declined from peak levels reached in 2022. This, combined with lower interest rates, has led to a steady improvement in home ownership affordability and increased demand for housing. Activity has been stronger in the entry-level price points compared to more high-end homes. However, inventory remained near historic lows in most markets. Cancellations in the new home market moderated and some homebuilders have increased speculative home inventory.\nCommercial real estate (CRE) conditions were mixed. The industrial sector remained healthy, while office, multifamily, and some segments of retail slowed. An increasing number of contacts reported concerns about rising costs outpacing rent increases. More employers requiring staff to return to the office has helped stabilize some segments of the market; however, a significant amount of available sublease space is expected to create headwinds. A rising number of contacts mentioned concerns about the availability of financing as some banks reduced funding commitments amid weaker lending from larger financial and non-bank institutions. Concerns over declining CRE values accelerated.\nTransportation\nTransportation activity was largely consistent with the previous report. Ports continued to see a slowing in container trade, though volumes remained above pre-pandemic levels. Shipments of autos and heavy machinery through District ports increased. Railroads reported further declines in overall freight shipments. Air cargo contacts noted significant year-over-year volume declines. Truck capacity remained readily available, and some trucking contacts noted expectations for an improvement in volumes later this year.\nManufacturing\nSome manufacturers reported significant slowing in activity, especially firms producing inputs for residential construction, where declines were attributed to elevated mortgage rates and persistently high construction costs. Lead times and supplier delivery times improved, and supply chains were characterized as normalizing. Auto manufacturers noted strong demand; however, consumer confidence was cited as a risk to the outlook.\nBanking and Finance\nLiquidity pressures persisted for some District financial institutions. Banking contacts reported that a limited number of customers expressed concerns about recent bank failures and their level of uninsured deposits held at a single institution; however, banks have not experienced a large outflow of deposits. Unrealized losses remain elevated, limiting the ability to sell securities for liquidity without negatively impacting capital. Despite concerns about liquidity, banks indicated loan growth remained solid over the reporting period.\nEnergy\nEnergy contacts noted robust activity in exploration and production, crude oil refining, power infrastructure projects, liquefied natural gas, and renewable energy projects. Strong global demand and federal dollars for decarbonization from the Inflation Reduction Act were cited as factors influencing activity strength. Chemical manufacturers reported softening in the chemicals space, largely for housing sector inputs. Utility providers also reported some slowing in industrial segments tied to housing. Commercial and residential utility segments, however, remained strong.\nAgriculture\nAgricultural conditions were mixed. Domestic supplies of chicken exceeded demand as the Avian Flu limited exports. However, foreign demand for poultry improved as some countries loosened import regulations. Demand for eggs exceeded supply but softened in response to elevated prices. Cattle supply remained low, and beef producers expressed concerns that falling chicken prices may cause consumers to substitute chicken for beef. Demand for cotton and soybeans fell from already low levels. Contacts expect reduced plantings of cotton this year as discretionary spending softens. Contacts noted continued supply chain improvements.\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"

National Summary

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"Beige Book: National Summary\nApril 19, 2023\nThis report was prepared at the Federal Reserve Bank of Richmond based on information collected on or before April 10, 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\nOverall economic activity was little changed in recent weeks. Nine Districts reported either no change or only a slight change in activity this period while three indicated modest growth. Expectations for future growth were mostly unchanged as well; however, two Districts saw outlooks deteriorate. Consumer spending was generally seen as flat to down slightly amid continued reports of moderate price growth. Auto sales remained steady overall, with only a couple of Districts reporting improved sales and inventory levels. Travel and tourism picked up across much of the country this period. Manufacturing activity was widely reported as flat or down even as supply chains continued to improve. Transportation and freight volumes were also flat to down, according to several Districts. On balance, residential real estate sales and new construction activity softened modestly. Nonresidential construction was little changed while sales and leasing activity was generally flat to down. Lending volumes and loan demand generally declined across consumer and business loan types. Several Districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity. The majority of Districts reported steady to increasing demand and sales for nonfinancial services. Agriculture conditions were mostly unchanged in recent weeks while some softening was reported in energy markets.\nLabor Markets\nEmployment growth moderated somewhat this period as several Districts reported a slower pace of growth than in recent Beige Book reports. A small number of firms reported mass layoffs, and those were centered at a subset of the largest companies. Some other firms opted to allow for natural attrition to occur, and to hire only for critically important roles. Contacts reported the labor market becoming less tight as several Districts noted increases to the labor supply. Additionally, firms benefited from better employee retention, which allowed them to hire for open roles while not constantly trying to back-fill positions. Wages have shown some moderation but remain elevated. Several Districts reported declining needs for off-cycle wage increases compared to last year.\nPrices\nOverall price levels rose moderately during this reporting period, though the rate of price increases appeared to be slowing. Contacts noted modest-to-sharp declines in the prices of nonlabor inputs and significantly lower freight costs in recent weeks. Nevertheless, producer prices for finished goods rose modestly this period, albeit at a slightly slower pace. Selling price pressures eased broadly in manufacturing and services sectors. Consumer prices generally increased due to still-elevated demand as well as higher inventory and labor costs. Prices for homes and rents leveled out in most Districts but remained at near record highs. Contacts expected further relief from input cost pressures but anticipated changing their prices more frequently compared to previous years.\nHighlights by Federal Reserve District\nBoston\nBusiness activity was roughly even. Tourism contacts enjoyed moderate growth, while retail sales were flat, and manufacturing slowed. Home sales fell further. Headcounts rose modestly and wage growth was moderate. Prices increased modestly amid further easing of cost pressures. Some contacts worried that smaller banks might restrict lending over liquidity concerns, putting a damper on economic activity.\nNew York\nRegional economic activity was little changed, though goods production picked up noticeably. The labor market has remained solid, with ongoing slight job growth and wage gains. Inflationary pressures moderated somewhat but remained widespread. Conditions in the broad finance sector deteriorated sharply coinciding with recent stress in the banking sector.\nPhiladelphia\nBusiness activity appeared to decline slightly during the current Beige Book period after increasing last period. Consumer demand ticked down, while employment held steady. Wage growth slowed to a modest pace. Price inflation subsided but continued to grow modestly. Banks reported tighter lending standards. Expectations were subdued as sentiment remained cautious.\nCleveland\nEconomic activity was generally flat in the Fourth District and developments in the banking sector appeared to have very little impact on either recent economic activity or credit availability. Labor demand eased, and the supply of workers increased, particularly for lower-wage positions. Wage and other cost pressures continued to ease.\nRichmond\nThe regional economy contracted slightly in recent weeks. Manufacturing activity, retail spending, and loan demand softened. Travel and tourism picked up moderately while nonfinancial service providers indicated steady demand. Real estate firms reported reduced activity, while transportation freight volumes contracted moderately. Employment rose slightly with moderate increase in wages. Prices grew at a strong rate.\nAtlanta\nEconomic activity grew modestly. Labor markets improved further, and wage pressures eased slightly. Some nonlabor costs moderated and others remained unstable. Retail sales softened. Auto sales were robust. Tourism activity remained strong. Housing demand improved further. Transportation was mixed. Loan growth was solid. Energy demand was healthy. Agriculture remained mixed.\nChicago\nEconomic activity was little changed. Employment increased moderately; consumer spending, business spending, and construction and real estate were flat; nonbusiness contacts saw little change in activity; and manufacturing demand decreased modestly. Prices and wages rose moderately, and financial conditions tightened moderately. Agricultural incomes were expected to be lower in 2023 than in 2022.\nSt. Louis\nEconomic conditions have remained unchanged since our previous report. Labor markets remained tight, but reports of easing increased. Firms struggled to pass on price increase to customers, and contacts across a range of industries reported supply chain improvements. Banking contacts reported slowing loan growth and a decline in deposits, but expressed confidence in their overall position.\nMinneapolis\nEconomic activity in the region grew slightly in recent weeks. Employment gains were modest, and labor supply improved slightly. Prices were steady and wages rose slightly; levels for both remained high. Consumer spending was flat. Manufacturing declined a bit, but the outlook was more positive. Construction activity improved slightly, save for residential building. Minority-and women-owned firms reported steady activity.\nKansas City\nTotal economic activity across the Tenth District declined slightly in March and April. However, almost every business contact reported no pull back in planned capital expenditures, hiring plans or planned wage increases in response to recent financial volatility. Worker retention was reportedly much higher, even as wage growth slowed. Households pulled back on spending, particularly on bigger ticket items like cars or home construction projects.\nDallas\nModest growth continued, with steady gains in service sector activity and a pickup in home sales and manufacturing output. Job growth was modest, though hiring slowed sharply in services. The pace of price increases slowed. Outlooks were largely negative, and contacts voiced concern about weakening demand, a potential recession, and the spillover effects of the recent bank failures on the broader economy.\nSan Francisco\nEconomic activity expanded slightly. Employment levels were steady amid tight labor market conditions, while wage and price growth moderated further. Demand for retail goods softened, while demand for services was robust. Manufacturing activity was stable, while conditions in the agriculture sector slowed somewhat. Residential and commercial real estate activity fell, and lending activity declined substantially.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2023/2023-04-bo

"April 19, 2023\nSummary of Economic Activity\nBusiness activity in the First District was flat on average. Tourism maintained its strong momentum, with moderate further increases in air travel and convention activity, while retail sales were steady on balance amid mixed results. Demand softened moderately for manufacturers, although some continued to experience solid revenue growth. Software and IT services firms reported stable demand and somewhat higher profits. Residential real estate sales declined modestly, as low inventories and high prices continued to deter transactions. Commercial real estate activity was flat, but credit was expected to tighten moving forward. Employment increased modestly and wage growth was moderate. Prices increased at a modest pace and slower price growth was expected for the rest of 2023. The outlook was mostly positive, but some contacts worried that smaller banks might restrict lending over liquidity concerns, putting a damper on economic activity.\nLabor Markets\nHeadcounts increased modestly on balance, led by strong labor demand in the First District's hospitality and tourism sectors, and wage growth was steady at a moderate pace. Contacts in manufacturing said that the labor market softened significantly, making for much easier hiring and helping to alleviate wage pressures some. employment was roughly flat, and its wage growth was moderate, as contacts said that turnover was stable at a manageable pace, marking an improvement from one year earlier. A clothing retailer was engaged in hiring additional warehouse workers, but the pace of filling the 200 openings was slower than anticipated. Robust convention activity and an anticipated increase in business travel from Asia gave a moderate boost to food and beverage staffing at Boston-area hotels. Cape Cod hospitality contacts ramped up efforts to recruit international workers to address labor shortages in advance of the busy summer season, and Massachusetts has funded an effort to place visa holders in temporary housing to facilitate such hiring. Looking ahead, labor demand is expected to soften modestly on balance, but only one firm\u2014a manufacturer\u2014was planning to make significant reductions in staff in the near future. Wage growth was predicted to slow to a modest average pace.\nPrices\nPrice increases were modest on average as cost pressures eased further. Prices were mostly flat among software and IT services firms, although one enacted modest price hikes for selected products in addition to annual cost-of-living adjustments built into contracts. Price changes were mixed among manufacturers, including moderate increases by some and more aggressive promotions and discounts by others. Retail prices were largely stable. Hotel room rates in the Greater Boston area declined in line with seasonal expectations but have increased 10 percent relative to the same time last year. Cost pressures abated noticeably, as contacts noted modest-to-sharp declines in the prices of raw materials and significantly lower freight costs. On balance, the outlook called for further easing of price growth for the remainder of 2023, and some contacts planned to hold prices strictly fixed moving forward on worries that additional markups would be counterproductive.\nRetail and Tourism\nFirst District retail contacts reported flat sales on average, while tourism contacts saw moderate further increases in activity relative to seasonal trends. A clothing retailer experienced softer demand throughout the early months of 2023, but revenues held steady due to earlier price increases. Cape Cod retailers experienced strong first quarter sales, but a large-scale infrastructure project crimped activity in recent weeks. Based on advance bookings, hospitality contacts on the Cape expect summer 2023 occupancy and room rates to match last summer's record-setting results. Airline passenger traffic through Boston increased steadily in recent months, on both domestic and international routes, reaching roughly 95 percent of pre-pandemic levels as of the first quarter of 2023. The Greater Boston hotel occupancy rate increased relative to seasonal trends, and spring and summer bookings continued to climb. Scheduled convention activity and cruise bookings for the spring and summer are expected to exceed 2019 levels.\nManufacturing and Related Services\nManufacturing contacts reported mixed revenue results, but demand was moderately softer on balance. Some contacts reported modestly higher sales but also said that the pace of revenue growth had slowed recently. For one firm, overall results were hit by a steep slowdown in demand from customers in the semiconductor industry. Others experienced weaker sales as their customers continued to draw on inventories accumulated in 2022 in response to supply chain concerns. A contact in the semiconductor industry said that industry sales were down but that their own sales were up due to investment demand from electric car manufacturers. None of our contacts reported major revisions to capital expenditure plans, and a few pointed to increased spending on automation. Contacts were generally optimistic for their own results for the rest of 2023, although several described the outlook for the economy more broadly as highly uncertain.\nSoftware and IT Services\nDemand for software and IT services was stable on balance. Revenue growth at one firm exceeded expectations, and another experienced an ongoing pullback by clients facing internal liquidity concerns. Profits and margins were modestly higher on average. Capital and technology spending was unchanged and was expected to hold steady for most firms, although one mentioned the possibility that capital expenditures could soften moving forward. Contacts were largely optimistic and expected demand for their own products and services to hold steady moving forward. Although one contact perceived that the risk of a widespread banking crisis had abated recently, another contact felt that nervousness about the banking sector could dampen aggregate economic activity.\nCommercial Real Estate\nCommercial real estate activity in the First District was mostly unchanged since February. In the industrial property market, rents continued to level off even though leasing demand was still deemed strong relative to supply. Office leasing activity was mostly flat, although contacts noted a modest slowing of deal flow in both Boston and Providence. Office asking rents were roughly stable, but one contact noted that tenants demanded (and on balance received) increasingly generous concessions. Conditions in the retail market worsened slightly in response to patches of weakness in consumer spending, and as a result firms became more cautious with capital spending. Concerning the outlook, contacts expected to see slight to moderate further declines in office and retail leasing activity moving forward, and perceived growing constraints on investment activity. In particular, several contacts predicted that lending to the commercial real estate sector would become more conservative in response to heightened concerns about banking risks, and one expressed that the credit contraction could be large enough to spill over to other sectors of the economy.\nResidential Real Estate\nFirst District home sales softened in February (the latest month for which data were available) following a temporary uptick in sales in January that was attributed to a slight\u2014yet partly transient\u2014decline in mortgage rates. Closed single-family sales were down sharply on a year-over-year basis, and in Boston dipped to their lowest level in over a decade. Condo sales were roughly flat since the previous report. Inventories grew over-the-year on balance, albeit at a somewhat slower pace than was reported last time, and several contacts noted that the supply of homes for sale remained extremely limited. Home prices showed signs of softening amid growing buyer frustration over the lack of home affordability. Median single-family home prices nonetheless posted modest year-over-year increases on balance, a fact that one contact attributed to a decline in the proportion of starter homes on the market, although the median home price in Boston was down moderately from a year earlier. Looking ahead, contacts expressed concerns that low inventories and high mortgage rates could dampen activity during the typically busy spring sales season.\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"

Chicago

/beige-book-reports/2023/2023-04-ch

"April 19, 2023\nSummary of Economic Activity\nEconomic activity in the Seventh District was little changed overall in late February and March. Contacts generally expected slow growth in the coming months, though many expressed concerns about the potential for a recession in the coming year. Employment increased moderately; consumer spending, business spending, and construction and real estate were flat; nonbusiness contacts saw little change in activity; and manufacturing demand decreased modestly. Prices and wages rose moderately, and financial conditions tightened moderately. Banking contacts reported some movement in deposits but little change in credit availability following the collapse of Silicon Valley Bank. Agricultural incomes were expected to be lower in 2023 than in 2022.\nLabor Markets\nEmployment increased moderately over the reporting period and contacts expected slower employment growth over the next 12 months. Many contacts continued to have difficulty finding workers, especially those in the skilled trades. At the same time, however, many said hiring was easier compared with a few months ago. Some manufacturers reported that with a slowdown in orders, they were feeling less urgency to fill open positions and were more willing to wait for the right candidate. One contact in state government saw signs of less labor hoarding, as businesses were making less of an effort to keep underutilized or underperforming workers. Wage and benefit costs rose moderately, with several contacts indicating that regular annual wage and benefit increases had recently taken effect.\nPrices\nPrices rose moderately in late February and March, and contacts expected a similar rate of increase over the next 12 months. Producer prices rose modestly, with contacts highlighting higher costs for raw materials (particularly steel) and energy. Several contacts noted that growth in shipping costs had slowed noticeably, particularly for containers and ocean freight. Consumer prices generally increased due to the continued elevated level of demand and the passthrough of higher costs.\nConsumer Spending\nConsumer spending was unchanged on balance over the reporting period. Nonauto retail sales were slightly softer, with contacts noting declines for gasoline and building materials and lower than expected sales of furniture and electronics. Light vehicle sales were unchanged overall, and service and parts demand remained strong. Leisure and hospitality spending increased slightly, driven by greater spending in travel categories such as cruise lines and travel agencies.\nBusiness Spending\nBusiness spending was stable overall in late February and March. Capital expenditures increased modestly, with several contacts reporting spending on renovation or expansion of existing structures. Demand for transportation services decreased some, though activity remained at a high level. Demand for residential, commercial, and industrial energy decreased slightly, with one contact highlighting declines from manufacturing and small commercial enterprises. Inventories for most retailers were at comfortable levels. Though auto inventories continued to move up, according to a survey of dealers they were still only around half of pre-pandemic levels. In manufacturing, inventories stayed slightly elevated, and many contacts indicated that they were no longer experiencing supply chain disruptions. A construction contact noted that materials availability had improved to the point that certain suppliers were no longer taking orders more than a few weeks in advance.\nConstruction and Real Estate\nConstruction and real estate activity was little changed on balance over the reporting period. Residential construction decreased slightly, while residential real estate activity was up modestly across segments. One contact attributed the pickup in sales to lower mortgage rates. Home prices and rents moved up modestly. Nonresidential construction activity was little changed overall, though contacts highlighted renovation of hospitality space as an area of growth. Elevated construction costs continued to hold back new projects. Commercial real estate activity decreased moderately, though some contacts said deal flow was still at a healthy level. Demand for leased multifamily space increased while demand for office space continued to fall. Prices and rents were down slightly. Vacancy rates increased slightly, and the amount of sublease space grew modestly.\nManufacturing\nManufacturing demand decreased modestly in late February and March. Steel orders decreased slightly. Fabricated metals orders were down modestly, with several contacts citing the automotive sector as a reason for declines. Auto production fell slightly. Machinery sales were up slightly, and one contact highlighted stronger demand from the aerospace sector. Heavy truck orders moved up slightly and backlogs remained very high.\nBanking and Finance\nFinancial conditions tightened moderately over the reporting period. Bond and stock markets saw little change in asset values on net, though volatility spiked and asset values temporarily fell following the collapse of Silicon Valley Bank (SVB). Banking contacts reported fielding some inquiries about deposit safety after SVB's failure and also saw some deposit transfers. A contact at a large bank that received new deposits was uncertain whether the deposits would stick once there was more clarity about the health of smaller banks. Business loan volumes decreased slightly, with one contact noting that clients producing durable goods were most likely to be struggling. Business loan quality was stable, and contacts did not report changes in lending standards. The consumer loan market saw a slight decrease in the volume of loans, led by further declines in refinancing activity. Consumer lending standards tightened slightly, while loan quality was stable.\nAgriculture\nWith input costs remaining elevated and many product prices down, contacts expected lower agricultural income for the District in 2023 compared with a strong 2022. Wheat prices were generally lower over the reporting period, during which the agreement for exporting grain from Ukraine was extended into May. Corn and soybean prices were also lower despite smaller estimates for the South American harvest. Planting delays were likely in some places in the District due to excess precipitation, though contacts noted the extra moisture could also recharge ground water levels for use later in the growing season. Although fertilizer costs fell, the cost of most other inputs remained high for crop farms. Cattle prices increased as the U.S. herd was squeezed by drought and a harsh winter. Egg prices moved up, while dairy and hog prices were down. High feed costs continued to compress most livestock margins. Prices for agricultural land continued to rise, reportedly at a slower pace.\nCommunity Conditions\nCommunity development organizations and public administrators reported little change in overall economic activity through March. Demand for social services remaining elevated despite reports of overall economic strength. State government officials again saw healthy growth in tax revenues and low levels of unemployment insurance claims. Despite slow growth and funding challenges, small businesses and nonprofits continued to be focused on employee recruitment and retention and were not reporting plans for layoffs. High interest rates and elevated supply costs continued to challenge plans to expand availability of affordable housing units and childcare facilities, non-profit developers reported. Family-facing organizations said there were signs of slower growth in consumer prices; however, the end of Covid-era benefits was putting new stress on household budgets.\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/2023/2023-04-mi

"April 19, 2023\nSummary of Economic Activity\nThe Ninth District economy grew slightly since the previous report. Employment gains were modest; labor demand remained high, but signs of softness also appeared. Wage pressures rose slightly and remained at high levels. Price pressures were steady at high levels. Consumer spending was flat, though activity varied in different segments. Commercial construction rose slightly, but residential construction continued to be slow. Commercial real estate was flat, and residential real estate remained very slow. Manufacturing activity contracted slightly, and agricultural conditions remained strong. Activity among minority- and women-owned businesses was steady. A substantial majority of contacts reported no effect on their organization from recent banking turmoil.\nLabor Markets\nEmployment grew modestly since the last report. Contacts reported a slight drop in job openings, but overall demand for labor remained healthy. A monthly business conditions survey showed that overall hiring sentiment remained positive; staffing contacts also noted increases in job orders with the coming of spring. Layoffs appeared to increase, but mass layoff events were still low. A Minnesota staffing firm said that businesses were \"exfoliating the workers they don't need.\" A Wisconsin workforce contact said that hiring had softened; there was not widespread downsizing, but more the \"abandonment\" of recruiting for unfilled positions. Several sources noted that turnover also appeared to be ebbing and could be a factor in lower job postings. Numerous contacts said labor availability improved slightly. A Wisconsin staffing contact said the number of job applicants rose \"but the quality is not strong.\" Still, job placements were growing because clients \"are becoming more open to more-questionable candidates.\"\nWage pressures remained high but there were small signs of easing. Most contacts reported that they still needed to offer higher wages than previously to fill open positions. A staffing firm reported that wages for industrial positions had risen more than 10 percent over the past year, and additional increases were expected. But multiple contacts said there was less need for off-cycle pay increases, and raises were returning to an annual frequency.\nPrices\nPrice pressures were steady since the last report, though levels remained elevated. Price pressures for inputs were greater on balance than for final goods, according to contacts. About half of respondents to a District business conditions poll reported no change to the prices they charged for their products and services in March from a month earlier, compared with a third reporting increases. Nearly two-thirds of hospitality and tourism contacts reported that inflationary pressures had gotten somewhat or much worse over the past three months. Several manufacturing contacts reported more resistance from customers to price hikes. Construction contacts reported that although prices of lumber and certain materials have retreated from highs, prices of other inputs, such as furnishings, remained elevated. Retail fuel prices in District states increased moderately overall since the previous report. Prices received by farmers in February increased from a year earlier for corn, soybeans, potatoes, hay, cattle, turkeys, and eggs; prices decreased from a year earlier for wheat, milk, hogs, chickens, sugar beets, dry edible beans, lentils, and canola.\nWorker Experience\nJob seekers continued to prioritize higher pay and greater flexibility as they looked for jobs and remained positive overall about their prospects. Many showed a strong willingness to learn new skills and consider a different line of work to advance their goals. Minnesota and South Dakota immigrant workers employed in agriculture, food processing, and manufacturing reported stable employment conditions. Some wished to find employment outside their current industry but were limited by language barriers and job proximity. A food processing worker in her sixties said she reduced her working hours because driving in the winter was difficult, but she did not plan on retiring soon. \"We came here to work, retirement is not for us,\" she added. Others shared similar sentiments.\nConsumer Spending\nConsumer spending rose slightly since the last report, with varied activity among different segments. Minnesota retail contacts reported modest sales growth in recent weeks. However, foot traffic at some South Dakota retailers has reportedly slowed compared with last year, said a contact there. The lodging industry in Minnesota and Montana continued to see healthy demand in March. However, industry contacts in both states noted some signs of softening demand. Vehicle sales in Minnesota and Wisconsin in March were lower compared with last year; in the western part of the District, sales at a dealership with multiple locations were slightly higher for new vehicles, despite inventory shortages, but 12 percent lower for used vehicles. Recreational, powersport, and marine vehicle sales remained subdued, with the RV industry \"bloated with inventory,\" according to a contact, and higher interest rates dampening demand. Spring break airline traffic has been brisk, with monthly passenger levels at some District airports seeing double-digit growth over last year.\nConstruction and Real Estate\nCommercial construction rose slightly since the last report. While new office projects remain slow, other sectors remained active, especially with the coming of spring. Industry data showed that recent nonresidential activity has been on par with last year. Contacts also reported that multifamily construction has remained healthy. A small sample of construction contacts reported that March sales were higher, on average, than a month earlier, and they had similar expectations for the coming month. Residential construction, on the other hand, was still in the doldrums. The number of single-family units permitted in March was down more than 40 percent, year-over-year, in the Minneapolis-St. Paul region; even larger declines were seen in Rochester, Minn., Bismarck and Fargo, N.D., and Sioux Falls, S.D.\nCommercial real estate was flat since the last report. In the Minneapolis-St. Paul region, leasing activity for industrial property remained strong, and vacancy rates fell slightly in the first quarter, despite a considerable amount of new supply coming online. Office space saw the opposite trend, with vacancies rising despite no new supply. Residential real estate remained slow, with higher mortgage rates heavily impacting sales. Available data on closed and pending home sales in March showed moderate-to-large declines across the District. A lack of inventory kept home prices elevated.\nManufacturing\nManufacturing activity decreased slightly since the last report. A regional index of manufacturing conditions indicated contraction in activity in March from a month earlier in Minnesota, North Dakota, and South Dakota. Manufacturing respondents to a District business conditions survey reported overall unchanged sales in March from a month earlier, though expectations for April were higher and many contacts noted strong backlogs. Inventories increased slightly, according to contacts, and several noted that supply chain pressures had eased. A producer of inputs for large engines and industrial equipment reported that it was expecting a dramatic reduction in sales and was planning to reduce staff by 20 percent in response. A producer of food and beverage equipment noted that \"customers are hesitant to invest in costly equipment when interest rates are so high.\"\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions were stable at strong levels entering the planting season. Most contacts reported that farm incomes continued to increase from a year earlier, while capital spending was steady. However, persistent wintry weather, including a severe snowstorm, delayed preparation for spring planting in many areas. District oil and gas exploration activity was unchanged since the previous report.\nMinority- and Women-Owned Business Enterprises\nMinority- and women-owned businesses reported little change in activity compared to last period. A few were concerned that their inability to pass on increased input and labor costs through final prices was beginning to threaten their existence. A number of contacts were still unsuccessfully looking for workers; they quoted wage competition and mismatched skills as the main reasons. Sentiments around recent banking events were mixed. While some expected their access to credit to further narrow, others expected little or no impact. A contact working with startups expected area entrepreneurs in the tech sector to be affected but was unsure as to what extent.\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

/beige-book-reports/2023/2023-04-cl

"April 19, 2023\nSummary of Economic Activity\nReports from Fourth District business contacts were consistent with generally flat aggregate economic activity, though conditions continued to vary by industry segment. While consumer spending appeared to firm somewhat from that of the prior period, it remained soft, and business spending was mostly flat. Concerns about developments in the banking industry reportedly had limited impact on recent business activity, though a small share of contacts reported a modest decrease in credit availability. However, many contacts indicated that these developments had increased uncertainty. Hiring slowed as firms' demand for additional workers eased and as a larger share of contacts sought to reduce headcount. Labor availability appeared to increase, particularly for those seeking to fill lower-wage positions. Wage and other nonlabor input cost pressures continued to trend lower, while price pressures eased from those of the previous reporting period.\nLabor Markets\nEmployment growth in the Fourth District appeared to be flat in recent weeks. The apparent easing in labor demand was illustrated in more-frequent reports of employers reducing staffing through attrition, hiring freezes, or layoffs. Moreover, some banking and manufacturing firms noted replacing only revenue-generating positions or hard-to-fill production positions while holding off on hiring support staff. Firms looking to increase staff more frequently stated that labor supply had improved recently. On balance, firms planned to maintain current staffing levels or selectively fill critical positions in the coming weeks.\nThe softer demand for labor and the increased labor supply were accompanied by further easing in wage pressures. The share of contacts that reported increased pay fell to 36 percent, the lowest share in more than two years. Moreover, 62 percent of contacts reported holding wages steady, many in response to declining margins or increased labor availability. Even so, many contacts across industries indicated that wage increases remained necessary to attract and retain skilled labor.\nPrices\nNonlabor input cost pressures eased in recent weeks, continuing a trend that started last summer. Several contacts reported that their overall costs had flattened. One homebuilder said he recently started \"pressing people to lower [their] prices but haven't had much success yet.\" That said, contacts in construction and manufacturing noted that costs for steel and concrete products increased recently. One steel producer said that he expected steel costs to rise further in the second quarter, but he expected costs to fall in the third quarter. More broadly, contacts expected further relief from input cost pressures in the months ahead.\nOverall selling-price pressures eased from those of the prior reporting period, but they varied across industries. On the one hand, natural gas prices fell amid mild winter and early spring weather, and freight prices decreased because of a drop in demand. On the other hand, some manufacturers said they continued to raise prices to \"catch up\" from the cost increases over the prior two years. Similarly, some retail contacts reported selectively raising prices to cover higher costs, though they did so cautiously to remain competitive.\nConsumer Spending\nReports suggest that consumer spending firmed somewhat from that of the previous reporting period. Still, demand for discretionary items remained soft as households faced continued pressure from inflation and increased interest rates. One general merchandiser noted that higher prices for food and other essentials continued \"eating up more of the customer's wallet,\" leading customers to favor lower-priced options such as generic brands. Auto sales dipped in part because increasing interest rates and higher vehicle prices pushed out of the market many buyers who want, rather than need, a new vehicle. One dealer hoped that more manufacturer incentives would increase demand, but he cautioned that higher credit standards had become an additional headwind for potential buyers. On balance, contacts expected consumer spending to remain stable in the coming months.\nManufacturing\nOverall demand for manufactured goods increased slightly from that in the previous period. Orders for aerospace-related products remained strong, but demand generally weakened for items from manufacturers tied to the housing and automotive sectors. Some manufacturers benefitted from an increase in international orders, particularly from Europe, Asia, and the Middle East. That said, heightened uncertainty tempered some manufacturers' expectations because of a decrease in new orders and backlogs.\nReal Estate and Construction\nDemand for residential construction and real estate continued to be hindered by higher interest rates. One homebuilder stated, \"As long as interest rates stay high, demand is going to be down. We're still selling, but it's down from where it was a year ago.\" Given low inventories, some builders reported that demand for housing seems stronger than expected. Some builders are attempting to offset higher interest rates through various incentives, including rate buydowns.\nNonresidential construction and real estate contacts indicated that demand had changed little in recent weeks on balance. While a few contacts reported that projects had been put on hold, others indicated they have still been able to secure new projects. One general contractor noted that demand had remained stable, but projects were taking longer to get started because the firm had been spending more time working on budgeting issues in the preconstruction phase. Several contacts anticipated construction and leasing activity to soften further in coming weeks because of rising interest rates and banks' tightening credit.\nFinancial Services\nOverall, loan demand continued to decrease, albeit at a slower pace than in the prior period. Several bankers reported that recent developments in the sector added to heightened economic uncertainty that motivated customers to reach out about the safety of their deposits. Others posited that the increased uncertainty along with high interest rates had reduced borrowing. Lenders indicated that delinquency rates remained low for both commercial and consumer loans. Core deposits continued to decline, a situation which bankers attributed to rate competition among banks and to outflows to higher-yielding alternatives. Looking forward, loan demand was expected to soften further in coming months.\nNonfinancial Services\nFreight activity declined this reporting period. One hauler mentioned that contract customers have cut back their orders and that the spot market for freight has also weakened. Contacts anticipated that freight demand would continue to decline. Generally, professional and business services contacts expected demand to be flat.\nCommunity Conditions\nNonprofit contacts reported increased demand for their services over the past six months because of rising costs for food, shelter, and utilities. One contact noted that food pantry use is up 30 percent compared to prepandemic levels, and another mentioned an increase in the number of first-time users of food assistance. Several contacts said that homelessness was rising and that more families were moving in with relatives because of higher rents, increased evictions, and a shortage of affordable housing. According to multiple contacts, fewer landlords were accepting Section 8 vouchers, a situation which contributed to the housing shortage. Some contacts who offer loan products to households and businesses noted that rising interest rates increased the demand for their products. One community service provider saw a rise in applications for zero-interest, small-dollar loans, and a community development financial institution contact reported that more individuals were seeking funding through her enterprise because of higher interest rates at local banks.\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/2023/2023-04-kc

"Beige Book Report: Kansas City\nApril 19, 2023\nSummary of Economic Activity\nTotal economic activity across the Tenth District declined slightly in March and April. However, almost every business contact reported no pull back in planned capital expenditures, hiring plans or planned wage increases in response to recent financial market volatility. Hiring activity slowed, leaving total District employment mostly unchanged. Worker retention was reportedly much higher, even as wage growth slowed. Consumer spending declined slightly. Households pulled back most on bigger ticket items like cars or home maintenance and improvements. Prices continued to rise at a moderate pace. Several food manufacturers indicated they do not expect to be able to negotiate the same pace of price increases as they did over the past year in the coming months. Deposit outflows at community and regional banking organizations raised funding challenges for many organizations in recent weeks. However, community development financial institutions, which typically serve microbusinesses and low-to-moderate income borrowers, reported stable funding conditions despite recent financial volatility. Agricultural lenders also indicated stable liquidity to support lending over the medium term. Generally, lenders expected somewhat tighter lending standards and stricter pricing related to credit risks in coming months.\nLabor Markets\nManufacturing employment in the Tenth District increased modestly in recent weeks, which contacts tied to a better ability to recruit for open positions rather than an increase in overall demand for workers. Restaurant owners, hotel operators and most service businesses indicated that employment changed little over the past month. Although employment in healthcare grew at a moderate pace over the last month, labor demand at healthcare establishments slowed moderately in some parts of the District. Job losses in tech occupations were concentrated among larger companies operating in the region. Contacts noted that tech workers were finding new employment opportunities within a couple of weeks on average, but often at somewhat lower pay. Expected employment growth was reportedly much lower than just a few months ago.\nAcross industries and geographies, contacts reported that wage growth is slowing significantly compared to last year, and that mid-cycle wage increases are much less likely this year. Despite slowing wage growth, most businesses indicated that worker retention improved in recent weeks. Most contacts characterized expected wage growth over the near term as being above growth rates expected over the long term.\nPrices\nPrices rose moderately across the District. Services contacts reported selling prices grew only slightly. Yet, most contacts at services businesses anticipate changing their prices more frequently compared to the previous year, taking opportunities to raise prices incrementally when available. Most businesses said their recent difficulty with passing cost increases through to customers compressed their profit margins, with most indicating they expect to increase prices further over the medium term to rebuild lost profitability. One notable exception was processed food categories, where contacts do not expect to be able to negotiate as large, or as many, price increases with grocers as they did last year.\nConsumer Spending\nHousehold spending continued to fall slightly in recent weeks. Purchases of larger ticket items, such as cars or spending on home construction projects, declined significantly. Offsetting those declines were robust spending growth at restaurants and a rebound in leisure travel activity. Several contacts noted in-store retail spending growth picked up slightly, but also highlighted that the distinction between brick-and-mortar and online sales is less important as most establishments have developed some sort of online sales platform.\nCommunity Conditions\nCommunity Development Financial Institutions (CDFIs) across the District reported they have generally not experienced adverse effects resulting from the recent volatility in the banking sector so far. Most contacts reported their banking relationships were strong, with some banks proactively reaching out to quell any concerns about funding commitments. CDFIs expect strong and increasing loan demand as an alternative and competitive lender to commercial banks, especially as banks tighten credit. Looking ahead, several CDFIs reported concerns about the ability of businesses to pay on loans, especially as more Economic Impact Disaster Loan payment deferments continue to expire throughout the year.\nManufacturing and Other Business Activity\nManufacturing activity was unchanged from recent months while activity at services businesses declined slightly. In response to recent financial volatility, almost every contact reported they quickly assessed their distribution of bank deposits; however, most business contacts reported no pull back in capex plans, hiring plans or planned wage increases resulting from recent events. Expectations of production and sales over the next six months were little changed, except in technology sectors where business activity is expected to decline moderately.\nIn contrast, District contacts in the venture capital and start-up space reported a much more adverse outlook compared to just a couple of months ago as a direct result of the closure and challenges among the key lenders to the sector. Businesses tended to point to prolonged declines expected for the start-up ecosystem, rather than declines in certain segments of the startup community, such as life/bio sciences or tech services.\nReal Estate and Construction\nVacancy rates at commercial properties increased moderately in recent weeks, most notably at office properties. Yet, contacts indicated use of warehousing and distribution space, which had been the strongest property segment over the last year, declined over the past month. Several contacts noted subleasing prices declined further. Following the recent financial market volatility, most contacts noted that lending for commercial real estate development is almost completely unavailable. From the lender side, one contact commented \"we'd already been focusing only on premium deals, but now we are being even stricter about what 'premium' means.\"\nCommunity and Regional Banking\nAfter tightening credit standards over the past several weeks, many contacts reported expectations for further tightening or more strict pricing related to credit risks. Loan demand also weakened modestly in the past month, driven by increased borrowing costs and economic uncertainty. Most notably, contacts reported weaker demand in commercial real estate and commercial and industrial loans, though declines were broad-based. Credit quality remained stable, but contacts continued to expect loan quality to deteriorate over the next six months. Deposit levels declined moderately as large depositors withdrew uninsured balances amid the volatility in the regional banking sector and ongoing intensity of rate competition.\nEnergy\nTenth District energy activity declined moderately over recent months. The number of active gas rigs in the District decreased as natural gas prices continued to decline below profitable levels, and prices were expected to remain in an unprofitable range over coming months. However, declines in the number of active oil rigs were modest, as firms expect oil prices to remain in a profitable range in the near term, albeit with profitability falling in recent months. In line with these expectations, oil producers reported access to credit over the last month remained unchanged despite banking disruptions. The average price needed for a substantial increase in drilling to occur remains above near-term oil and gas price expectations, constraining future production growth. Most business contacts reported higher cost pressures across several key inputs and anticipate persistent cost pressures in the coming year. Accordingly, capital spending growth slowed relative to last year and is expected to decline over the next six months.\nAgriculture\nAgricultural economic and credit conditions in the Tenth District were reportedly strong. Elevated commodity prices continued to support profit opportunities for many producers. Farm loan repayment rates improved at a gradual pace in the first quarter and indicators of credit challenges were limited. Agricultural bankers throughout the region also reported that their liquidity was adequate to meet current credit demand and deposit withdrawals. The impact of higher interest rates on borrower finances and farmland markets was reportedly a growing concern. More broadly, drought and elevated production costs continued to affect many areas of the region.\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

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"Beige Book Report: New York\nMarch 8, 2023\nSummary of Economic Activity\nEconomic activity in the Second District leveled off in early 2023 following a period of significant contraction. Supply availability continued to improve and is expected to improve further in the months ahead. Inflationary pressures remained persistent as the pace of both input and selling price increases picked up in recent weeks after a sustained period of moderation. The labor market has remained strong: employment increased slightly, wage growth picked up, and hiring plans remained solid. Consumer spending was steady to up slightly, and tourism has continued to strengthen. The home sales market has remained subdued but showed signs of picking up beyond the seasonal norm, while the rental market has firmed. On balance, commercial real estate markets were steady. Conditions in the broad finance sector improved somewhat, though regional banks continued to report widespread declines in loan demand, ongoing tightening in credit, and rising delinquency rates. Businesses expect economic conditions to improve modestly in the coming months.\nLabor Markets\nLabor market conditions have remained strong. On balance, employment increased slightly in recent weeks, with the strongest gains reported by businesses in the information and wholesale trade sectors. However, manufacturers indicated that employment declined for the first time since early in the pandemic. Still, job openings remained widespread and contacts at two major employment agencies indicated that concerns about a broader weakening in the labor market have not materialized. While it has become easier to attract and retain workers, finding workers with desired skills or experience remains a significant challenge. A New York City employment agency attributed some of the recent churn in the labor market to more workers looking for full or hybrid remote work options as many businesses have started to require more time onsite from their employees. Overall, hiring plans generally remain solid.\nWage growth picked up in early 2023, in part due to an increase in the minimum wage across the District. In the coming year, businesses expect wage increases to moderate to rates observed before the pandemic.\nPrices\nInflationary pressures remained persistent. After a sustained period of moderation, business contacts reported that the pace of input price increases picked up in recent weeks. Of note, shipping charges, energy costs, and the prices of raw materials rose noticeably. Selling price increases also picked up after slowing for much of last year. Retailers and leisure & hospitality firms reported modest increases in their selling prices. Businesses expect both input and selling price increases to remain fairly widespread in the months ahead.\nConsumer Spending\nConsumer spending was steady to up slightly in early 2023. Nonauto retailers indicated that business steadied but remained sluggish in recent weeks, while spending on travel-related services and in restaurants and bars was up moderately. Auto dealers in upstate New York reported that sales of new vehicles were up modestly as inventory levels continued to improve. However, sales of used vehicles have remained soft. Consumer confidence edged down but remained high.\nManufacturing and Distribution\nManufacturing activity declined further in early 2023, following a period of sharp contraction. Contacts in wholesale distribution also reported declining activity, while businesses in the transportation & warehousing sector reported that activity steadied. A growing number of businesses indicated that supply disruptions continued to ease, and delivery times shortened for the first time since the pandemic began. Looking ahead, businesses in manufacturing and distribution expect conditions to improve somewhat in the coming months.\nServices\nService sector activity continued to weaken in the new year, though at a slower pace than in the previous reporting period. Information sector businesses noted widespread weakening, while providers of professional & business and leisure & hospitality services reported modest declines in activity, and contacts in the education & health sector indicated some leveling off in activity after a sustained period of weakness. For the first time since last Fall, businesses in the service sector expect economic conditions to improve in the months ahead.\nTourism activity in New York City strengthened further in early 2023. Demand for hotel rooms continued to trend up, with hotel occupancy rates now just slightly below and average room rates modestly above pre-pandemic levels despite new hotels opening in the city. Attendance at Broadway shows has continued to improve, and a substantial number of shows are scheduled to open. Though business travel has yet to bounce back, domestic leisure travel has been strong, buoyed by the ability to work remotely. International travel continues to improve but has not returned to pre-pandemic levels.\nReal Estate and Construction\nThe residential sales market remained subdued in early 2023, though there are signs that activity has begun to pick up beyond the seasonal norm. Real estate contacts in upstate New York reported that prices have been flat to down slightly, and that sales volume and buyer traffic remain sluggish. By contrast, sales of both single-family homes and apartments picked up in and around New York City, and prices held steady. The inventory of available homes has declined in Manhattan and has remained exceptionally low elsewhere. Bidding wars are still occurring for desirable properties in upstate New York and remain fairly widespread in and around New York City outside of Manhattan.\nResidential rental markets have firmed. In Manhattan, rents remained high and have been little changed in recent weeks, even when taking landlord concessions into account. Already low rental vacancy rates in Manhattan edged down slightly. However, rents increased sharply in Brooklyn and Queens to start the year. Rents also remain high and continue to rise in upstate New York.\nCommercial real estate markets were little changed in early 2023. Office vacancy and availability rates edged up in New York City and northern New Jersey and were steady across upstate New York. Office rents were flat across the District. Retail vacancy and availability rates held steady, though retail rents fell slightly. Vacancy and availability rates edged up from low levels in the industrial market and rents trended up modestly.\nConstruction contacts reported some stabilization in business conditions but remained pessimistic about the near-term outlook. New office construction starts remained at low levels in most of the District, though there was some pickup in northern New Jersey. New industrial construction starts were up in and around New York City but were little changed elsewhere. Multi-family residential starts remained weak across the District.\nBanking and Finance\nContacts in the broad finance sector reported some improvement in business conditions. However, with rising interest rates, small to medium-sized banks in the District continued to report widespread declines in loan demand across all segments\u2014especially residential mortgages. Already low levels of refinancing activity decreased further. Credit standards continued to tighten on all loan types except consumer loans. Loan spreads narrowed. Nearly all bankers reported higher deposit rates. Finally, delinquency rates rose noticeably on all types of loans.\nCommunity Perspectives\nCommunity leaders highlighted the pressures faced by many households from a lack of availability of childcare and preschool. Such services are operating at a reduced capacity because of teacher shortages, the decline in childcare centers, and the expiration of pandemic-era funding. Housing affordability remains a significant challenge, despite efforts to improve affordability through changes in zoning and regional collaborations to build more housing. A rise in homelessness and large influx of asylum seekers have increased demands on the region's shelter and transitional housing sector.\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"

Richmond

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"March 8, 2023\nSummary of Economic Activity\nThe Fifth District economy grew modestly since our previous report. Manufacturing activity was unchanged, on balance, as some segments continued to grow while others contracted. District ports reported a net decline in total volumes as import activity slowed while loaded exports picked up moderately. Trucking companies also saw a decline in total volumes leading to lower spot market rates. Retailers experienced solid growth in sales and most said that consumer confidence was strong. Travel and tourism grew moderately, and hotels reported strong growth in revenues as occupancy was solid and average room rates were up. Residential real estate activity picked up in recent weeks, but the low inventory of houses continued to restrict sales volumes. Commercial real estate activity was unchanged since our previous report. Financial institutions reported weakening loan demand and a decline in deposit levels. Nonfinancial services demand held up while revenues flattened out due to rising costs. Employment grew modestly and employers continued to struggle to find qualified workers. The pace of wage growth slowed somewhat but was still elevated, overall. Prices continued to rise strongly on a year-over-year basis.\nLabor Markets\nEmployment grew modestly in recent weeks. Contacts continued to report significant issues with finding qualified workers. A motorcoach company cited a lack of applicants, even after offering to train candidates on how to drive their buses. An ice cream chain put expansion plans on hold so they could focus on hiring and retaining employees. Conversely, a staffing agency reported that they were able to fill numerous data mining openings, as the position attracted a good supply of quality candidates. The growth rate of wages was beginning to slow; however, wages were still above what employers were expecting to offer. An air compressor supplier reported that the wage for a replacement worker was significantly higher than the employee they were replacing.\nPrices\nYear-over-year price growth remained elevated, however the pace of growth eased slightly in recent months. According to our most recent surveys, prices received by manufacturers grew around six percent over the prior year, but that was down from around ten percent growth reported in November 2022. Prices received by services firms, on the other hand, remained elevated and have yet to ease significantly from their recent peak. These trends largely reflected price growth for firms' inputs, with manufacturers seeing input price growth slowing more than services firms reported.\nManufacturing\nManufacturing activity in the Fifth District was little changed in recent weeks. Sentiment about business conditions reflected the industries manufacturers serve. For instance, a steel manufacturer reported a \"siloing\" of demand, as growing industries \u2013 like electric vehicle plants \u2013 was making-up for declining parts of their business, like shopping centers. On balance, supply chains continued to improve as order backlogs and vendor lead times declined. Hiring was growing at a slower pace than previous periods. A cabinet manufacturer was forgoing layoffs amid expected declines in new orders, allowing attrition to naturally happen without replacing departing workers.\nPorts and Transportation\nFifth District ports reported a continued slowdown in total volume this period. Loaded import containers were down, primarily for furniture and retail goods, while loaded export volumes increased moderately, led by an increase in auto parts, agricultural products, and paperboard. Rolling stock exports grew modestly this period. Spot rates for trans-Asia containers declined to below pre-pandemic pricing and were significantly under current contract rates; Transatlantic rates were slightly lower this period. With reduced import volumes, the ports were anticipating carriers doing more blank sailings and/or taking ships out of rotation in the first quarter of 2023.\nTrucking firms reported a decrease in freight volume this period, and contacts indicated that capacity is no longer an issue. Some customers were seeking to bid out their existing contracts now in order to take advantage of lower freight rates. Spot market rates have decreased moderately this period. Despite higher fuel costs, a contact stated that it's hard to maintain existing rates in this environment. In the Less-than-Truckload segment, both volumes and shipping rates held steadier this period. Trucking firms indicated little difficulty retaining drivers and have been slower to backfill open positions due to the lower freight volumes.\nRetail, Travel, and Tourism\nRetailers reported solid growth in sales in recent weeks with several business reporting sales figures at or above pre-COVID levels. Most retailers said that consumer confidence was strong and that customers were willing to accept price increases. A grocery store, on the other hand, saw more customers trading down by buying store brands or less expensive proteins due to elevated food prices.\nTravel and tourism grew moderately since our previous report. Hotels reported that 2023 was off to a good start with solid growth in bookings and average daily rates leading to strong revenue growth. A hotelier in South Carolina said that occupancy rates were slightly below pre-COVID but that was only because the inventory of hotel rooms increased at a faster rate than bookings. An airport contact said that passenger traffic was up at the start of this year but compared to pre-COVID, traffic was still down for lack of available planes and pilots.\nReal Estate and Construction\nMost residential real estate professionals and builders noted a surprising uptick in new home sales activity since the beginning of the year. Housing inventory increased moderately, nevertheless it had a long way to go to reach market equilibrium. One respondent indicated that buyers were out looking again but it would be a better scenario if there were more homes available for sale. The low housing inventory also has resulted in fewer closed and pending home sales this period. Sales prices decreased modestly from their peak last spring; however, terms were more beneficial to the buyers. Lumber prices were down but overall construction costs remained high; the average base cost of a new home was up 33% in the last 2 years.\nCommercial real estate activity remained unchanged since the last period. However, rent costs were moderating in certain sectors. Leasing rates for multifamily were starting to decrease, particularly for mid-priced units; high end apartment rents were unchanged. Retail leasing was strong this period especially for service and food businesses. New retail centers continued to be built and most were pre-leased, leading to lower vacancy rates. The industrial market continued to be strong with higher rental rates and good absorption levels. The supply of Class A space tightened, particularly in suburban markets. Commercial contractors noted that a general shortage of key components, including labor, remained a significant factor. Overall, commercial buyers remained hesitant to commit due to market uncertainty.\nBanking and Finance\nFinancial institutions noted a continued weakening of loan demand across all loan types, especially in the commercial portfolio. Increasing interest rates were mentioned as the primary driver of this weakening, along with borrower uncertainty about the strength of the overall economy. Deposit levels continued to decrease, with competition for deposits beginning to rise. Moderate deposit interest rate increases were noted as institutions work to maintain their base. Institutions are observing a stabilization of delinquencies within their loan portfolios with no increases reported. Financial institutions expected moderate decreases in loan and deposit levels for the remainder of the year.\nNonfinancial Services\nNonfinancial service providers reported stable demand for their services but a flattening of revenue. Contacts expressed a general feeling of concern that their clients had with inflation and recession fears, which was impacting the level of work being performed by their firms. They were also seeing less non-mandatory engagements being performed, with clients sticking to only what is necessary for their businesses. Contacts were also seeing a slight change in the mix of sectors that were utilizing their services. Attracting labor was still a concern with contacts, and they were looking for ways to maintain and grow their workforces.\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\nMarch 8, 2023\nSummary of Economic Activity\nEconomic conditions have remained unchanged since our previous report. Employers continue to report tight labor markets, although the pace of wage growth has slowed. Contacts reported slowing price increases and plans to accept tighter profit margins in order to maintain prices. Consumer spending was mixed, with reports of continued price sensitivity but demand slightly outstripping expectations. The real estate sector saw rent growth flatten and homebuying demand slow, but demand for industrial and retail space rose. Manufacturing growth declined, and lending conditions remained stable. The overall outlook rose slightly thanks to expected improvements in input prices, labor costs, and demand.\nLabor Markets\nEmployment remains unchanged since our previous report, with contacts reporting tight labor markets but varying turnover rates. Several contacts reported challenges in hiring enough workers to meet demand, but an increased share reported more success in retaining employees. A restaurant contact in Memphis estimated 60 percent of restaurants in the area are understaffed and 80 percent have reported difficulty filling jobs. A logistics contact in Little Rock saw more rotation in and out of the company, while an employment contact in Memphis reported that more clients are staying at their current jobs. An agriculture contact reported a sharp increase in the number of firms using temporary visa worker programs for the first time.\nWages have grown slightly since our previous report. In contrast with the past few reports, contacts have reported minimal increases in wages. A healthcare contact in Louisville reported labor costs have been lowering reimbursements and pushing profit margins to just above break-even, while a retail contact in St. Louis has not been able to pass labor costs on to customers, which threatens the viability of their business. A construction contact in St. Louis reported that higher labor costs coupled with declining demand have placed a strain on the company.\nPrices\nPrices have increased modestly since our previous report. Overall, contacts reported slowing price increases and projected lower rates of price growth in the year ahead. This year, 63 percent of respondents reported an ability to pass on costs, down from 82 percent a year ago. Some industries expect to see the pace of price increases slow more than others, with retail respondents projecting a 4 percent increase this year, compared with 14 percent a year ago. However, some industries expect to see prices increase by more than the previous year, with tourism respondents projecting increased prices of 5.2 percent this year, compared with 0.3 percent a year ago. A contact in the hotel industry estimated they would pass on 60-70 percent of costs to consumers. A contact in the automobile sales industry reported that increased inventory levels led to more competitive market pricing, keeping prices lower. Firms, especially smaller ones, reported accepting tighter profit margins instead of increasing prices.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported mixed business activity and a mixed outlook. January real sales tax collections increased in Kentucky, Missouri, and Arkansas relative to December and decreased in West Tennessee. Retailers in St. Louis noted generally lower business activity due to customers cutting back on spending because of higher prices. District auto dealers reported generally steady business activity due to increased inventory, though they expected business activity may slow in the upcoming months due to higher interest rates. An auto dealer in Louisville reported they have been seeing new vehicle sales rates slowing. A restaurant contact in Memphis noted that demand continues to be steady even with food costs surging. District hospitality contacts noted that business activity was generally mixed, with demand moderated by rising costs.\nManufacturing\nManufacturing activity growth has modestly declined since our previous report. Firms have reported modest decreases in new orders and production. Contacts reported that international shipping costs are returning to their pre-pandemic levels. Similarly, prices for raw materials are falling but have yet to return to pre-pandemic levels. The labor market for manufacturing remains tight as firms look to hire more workers. On average, firms reported they expect slight increases in production, capacity utilization, and new orders in the coming quarter.\nNonfinancial Services\nActivity in the nonfinancial services sector has remained stable since our previous report. Air freight and passenger traffic has remained stable, but trucking services in the Memphis and St. Louis areas reported decreased pay per load, increased fuel costs, and parts shortages. In the Louisville area, investment in infrastructure sparked investment opportunities in freight transportation. A Memphis-area wedding planner reported a decline in spending on 2023 weddings, noting that couples are choosing less expensive options and spending wedding funds on honeymoons and house purchases instead.\nNonprofit firms that provide housing experienced steady funding and scaled up construction in the Memphis area. In the St. Louis area, nonprofit contacts in arts and public policy faced competition for volunteer labor. Rural healthcare in the Memphis area continued to face funding challenges and reduced the number of services and beds in response. While education contacts in the Louisville area reported depressed university enrollment, enrollment in community college increased due to new programs that reduced tuition costs.\nReal Estate and Construction\nResidential real estate rental rates have continued to stagnate since our previous report. Multiple residential real estate contacts reported that the rate increases of the past year are being met by resistance and families are staying in their current rentals. Residential real estate inventory has continued to increase since the previous report, as homebuyer demand slows. Some real estate contacts reported signs of increased demand in recent weeks due to some relative stabilization in mortgage rates.\nThe commercial real estate sector has been mixed. Office demand remains low, but industrial demand remains high despite increased rents. Retail real estate has improved since the previous report, and one contact reported retail projects are back in demand for the first time since before the pandemic. Construction demand has slowed, with contacts reporting that many projects are on hold as investors wait out market uncertainty about rate hikes. One St. Louis contact reported increased construction activity as interest rates flattened.\nBanking and Finance\nBanking conditions in the District remain stable since our previous report. Overall loan demand remains largely unchanged from the past quarter. Commercial and industrial loan demand saw a small decline, while demand for mortgage loans moderately increased with the dip in the 30-year fixed mortgage rate. Despite this recent growth, Memphis banking contacts expect mortgage lending to slow down in the coming month. Contacts also expect margins on interest-bearing deposits to contract as federal funds rate increases ease up and the resulting pressure from competition requires banks to pay higher interest rates. Credit and asset quality remain strong, and delinquency rates showed no significant change from the past quarter.\nAgriculture and Natural Resources\nDistrict agriculture conditions have declined moderately since our previous report. The number of acres of winter wheat planted in the District this season has increased by 27 percent compared with this period a year ago. These increases range from 15-55 percent across District states with the lone exception of Arkansas, which saw a moderate decrease of 14 percent. District contacts are no longer optimistic on the outlook for the rest of the year, due to concern about the increased cost of inputs, especially labor. Additionally, contacts noted sales were either at or below expectations, and some contacts expressed concern that higher interest rates were putting additional strain on their balance sheets.\nNatural resource extraction conditions increased moderately from December to January, with seasonally adjusted coal production rising just under 10 percent. However, January production decreased moderately by 11 percent compared with the previous year.\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 8, 2023\nSummary of Economic Activity\nThe Sixth District economy grew at a modest pace from January through mid-February. Labor markets improved somewhat amid persistent wage pressures. Many nonlabor costs increased, particularly food, utilities, and insurance; however, freight and shipping costs moderated. Low-income families continued to face barriers to full-time employment opportunities, and rising food and gas prices further strained household budgets. District retail sales exceeded expectations, and auto sales remained solid. Leisure travel activity showed continued strength, and business travel grew. Housing demand improved slightly as mortgage rates fell. Commercial real estate activity slowed. Transportation activity was mixed. Loan growth at financial institutions was solid, but delinquency rates rose slightly. On balance, energy demand was strong. Agricultural conditions remained mixed.\nLabor Markets\nLabor market pressures continued to ease since the previous report; however, contacts still described conditions as tight, especially among front-line, skilled trades, and IT positions. Most firms continued to hire. Layoffs or hiring freezes were noted by a few contacts, but they were largely limited in scope. Restaurants continued to close dining rooms and other firms noted postponing planned projects due to lack of available labor. To combat labor shortages, firms reported investments in training to upskill employees and capital expenditures in technology to reduce reliance on labor. Overall turnover has eased somewhat but not among hourly paid staff, who continued to change jobs for higher pay. Several employers also noted that affordable housing and childcare availability and costs further restrained the supply of workers at all levels.\nWage pressure remained persistent, though some easing was noted. Several contacts indicated that the wage levels for various positions, especially lower wage jobs, jumped significantly over the last year. Upward wage pressure is expected to persist this year, but many firms are targeting more modest increases than last year.\nPrices\nDistrict contacts noted moderation in freight and shipping costs along with improvements in supply chain imbalances over the reporting period. Some construction inputs, like lumber, saw prices decline, while concrete prices rose, increasing building project costs, on balance. Food and utilities costs also rose, further straining businesses' balance sheets. Rising insurance costs and wages were cited most often as risks to the business outlook over the coming year. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth at 3.5 percent, on average, in February, down from 4.3 percent in January. Firms' year-ahead inflation expectations were relatively unchanged at 2.9 percent in February, on average.\nCommunity Perspectives\nDistrict nonprofits serving low-income households noted that rising wages have not yet offset obstacles (e.g., access to childcare and transportation, affordable housing) challenging their ability to hold traditional full-time employment. Some workers have chosen part-time jobs, self-employment, and participation in the gig economy to maintain needed flexibility. Elevated food and gasoline prices continued to impact household cash flow. Consumer-facing contacts noted that rising prices resulted in increased use of credit for routine purchases.\nConsumer Spending and Tourism\nDistrict retailers reported higher-than-expected sales levels over the reporting period. Pent-up demand continued to fuel solid automobile sales. Despite ongoing inflationary pressures and rising interest rates, retail and auto contacts cite cautious optimism for the first half of the year.\nTravel and tourism contacts noted continued strong demand, on balance, for leisure travel accompanied by positive growth in business travel and conventions. Hotel occupancies and average daily rates were above pre-pandemic levels, although there was a slight softening in on-premises spending, such as for spa services and gift shop purchases. Hotel bookings for spring break were reported as healthy.\nConstruction and Real Estate\nAlthough purchase transactions remained substantially below year ago levels, housing demand improved slightly since the previous report as mortgage rates edged lower. Contacts indicated marginal increases in buyer traffic and sales in January as mortgage rates moderated from the highs experienced in October 2022. Though down from peak levels, year-over-year home price appreciation throughout the District was slightly stronger than the nation as a whole. Affordability remained a significant headwind primarily for entry-level buyers, and a larger share of homes sold at a discount from the asking price. New home builders continued to experience a high rate of cancellations and the majority offered incentives to attract buyers.\nCommercial real estate (CRE) contacts reported slowing market conditions in lower-tier office, multifamily, and certain segments of retail. The downward trend in the office sector eased further as more employers required staff to return to the office; however, heightened levels of sublease space remained an impediment to market recovery. Concerns regarding declining CRE values accelerated. Contacts reported increases in operating expenses and slowing or negative net operating income and rent growth. Additionally, firms continued to report instances of declining asset prices and buyers seeking greater concessions.\nTransportation\nTransportation activity was mixed over the reporting period. Railroads experienced significant declines in shipments of farm products, pulp and paper, non-metallic minerals, and pet coke, which were offset by increased carloads of coal, metallic ores, aggregates, and primary metal and forest products; intermodal freight volumes fell significantly. Air cargo contacts reported stable demand. Freight brokerages noted that revenue per load declined as trucking capacity rose. District ports saw increases in exports, vehicle imports, and heavy machinery exports amid slowing container volumes.\nBanking and Finance\nDistrict financial institutions reported solid loan growth across all portfolios, particularly in construction and development loans. The level of unrealized losses in securities portfolios improved marginally but remained high compared to year-earlier levels. Financial institutions reported placing additional reliance on higher cost alternatives as a source of funding amid slow deposit growth and elevated unrealized losses. Delinquency rates rose slightly, especially for loans past due 90 days or more, though the levels remain below historical norms.\nEnergy\nCrude oil refining and petrochemical manufacturing contacts continued to report strong demand, although contacts noted that demand for chemicals related to adhesives and steel manufacturing fell. A few contacts described reduced investment in the gasoline industry as demand for gasoline slowed amid improvements in fuel efficiency and growing demand for electric vehicles. The ongoing trend in renewable energy investments remained robust. Utility providers reported strong demand across segments and continued infrastructure investment.\nAgriculture\nAgricultural conditions remained mixed. Demand for beef increased, especially for calves, following the downsizing of Texas herds during the recent drought. Demand for milk declined amid reduced exports of powdered milk to China, and demand for butter fell from high levels. Cotton demand remained weak. While Florida's production of citrus fruits was limited by tree damage, demand remained strong. The Avian flu continued to limit the supply of eggs, which are generally sold domestically, and to drive prices upward. However, Avian flu-related restrictions on exports substantially softened global demand for poultry meat, thus increasing domestic supply; poultry companies reported losing money amid high costs and falling prices.\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\nMarch 8, 2023\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded modestly during the January through mid-February reporting period. Hiring activity grew modestly and labor supply improved somewhat. Wage and price growth moderated further, although overall levels remained elevated. Demand for retail goods was strong, and activity in the consumer and business services sectors was robust. Demand for manufactured products remained unchanged on net, while conditions in the agriculture and resource-related sectors softened slightly. Activity in residential real estate markets eased further, while commercial real estate activity was little changed. Lending activity declined modestly over the reporting period. Communities across the Twelfth District sought more workforce development and childcare services and continued to experience price pressures due to high inflation. Contacts expected a weaker outlook for the economy going forward as well as increased overall uncertainty.\nLabor Markets\nHiring activity grew modestly during the reporting period. Labor supply improved somewhat across most sectors, allowing employers to fill long-standing job vacancies. Firms reported higher applicant counts and lower staff turnover rates in many sectors, including finance, tourism, and agriculture. Despite improved labor availability, competition remained tight across skill levels, including for positions in food services, hospitality, construction, health care, and manufacturing. In fact, labor market tightness continued to be an issue for many providers for consumer services, except for those in the technology industry. Additionally, contacts in both health care and business services reported an increased demand for part-time positions in recent weeks. Many financial firms either slowed their hiring or contracted somewhat their employee head counts due to fewer real estate loan originations in an elevated interest rate environment. Other contacts reported stable employment levels, reduced job postings, or hiring freezes due to slowing demand and increased uncertainty. Contacts in the technology, entertainment, and transportation sectors mentioned that layoffs have either continued or are being considered as firms seek cost-cutting strategies amid lower demand.\nWage growth moderated somewhat across most sectors. Strong competition for workers and elevated living costs continued to drive wages upward, but increased labor availability lessened wage pressures overall. Some employers reported that pay for entry- and mid-level positions increased at somewhat faster rates than for those at management and executive levels. Workers continued to demand flexible work arrangements where applicable but were faced with firms' mixed appetites for remote work.\nPrices\nPrice levels remained elevated and rose further, albeit at a slightly slower pace. Firms generally reiterated their ability to continue passing higher costs through to clients, although the degree of which varied by sector. Contacts noted higher prices for natural gas, produce, eggs, electrical components, ferrous metals, packaging, food services, and hotel rooms. Conversely, some products and services saw stable or lower prices, including those for transportation, rents in certain areas, advertisements, cardboard, lumber, and other building materials.\nCommunity Conditions\nDemand for community and workforce development services remained high as elevated prices, interest rates, and uncertainty continued to challenge low-income households and rural communities across the District. In particular, households and community members sought support for childcare, food assistance, rental assistance, house affordability, mental health services, and financial literacy programs. Reports highlighted a recent increase in the number of new small businesses, especially those with diverse leadership, despite strong competition for labor. Some small business financiers raised concerns about capital access and increasing delinquency rates. Educators highlighted efforts to improve compatibility between their community college programs and local workforce needs.\nRetail Trade and Services\nRetail sales were strong overall but started to show signs of softening in recent weeks, in part due to consumers' rising credit card debt. Shopping centers experienced softer retail sales despite strong foot traffic. Reports also indicated that more consumers substituted usual purchases with lower quality or less expensive products, when possible, to compensate for higher prices. One retailer noticed that elevated energy prices led to moderated spending at the gas pump in recent weeks. These customers reportedly spent the freed-up funds at convenience stores located at the fuel stations. A specialty retailer with a national presence highlighted that inventory levels were stable.\nActivity in the consumer and business services sectors was robust. Demand for health-care services was high. Activity in the food services sector trended up, supported by good weather and more people returning to on-site work and to school campuses. Demand for leisure travel and accommodations started to moderate somewhat. A contact from Southern California noted that demand for accommodations during spring break was strong but lower than anticipated. Demand for business travel continued to modestly improve as conference and convention attendance remained strong. A contact from the Pacific Northwest highlighted the negative impact of technology firm layoffs on local retail and services sectors.\nManufacturing\nDemand for manufactured products remained unchanged on net. The metal production and recycling industries reported favorable conditions supported by inventory investment by domestic firms and demand from South Asia. However, offsetting factors arose from a softening of the construction industry and global macro concerns. Food manufacturing and capital equipment sectors reported robust demand, although a contact from the Pacific Northwest noted a slowdown in local manufacturing activity. Availability of raw materials normalized further as most contacts reported improvements in supply chain disruptions, except for inputs dependent on semiconductors. Demand for manufactured building supplies and home heating equipment weakened, although a contact from Southern California noted an increase in demand for specific building products, such as steel tubing and line pipes.\nAgriculture and Resource-Related Industries\nConditions in agriculture and resource-related sectors softened slightly. While international transportation bottlenecks eased further, demand from abroad continued to be hampered by the strong dollar. One contact observed that producers continued to shift sales to domestic markets, and another commented that domestic demand has been high enough to largely absorb available supply. However, demand for produce from retailers and food services providers was reportedly either stable or down in recent weeks. Contacts continued to report low crop yields due to drought conditions, while a contact in Alaska noted continued stability in some major seafood stocks. Input costs, such as labor, energy, water, and fertilizer, increased, though one contact in the Pacific Northwest noted that food transportation costs fell substantially.\nReal Estate and Construction\nActivity in residential real estate eased further over the reporting period. Demand for single-family homes continued to soften. Properties took longer to sell, and prices were lowered. Multifamily housing demand remained steady, though contacts reported that asking rents or the rate of rent increases declined. One contact in Oregon noted strong demand for larger rental units as renters shared spaces to keep shelter costs down. New residential construction fell moderately or remained steady across the District, with contacts citing financing costs and concerns about future demand. Price pressures for raw materials were reportedly mixed, rising in some areas, such as Northern California, and falling in others, such as the Mountain West.\nActivity in the commercial real estate market was little changed on net. Demand for office space showed continued weakness with low rents and high vacancies. A contact in Oregon reported slowing demand for warehouse and industrial space, though other contacts reported continued strength in these sectors. One contact in Nevada observed that businesses expressed interest in purchasing commercial spaces, rather than renting them.\nFinancial Institutions\nLending activity declined modestly in recent weeks. Contacts reported that overall economic uncertainty and higher interest rates led to a drop in demand for most commercial and personal loans, with notable softness in residential and commercial real estate lending. Deposits moderated, and in some cases fell, but liquidity remained elevated overall. According to reports, credit quality was generally healthy, but financial institutions continued to tighten lending standards in response to increased economic uncertainty.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

/beige-book-reports/2023/2023-03-ch

"March 8, 2023\nSummary of Economic Activity\nEconomic activity in the Seventh District increased modestly overall in January and early February. Contacts generally expected slow growth in the coming months, though many expressed concerns about the potential for a recession this year. Employment increased moderately; consumer spending increased modestly; business spending and manufacturing increased slightly; nonbusiness contacts saw little change in activity; and construction and real estate activity decreased modestly. Prices and wages rose moderately, while financial conditions were unchanged. Agricultural incomes were expected to be lower in 2023 than in 2022.\nLabor Markets\nEmployment increased moderately in January and early February, and contacts expected a somewhat slower increase in employment over the next 12 months. Many contacts continued to report difficulty finding workers, though the number of applicants for open positions increased. There were also more contacts reporting they were not looking to hire or were reducing their workforce. Wage and benefit costs continued to increase, with several contacts noting higher health insurance costs.\nPrices\nPrices rose moderately over the reporting period, and contacts expected a similar rate of increase over the next 12 months. Producer prices rose moderately, with contacts highlighting higher costs for raw materials and energy. Several contacts noted that growth in shipping costs had slowed noticeably, particularly for long distance shipping. One contact indicated that there was a noticeable increase in wholesale used vehicle prices as dealers stocked up in anticipation of strong demand. Consumer prices generally moved up with the continued elevated level of demand and the passthrough of higher costs, though there was growing customer resistance to paying higher prices.\nConsumer Spending\nConsumer spending increased modestly over the reporting period. Nonauto retail sales were up slightly, helped by promotional offerings. There was strong sales growth in the personal care and sporting goods sectors, but weaker growth in the grocery, electronics, and apparel sector. Contacts noted softer discretionary spending by consumers, especially for lower-end products. New and used light vehicle sales were unchanged, and low inventories continued to support high prices. Leisure and hospitality activity continued to expand.\nBusiness Spending\nBusiness spending increased slightly in January and early February. Capital expenditures remained stable on balance, with contacts reporting purchases of new software and replacing old equipment. Demand for transportation services was little changed as activity remained at a high level. Shipping backlogs declined but remained elevated. Retail inventories moved down closer to comfortable levels, and contacts said promotions had been successful in helping pare stocks. Auto inventories continued to slowly recover from low levels and were most limited for the most popular models. In manufacturing, inventories remained slightly elevated, though wait times for raw materials improved. Many contacts indicated they were no longer experiencing supply chain disruptions.\nConstruction and Real Estate\nConstruction and real estate activity decreased modestly over the reporting period. Residential construction was down modestly. Home remodeling activity was steady, though one contact saw a decrease in quoting. Residential real estate activity decreased moderately. Sales volumes were down across all segments, but one contact noted an increase in leasing of multifamily units. Home prices were little changed overall, while rents increased slightly. Nonresidential construction was unchanged over the reporting period, with contacts noting solid demand from health care and the public sector but weaker demand for distribution center construction. High interest rates and input costs continued to hold back activity, while lead times remained long for critical products such as HVAC and power generation equipment. Commercial real estate activity was little changed over the reporting period. Demand for high quality space remained solid, with one contact highlighting strong interest in retail space previously occupied by big box tenants. Overall, prices and rents decreased modestly, while vacancies and the availability of sublease space were up moderately.\nManufacturing\nManufacturing demand increased slightly in January and early February. Manufacturing backlogs were down slightly as contacts continued to struggle with short supplies of certain inputs, though overall, wait times improved. Steel demand rose, with contacts noting growth in sales to other manufacturing sectors and the energy industry (both for renewable and nonrenewable production). Fabricated metals demand decreased slightly across a range of sectors. Auto production ticked up but remained constrained by semiconductor and labor availability. Heavy truck orders increased slightly. Heavy machinery production moved down some but remained at a high level, supported by large backlogs and solid spending from the agriculture and infrastructure construction sectors.\nBanking and Finance\nFinancial conditions were little changed over the reporting period. Bond and equity markets saw a slight increase in asset values and flat volatility. There was a small decline in business loan demand across a range of sectors. Business loan quality edged down, and standards tightened slightly. In consumer markets, loan volumes decreased moderately, with contacts pointing to declines in residential mortgage lending and unsecured consumer loans. Consumer loan quality slightly decreased overall, and one contact noted that credit card and auto loan delinquency rates had edged up and were approaching pre-pandemic levels. Consumer loan standards tightened slightly.\nAgriculture\nContacts' forecasts for District agricultural income for 2023 were mostly for near average returns, down from an above average 2022. Wheat prices were up, in part because of longer Russian inspection times for Ukrainian grain shipments and buyers' greater reluctance to enter purchase agreements given uncertainty about whether the shipping deal with Russia would continue. Corn and soybean prices were also higher, spurred by uncertainty about the size of South American harvests. Contacts noted that lower costs for some inputs would help farm incomes but rising feed costs were a continuing concern for livestock producers. Egg prices dropped from extremely high levels, and dairy prices were generally lower. There were reports of closures of smaller dairy operations, for which higher interest rates on loans were making it more expensive to expand to a more profitable scale. Cattle and hog prices moved higher during the reporting period.\nCommunity Conditions\nCommunity development organizations and public administrators reported little change in overall economic activity in January and early February. State government officials again saw healthy growth in tax revenues and low demand for unemployment insurance. Small business support organizations reported rising costs for their clients, highlighting higher insurance premiums. Affordable housing developers said they were facing double-digit percentage increases in materials and labor costs, which were stressing the financing structures of projects. As financial supports associated with COVID-19 are coming to an end, nonprofit organizations reported greater demand for job search support as well as challenges to their own revenue streams.\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/2023/2023-03-cl

"March 8, 2023\nSummary of Economic Activity\nThe Fourth District economy contracted slightly in recent weeks amid persistent softness in household spending, particularly goods spending. Several retailers and restauranteurs reported a typical post-holiday sales slump, but some said that sales fell short of their expectations as inflation continued to weigh on discretionary spending. In addition, higher interest rates contributed to ongoing weakness in light vehicle and home sales. Freight and manufacturing firms suggested that softer household spending dampened demand in their own industries, while bankers noted that higher interest rates curbed overall loan demand. Contacts generally expected business activity to soften further in coming months. Employment rose slightly, and while reports of layoffs remained few, a larger share of contacts noted that they had paused hiring. Increased labor availability, particularly among lower-paid workers, was accompanied by some further relief in wage pressures. Nonlabor input cost pressures changed little in recent weeks, while selling price pressures edged higher.\nLabor Markets\nDistrict employment increased slightly, though a larger share of contacts indicated that they had held staffing steady. Firms that were hiring often cited ongoing turnover and persistently high job vacancies as the main drivers. For instance, one manufacturer stated, \"We still need about 10 percent [more] staff \u2026 to reach pre-COVID levels.\" On balance, contacts' hiring expectations suggest employment growth will slow further in coming weeks. Looking forward, several contacts suggested that they were less likely to lay off workers in the event of an economic downturn because they were focused on retaining enough staff to meet longer term production goals.\nWage pressures continued to ease, and the share of contacts reporting increased pay was one of the lowest in the past 12 months. However, the relief was spotty. Notably, food and hospitality firms reported declining wage pressures related to increased labor availability. Meanwhile, contacts in the financial services and nonresidential construction sectors reported that sustained competition for skilled workers was still leading to large pay increases. Similarly, manufacturing contacts often offered wage increases that exceeded prepandemic norms to help employees offset the effects of inflation.\nPrices\nOn balance, nonlabor input cost pressures changed little in recent weeks but were down meaningfully from a year earlier. Moreover, an increased share of contacts reported that their costs had stabilized recently. In addition, even when costs were said to be rising, contacts reported that they were increasing at a slower pace. Looking forward, contacts expect nonlabor input cost pressures to ease slightly further in the months ahead.\nThe share of contacts reporting increased selling prices was up slightly from that in the previous cycle but still down considerably compared to a year ago. Many contacts raised prices to offset high input costs. However, some firms reported increased pressure to not raise prices even as their costs remained elevated. For example, one freight hauler noted, \"We have lost some of our normal business because we were not willing to reduce rates as much as our customers demanded. Our costs are not decreasing, so our margins are getting squeezed.\"\nConsumer Spending\nOn balance, contacts' reports suggest consumer spending was down somewhat as households faced continued pressure from high prices and increased interest rates. One general merchandiser noted that slower than normal holiday sales had been followed by further declines to start the new year, while another reported that high prices had led to a \"pretty dramatic bias toward food and consumables over discretionary purchases. If there's money left over, customers will spend some on general merchandise.\" Auto dealers continued to report that higher vehicle prices and increased interest rates had resulted in softer customer demand. One industry contact said that his returning lease customers were often \"shocked by the increase in monthly payments.\" On balance, contacts expected consumer spending to remain soft in coming months.\nManufacturing\nOverall demand for manufactured goods changed little from the prior reporting period. However, reports continued to vary by industry segment. Demand increased for firms in aerospace and in heavy trucks and trailers. By contrast, softer demand was reported by firms associated with interest rate-sensitive sectors, including residential real estate and light vehicles. Multiple contacts said that softer consumer spending had reduced demand for their customers' products. Broadly, manufacturers expected demand for their products to remain steady or increase slightly in the coming months and they frequently cited improved supply chains and stabilizing inventories as contributing to their relatively optimistic expectations.\nReal Estate and Construction\nResidential construction and real estate contacts reported that elevated interest rates continued to constrain demand, though the pace of contraction slowed somewhat. In fact, one homebuilder noted that demand had increased in recent weeks, a situation which he attributed to stabilizing mortgage interest rates and slower increases in materials costs (and home prices) compared to the prior two years. Still, contacts anticipated demand overall would remain below typical levels into the near future.\nNonresidential construction contacts reported that demand softened further because of high interest rates for commercial projects. One general contractor noted that the projects that are moving forward have often been self-funded. Real estate developers also cited weaker demand as customers have become increasingly concerned about high interest rates and general economic uncertainty. Contacts said that these same factors would lead to further softening in demand in coming months.\nFinancial Services\nOverall, loan demand continued to decline this reporting period. Bankers noted a slowdown in lending to both businesses and households, which they attributed to high interest rates. Some lenders also suggested that perceived economic uncertainty was causing borrowers to be more cautious. Overall, delinquency rates have remained low, though a few bankers noted a slight increase in credit card delinquencies. Core deposits continued to decrease slightly, and bankers suggested that deposit rate competition and a shift to higher-yield alternatives contributed to the decline. Looking ahead, lenders anticipated that loan demand would weaken further as borrowing costs are expected to remain elevated.\nNonfinancial Services\nFreight activity remained weak, which contacts attributed to a variety of factors including weaker demand in construction and consumer goods, as well as an ongoing inventory correction cycle. Contacts expected freight demand to remain soft in the months ahead. Demand for professional and business services grew at a relatively steady pace this period. One firm that provides transaction authentication services indicated that the continued upward trend of internet shopping will ensure growth in demand for his services.\nCommunity Conditions\nWorkforce development contacts indicated that the number of individuals seeking their services remained below prepandemic levels, though a few reported an uptick in recent months. Contacts noted that individuals were more likely to seek their services for training opportunities than for job placement. One contact mentioned that every worker who recently completed a manufacturing training program had at least two job offers. The difficulty manufacturers are having attracting and retaining workers led some to explore apprenticeships to meet their staffing needs. According to multiple contacts, lower-wage workers have greater options for employment and have become more selective in their job choices, prioritizing flexible work schedules in addition to pay. An eastern Kentucky contact reported increased demand for skilled trade workers as the region continued to rebuild from the July 2022 floods.\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"

Boston

/beige-book-reports/2023/2023-03-bo

"March 8, 2023\nSummary of Economic Activity\nBusiness activity in the First District increased slightly on average amid modest growth in retail and restaurant activity. Manufacturers reported a slightly slower pace of activity, especially for semiconductor sales, but remained upbeat. Residential real estate sales fell modestly, while commercial real estate markets were stable but the outlook weakened. Employment was flat as wage growth remained above average and labor shortages persisted for many positions. No contacts planned to enact significant layoffs in the near term, even if recent sales had slowed. Some firms expected to offer above-average wage increases in 2023 to stave off still-high attrition rates, while others were planning for average wage growth. Prices increased slightly overall, as a variety of nonlabor costs continued to ease. Contacts expected to enact at least modest further price increases in 2023.\nLabor Markets\nWage growth was steady at an above-average pace, and headcounts were roughly flat on balance. Retailers reported a modest decline in headcounts on average, with significant layoffs at one firm and elevated attrition at others, while restaurant employment rose slightly since the last report but remained somewhat below its pre-pandemic benchmark. One manufacturer noted strong hiring, while other manufacturing contacts reported flat or slightly lower headcounts. Retailers said that wage pressures remained strong (if stable) in the face of elevated attrition, and manufacturers said that hiring remained a challenge or got slightly easier. A workforce development contact faced difficulties keeping candidates engaged in their degree and placement programs (for technical roles) despite abundant job openings; the contact noted that high childcare costs deterred some candidates but that other cases of disinterest were harder to explain. According to staffing services contacts, welders, carpenters, and mechanics were highly sought after by construction employers and remained very hard to find. Wage growth for construction workers remained well above average. Light industrial roles were also hard to fill despite employers' having enacted large hourly wage increases for such positions in recent years. Some firms hesitated to make direct hires given fears of a recession, but hiring from temporary roles became more common. Labor market power was seen as shifting slightly more in favor of employers, as employees lost some leverage in demanding hybrid work and flexible schedules. Contacts in the semiconductor industry said that they had no plans to lay off workers despite slowing sales, although one paused plans to expand headcounts. Otherwise, hiring plans among manufacturers were unchanged, and retail headcounts were expected to hold steady moving forward. The outlook for wage growth was mixed, as staffing contacts expected the pace of wage growth to soften, while retailers expected to have to raise wages (and other compensation) at an above-average pace in 2023 to stave off attrition, and manufacturers planned for average merit increases despite some larger gains in starting pay for hard-to-fill positions.\nPrices\nPrices were up slightly on average, as nonlabor pricing pressures continued to abate but with some noteworthy exceptions. Retail and restaurant contacts reported further declines in freight and shipping costs. Nonetheless, restaurants faced new pressure on profit margins from rising rents and rising health insurance costs, in addition to still-elevated (if relatively stable) food prices and credit card processing fees. One retailer posted moderate price increases to pass on increased propane and labor costs, as other retailers held prices steady. Manufacturing contacts said that nonlabor cost pressures had moderated recently. Lumber costs stabilized, but overall construction costs remained elevated due to lingering supply chain issues and scarce labor. Although none had significantly changed their output prices since the last report, manufacturers perceived that further price increases were likely for 2023.\nRetail and Tourism\nAmong First District contacts, retail and restaurant sales increased modestly in recent weeks. An online retailer experienced a slight uptick in sales volume relative to seasonal expectations following the holidays. A salvage store similarly enjoyed a small increase in sales, which the contact attributed to a strong inventory of high-quality goods and the recovery of cross-border commerce with Canada to above pre-pandemic levels. A Massachusetts restaurant industry contact said that sales increased modestly throughout the state, contrary to typical seasonal dips after the holidays, although business at downtown Boston establishments continued to substantially trail pre-pandemic levels. Despite growth in sales volume, profits were hurt by increases in ancillary costs. A discount furniture retailer experienced minor improvements in sales volume so far this year, noting that new product lines at lower price points were a particular source of strength. Contacts were optimistic on balance, but several pointed to an increased focus on cost containment strategies to maintain profits and minimize the need for further price increases.\nManufacturing and Related Services\nNews from our manufacturing contacts was largely positive. Contacts reported generally high levels of economic activity, but sales growth slowed to a modest pace on average. Reports from the cost side showed a similar pattern: prices and wages remained high, but price and wage inflation moderated significantly compared with 2022, and supply chain issues improved. Contacts in the semiconductor industry said that the boom of the last few years has cooled. Although booms and busts are typical in that industry, our contacts expected this bust cycle to be mild and possibly short-lived (less than one year). A furniture maker, who had recently been somewhat pessimistic about the direction of consumer spending, became more optimistic after their sales responded very positively to recent promotions. Otherwise, contacts were generally optimistic about 2023, expecting growth to revert to sustainable levels after a period of exceptional performance.\nCommercial Real Estate\nThe commercial real estate market in the First District has been relatively stable since the beginning of 2023. The industrial market continued to see low vacancy rates and high leasing demand, but nonetheless rents have levelled off recently. Though the office market remained weak\u2014a Hartford contact described the market as \"abysmal\"\u2014another contact noted a slight increase in leasing interest for larger spaces in downtown Boston, and leasing was stable in Providence. In the retail market, food and beverage establishments experienced relatively strong leasing demand, while vacancies continued to pile up for department stores and big-box retail. Credit conditions tightened further, for example, as construction loans faced increased capital requirements. The only significant construction activity pertained to industrial properties. Most contacts expected commercial real estate activity to weaken moving forward, with the industrial market outperforming other sectors. The office class was predicted to weaken further, mainly as the result of pending lease maturations and the likelihood of high-profile loan defaults, and downward pressure on rents was expected.\nResidential Real Estate\nIn First District residential real estate markets, weak sales activity persisted even as inventory continued to improve in recent months. Boston and Vermont reported year-over-year changes for December 2022 while all other areas reported year-over-year changes for January 2023. Connecticut data were unavailable. Closed sales fell modestly in most markets since the last report and were down 30 percent from a year earlier, although sales of Maine condos improved slightly and were off by just 4 percent year-over-year. Inventories increased substantially in Rhode Island from the previous report and were stable elsewhere. Price growth slowed slightly from the previous report on balance, as median sales prices increased modestly over the year in most markets and were flat in Massachusetts (for single-family homes) and down slightly in Boston (for both single-family and condos). The Boston, Rhode Island, and Maine contacts attributed the slow sales activity to higher mortgage rates. That same set of contacts continued to express concerns about low inventories, stressing that even with recent increases in supply, the market remains unbalanced.\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"

Dallas

/beige-book-reports/2023/2023-03-da

"March 8, 2023\nSummary of Economic Activity\nThe Eleventh District economy continued to expand modestly. Manufacturing output and demand declined, but growth picked up slightly in the service sector. Retail sales fell again, and energy activity eased slightly. Rising interest rates further weakened loan demand. Agricultural conditions and housing market activity improved. Local nonprofits cited higher demand for assistance. Overall payrolls rose moderately, though job growth stalled out in manufacturing. Wage and cost pressures were little changed and generally remained above average. Outlooks were mostly negative, and uncertainty remained high, with contacts voicing concern about weakening demand, inflation, and high interest rates.\nLabor Markets\nEmployment increased moderately during the reporting period. The pace of hiring slowed in the service and energy sectors, and employment growth stalled out in manufacturing. While several firms continued to cite difficulty recruiting for open positions, many others reported an improvement in both the quality and quantity of applicants. Airlines cited capacity constraints due to pilot staffing issues, and one health care contact said they were lowering education and licensing requirements for several hundred job openings to expand the applicant pool. Some small or rural school districts in Texas have transitioned to a four-day school week in part due to staffing shortages and the need to attract teachers. In contrast, several firms noted hiring to cover turnover rather than to expand payrolls, and contacts in the education sector said there were less job opportunities for graduating students, particularly in high tech. There were reports of hiring freezes or layoffs in construction, manufacturing, financial services, and professional and business services.\nWage pressures remained elevated, though they have stabilized or eased recently in some industries. A staffing firm said that candidates were realizing they can't keep demanding higher wages. Downstream energy firms said wage pressures softened slightly, and construction contacts noted some easing in pricing for certain trades.\nPrices\nInput cost pressures generally remained elevated but there were some reports of easing in raw material pricing due to improving supply chains. Construction and land development costs were generally stable but high, and prices rose for concrete. Apartment operators noted a sizable increase in operating costs, particularly for insurance. Selling price pressures accelerated in manufacturing but were little changed in energy and services. Homebuilders continued to use incentives and discounts to close sales. Airlines expect ticket prices to stay elevated.\nManufacturing\nTexas factory output dipped slightly during the reporting period after increasing modestly in December. New orders for manufactured goods continued to decline for both durables and nondurables in part due to falling backlogs, inventory realignment, economic uncertainty, and slowing construction activity. Weakness in demand was most pronounced in construction-related manufacturing, though computer and electronic product and food manufacturers cited declines as well. Refinery utilization rates slipped, but margins remained healthy. Overall, economic uncertainty remained elevated, and outlooks weakened.\nRetail Sales\nRetail sales declined broadly over the past six weeks. Clothing, food and beverage, furniture, and electronics store retailers cited a decrease in revenues on net. A few retailers reported less traffic, and auto dealers continued to note that higher interest rates and economic uncertainty were hampering sales. Outlooks worsened, with continued concern about affordability, high interest rates, and inflation.\nNonfinancial Services\nService sector activity expanded modestly during the reporting period. Activity in business services, information, and leisure and hospitality sectors increased, and transportation services firms generally noted higher revenues and cargo volumes. Airlines saw continued strong leisure demand and said that business travel was steadily recovering. Staffing firms cited mixed demand for their services, with a few noting declines in temp hiring.\nConstruction and Real Estate\nActivity in the single-family housing market improved during the reporting period following dreadfully slow activity in prior months. Buyer traffic picked up, and sales, particularly for new homes, were exceeding expectations. Contract cancellations were coming down as well, though they remained slightly elevated. Buyer incentives on new homes, including rate buydowns and discounting continued to be widespread. Prices have dipped but were holding up relatively well due to tight inventories. Outlooks improved since the last report. Apartment leasing remained sluggish, and occupancy and rents were flat.\nDemand for office space remained lackluster. Activity in the industrial market continued to be solid, but contacts were concerned about the elevated construction pipeline. The higher cost of capital, tighter lending standards, and economic uncertainty has made it difficult to price deals, diminishing investment sales activity.\nFinancial Services\nLoan demand declined further, with more than half of bankers reporting a decrease over the past six weeks. Nonperformance increased notably, particularly for consumer loans, and a financial services contact said that higher interest rates had boosted inbound call volumes. Loan price growth moderated somewhat but remained highly elevated, and credit standards and terms continued to tighten. Business activity declined significantly, and expectations are for loan demand and business activity to fall further and loan performance to worsen. Contacts cited rising interest rates and inflation as headwinds and voiced concern over deposit outflows.\nEnergy\nOilfield activity eased slightly during the reporting period largely due to winter weather-related disruptions. Overall, energy sector activity has levelled off as labor and supply chain challenges have weighed on activity. Contacts expect spending on drilling and well completions to increase steadily this year. Outlooks remained positive, but contacts said there was still considerable uncertainty regarding the impact of sanctions on Russian refined products and of Chinese demand on energy markets.\nAgriculture\nAgricultural conditions improved slightly over the reporting period. Though much of the district remained in some level of drought, the winter wheat crop was faring better this year than last. Spring row crop planting was on the horizon, and contacts expect an increase in grain acres and a decrease in cotton acreage in 2023. Agricultural commodity prices were relatively high, and some improvement was seen in input costs, particularly fertilizer. Cattle prices rose amid solid beef demand, while egg prices have declined after surging at the beginning of the year.\nCommunity Perspectives\nNonprofits continued to report higher demand for their services. Housing affordability remained a key concern amid high rents and housing costs. Evictions ticked up, and contacts said that higher interest rates and home prices were eroding the impact of down payment assistance programs. Lack of affordable childcare was another primary issue, impeding employment for lower-income women. Nonprofits expressed concern that high operating costs together with the recent decline in public funding would limit their capacity to provide services. A contact at a public university reported that enrollment was solid but the cost of attendance and the ability to pay tuition remained a challenge for students from low to moderate income households, particularly in light of the depletion of the Higher Education Emergency Relief Funds (HEERF). Notwithstanding, a community college contact noted increased enrollment in career and technical education.\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"

Kansas City

/beige-book-reports/2023/2023-03-kc

"Beige Book Report: Kansas City\nMarch 8, 2023\nSummary of Economic Activity\nTotal economic activity across the Tenth District fell slightly in February. Consumer spending continued to decline, primarily due to reduced discretionary spending on leisure and retail, while non-discretionary spending on food, energy, and healthcare continued to rise. Several contacts noted declines in workers' overtime hours, less hiring of temp workers, and fewer new job openings. However, employment levels remained high and labor market conditions continued to be tight. Contacts reported labor costs were elevated and indicated more difficulty in passing these costs to customers in recent weeks. In the housing sector, contacts highlighted the elevated levels of mobility of residents as an opportunity for rental property managers to raise rents more frequently, leading to faster rent growth on an annual basis. The recent surge in rent prices was reportedly a headwind to financing for new multifamily housing development, as the uncertainty about how to estimate future revenue growth from housing properties squelched new projects. Community bankers reported low past due and problem loan levels. Although some bankers highlighted concerns regarding future consumer credit performance, most respondents expected credit quality to remain largely unchanged over the next six months.\nLabor Markets\nTenth District contacts reported that employment increased moderately over the past few weeks, though the pace of hiring has significantly slowed from its recent elevated level. Businesses continue to report difficulty finding qualified workers to fill open positions, reflecting ongoing tightness in the labor market. Labor force participation declined in most District states over the last few months, further constraining labor supply for businesses seeking to fill open positions. Business contacts continued to report difficulty hiring for entry-level positions, but in recent weeks indicated they are focused on hiring for both entry-level and mid-level positions over the next six months.\nWhile most contacts reported that they currently do not have plans to lay off workers, a greater number of businesses reported they are reducing employee hours, use of overtime, and their hiring of temporary employees. Wages continued to grow moderately for manufacturing and services businesses with expectations for robust growth over the next six months.\nPrices\nPrices rose at a moderate pace across most sectors of the District economy. Contacts in the service sector noted that labor cost pressures continue to rise at a robust pace, but indicated these pressures were increasingly difficult to pass on. In the housing sector, several contacts suggested that elevated levels of residents' mobility are allowing rental property managers to adjust rents more frequently, leading to faster rent growth on an annual basis. Expected price growth over the next several months remained elevated across most sectors.\nConsumer Spending\nConsumer spending fell slightly over the past month, held down primarily by softer leisure and hospitality spending. Contacts reported the return of international travelers this year partially offset recent declines in spending by domestic travelers. Though overall consumer spending declined, businesses noted a bifurcation in spending patterns. Discretionary and more interest rate sensitive consumption categories \u2013 such as travel and car purchases \u2013 declined at a rapid pace, while spending on non-discretionary consumption categories \u2013 such as food, energy, and healthcare \u2013 increased modestly.\nCommunity Conditions\nLow to moderate income (LMI) households in the Tenth District reported greater difficulty securing adequate childcare over the past few months. Contacts cited both a lack of availability and rising costs at childcare facilities as the major barriers faced by households seeking care. Insufficient childcare availability and unaffordability continued to hinder workforce participation among LMI households. Recent policy efforts to improve childcare availability \u2013 for example, a recent zoning reform in Wichita, Kansas increased maximum home daycare capacity from 10 to 12 children \u2013 have reportedly been more than offset by an acceleration of closures of childcare facilities.\nManufacturing and Other Business Activity\nManufacturing businesses reported that overall activity remained mostly unchanged over the past few weeks. Higher prices supported revenues, but measures of real activity, including production, backlogs, and new orders, declined moderately. Durable goods manufacturers reported more severe declines in production and expectations. Growth among services businesses was mixed across sectors. While retail and tourism businesses reported moderate declines in activity, professional businesses services, transportation, and healthcare businesses reported greater levels of activity.\nAcross manufacturing and service sectors, businesses indicated tighter financial conditions reduced demand for their products significantly. However, most businesses revised their plans for capital expenditures downward only slightly, which they attributed more to softening demand than to the higher interest expenses from tighter financial conditions.\nReal Estate and Construction\nDevelopers of multifamily housing indicated further deterioration of conditions from already depressed levels. Rising interest rates continue to be a challenge to financing multifamily housing projects, but contacts also highlighted recent volatility in rental rates as an additional headwind. Uncertainty about projected rent growth is reportedly very high, further hindering financing activities for new projects. Builders of single-family homes reported costs associated with higher interest rates are exacerbated by ongoing delays related to delivery of materials, inspections, and worker shortages. Such delays raise the effective cost of higher rates for builders because that interest expense must be carried over a longer period.\nCommunity and Regional Banking\nLoan demand weakened modestly in the past month as rising interest rates and continued economic uncertainty weighed on borrower sentiment. Contacts reported weaker demand across all key portfolios but highlighted stable credit quality last month amid low past due and problem loan levels. Although some contacts highlighted concerns regarding future retail credit performance, respondents expected credit quality to remain largely unchanged over the next six months. Deposit levels declined moderately again this month as banks experienced strong rate pressure from other bank and non-bank competitors amidst increases in short-term interest rates. Further, deposits rotated from checking and noninterest-bearing accounts into time deposits and high-yield savings products as customers demanded additional yield on cash.\nEnergy\nTenth District energy activity fell slightly over the last month. The number of newly drilled and completed wells declined, as profitability for drillers began to fall for the first time in two years. Oil prices were roughly flat over the last month and crude oil stocks increased due to unscheduled refinery maintenance, contributing to the recent declines in District rig counts. On average, natural gas rig counts across District states are expected to decline over coming months, driven by generally lower domestic natural gas prices. However, there were some differences among District states. The number of gas rigs ticked up in Wyoming, as regional (western) natural gas prices were elevated. Additionally, Wyoming coal miners saw strong production growth related to higher coal prices in recent months.\nAgriculture\nThe farm economy in the Tenth District remained strong, but risks to the outlook lingered. In the livestock sector, cattle prices increased slightly in February and reached multi-year highs alongside lower inventories. In the crop sector, prices of corn, soybeans and wheat remained high and continued to support profitability. Despite strong market conditions, District contacts reported that elevated production costs, higher interest rates, and ongoing drought in some areas have put downward pressures on profit margins for many producers. Cost pressures have been particularly challenging for livestock operations, with several reports of early calf sales and herd liquidation as a result of intense drought and high feed costs, which could reduce revenues going forward.\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

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"March 8, 2023\nSummary of Economic Activity\nThe Ninth District economy grew modestly since the previous report. Employment gains were moderate, and large firms were having more recruiting success. Wages were unchanged overall but remained at high levels. Price increases were modest overall, with input prices expected to increase in coming months. Consumer spending as well as commercial and residential construction fell. Residential real estate decreased significantly. Manufacturing activity increased modestly, and agricultural conditions remained strong. Activity among minority- and women-owned businesses was steady.\nLabor Markets\nEmployment grew moderately since the last report. A survey of District firms in early February found a large majority hiring in some capacity. Less than 30 percent of employers said they were not hiring, and only 5 percent reported cutting workers. Other contacts also noted that firms were overhiring to ensure operational coverage or to create more attractive schedules that avoid overtime. Survey respondents from large firms reported notably better success at adding workers. Some contacts said that labor availability improved slightly, but overall it remained problematic. A recent Minneapolis-area job fair with more than 20 employers and hundreds of job openings attracted only 20 people. A Montana construction firm has found it economical to rent a jet to fly workers in to one of its plants to fill operational needs. Hiring local employees \"would be our first choice, but we had to adjust when we could not staff that way.\"\nWage pressures were flat but remained high. A Montana contact said hospitality and recreation employers \"are paying stupid amounts of money for entry-level employees just to get them for short seasons.\" Thirty percent of surveyed District firms reported annual wage increases of more than 5 percent, roughly in line with earlier surveys. A Minnesota contact reported that he was seeing \"restaurants and hotels balk at moving any higher with wages. They feel they just can't adjust their prices any higher.\"\nPrices\nPrice increases were modest overall since the last report amid some signs of easing inflationary pressures. Half of respondents to a monthly District business conditions poll reported no change to the prices they charged for their products and services in January from a month earlier, but a slight majority said their nonlabor input prices increased. Two-thirds of respondents either expected not to change their selling prices or to decrease them slightly in the coming month, though the outlook for input price increases remained elevated. According to a semiannual survey of businesses, about 2 in 5 firms reported \"little or no change\" in prices charged to customers over the past month. About half said wholesale prices from suppliers were modestly higher. Retail fuel prices in District states increased moderately since the last report.\nWorker Experience\nSome workers formerly in food and hospitality said they quit their jobs in recent months to start their own businesses and have more control over their lives. \"At the beginning, I was afraid to leave a job I had done for 15 years,\" shared a former cook. \"I have been cleaning houses for a few months now, and I am much happier.\" More electrical engineering graduates from a District college were reportedly applying for jobs in smaller companies with competitive wages, a move they had snubbed in the past, according to a contact. In Minnesota, workforce development contacts said more people were applying for jobs but \"ghosting\" prospective employers. A labor contact in Minnesota said that the narrow workplace flexibility in education was pushing people out of the profession and into other fields. Many were leaving within the first five years, and fewer were entering preparation programs in the field.\nConsumer Spending\nConsumer spending fell slightly overall since the last report. More than 100 firms in retail, hospitality, and entertainment reported that recent revenues and profits were lower overall compared with the previous quarter and year over year. A western Wisconsin restaurant owner noted that \"costs are much higher while guests are tightening their purse strings and not as willing to accept price increases.\" January gross sales in South Dakota grew compared with last year, but at the lowest monthly rate in over two years. A dealership with multiple locations reported that January vehicle sales rose 2 percent year over year, but new-vehicle sales dropped by 15 percent. Car and truck sales were also lower in Wisconsin, and sales of powersport and recreational vehicles remained lower across the District. Airline travel through District airports in January was higher year over year, with most seeing double-digit increases; Minneapolis-St. Paul International traffic rose 6 percent.\nConstruction and Real Estate\nCommercial construction fell slightly since the last report. Some of that slowdown was seasonal. A manufacturer of building products said that \"November through January are our weakest months. But the trend is down.\" A Montana architecture firm said that large corporate clients have delayed project starts. Other contacts reported a smaller pipeline of future projects. A contractor in Minneapolis-St. Paul said, \"Interest rate hikes have put a considerable damper on new construction projects.\u2026Projects aren't penciling out.\" Residential construction was lower. Single-family units permitted in December and January fell by half compared with a year earlier in Minneapolis-St. Paul. Billings, Montana, and Sioux Falls, South Dakota saw larger declines. Most other major markets were flat.\nCommercial real estate was flat since the last report. Office space continued to struggle overall despite a slow but ongoing return of workers to downtown offices. But overall vacancy rates grew as some large tenants downsized and space available for sublease increased. Industrial property remained strong, though higher financing costs reportedly had some developers reevaluating speculative projects. Residential real estate continued to crater. Most large markets in the District saw closed sales fall between 25 and 50 percent in December and January year over year.\nManufacturing\nDistrict manufacturing activity increased modestly since the previous report. Manufacturing respondents to surveys generally reported increased or steady orders and revenues, and positive near-term outlooks. However, about a quarter of firms said recent sales had declined. A regional index of manufacturing conditions indicated an expansion in activity in Minnesota and South Dakota in January from a month earlier, while activity contracted in North Dakota. A firm that supplies fabricated metal inputs to industrial customers noted strong demand for robotics and automation.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions remained strong heading into the end of winter. According to the Minneapolis Fed's fourth quarter (January) agricultural credit conditions survey, nearly three-quarters of lenders reported farm incomes increased from October through December compared with the same period a year earlier. Farm household spending, capital spending, and loan repayment rates also increased on balance, while demand for loans fell. A forestry contact noted that prices that sawmills were paying for logs had increased recently, leading to operating losses and production cuts at mills. Production at District iron ore mines was expected to increase slightly in 2023; one facility was making a large investment into producing a higher grade of ore. District oil and gas exploration activity was unchanged since the previous report.\nMinority- and Women-Owned Business Enterprises\nMinority-and women-owned businesses reported steady activity in recent weeks. Labor market tightness continued to put uneven pressure on minority and women entrepreneurs. A childcare provider said that despite higher demand for services, they cannot find qualified staff to maximize their licensed capacity: \"Parents want their children to learn Spanish, they look for that added value in our services, but finding staff is a big challenge.\" Electricians, plumbers, framers, cosmetologists, and other workers requiring certifications were also said to be in short supply. Contacts highlighted that while more people were looking at entrepreneurship as an alternative to employment, many faced challenges like access to capital, lack of credit history, lack of understanding of business processes, and lack of management and marketing skill.\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/2023/2023-03-ph

"March 8, 2023\nSummary of Economic Activity\nOn balance, business activity in the Third District appears to have increased slightly after declining slightly last period. Consumer demand appeared to tick up, but contacts cautioned against comparisons with year-ago sales that were dampened by the Omicron wave. Moreover, bankers and nonprofit agencies warned that lower-income households were buying food and other necessities on credit. Employment resumed a modest pace of growth despite the tight labor market. Wage growth and inflation continued to subside, but both remained moderate. Overall, firms continued to report less difficulty in hiring and fewer supply chain disruptions. On balance, expectations for economic growth over the next six months improved slightly among all firms; however, expectations remained well below their nonrecessionary historical averages.\nLabor Markets\nEmployment growth resumed a modest pace after having maintained a slight pace since July 2022. About one-fifth of the firms reported increased employment; one-tenth reported less employment. Contacts, including staffing firms, noted that hiring continued to be easier, with more applicants, lower turnover, and less wage pressure. One staffing contact commented that billboards advertising jobs were no longer seen in the area.\nHowever, firms continued to describe a very tight labor market in which staffing remained their primary challenge. Contacts pointed to a lack of childcare, baby boomer retirements, disconnected youth, the national immigration policy, and lingering effects of the pandemic as critical underlying factors.\nFirms again reported that wage inflation had subsided since the prior month but remained pervasive and moderate. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee was nearly equal to the share reporting no change (at a little under 50 percent); the share reporting lower compensation levels was just over 4 percent.\nOn a quarterly basis, firms' expectations of the one-year-ahead change in compensation cost per worker essentially held steady, with a trimmed mean of 5.2 percent in the first quarter of 2023 versus 5.1 percent in the fourth quarter of 2022. However, these recent expectations were lower than the 5.8 percent in the third quarter of 2022. Manufacturers expected wage increases of 5.0 percent; nonmanufacturers expected 5.5 percent.\nPrices\nOn balance, inflation continued at a moderate pace \u2013 comparable with the prior period. However, reports of price increases were generally less widespread, and expectations of future price hikes continued to fall.\nContacts reported that increases in prices received for their own goods and services over the past year held steady at a moderate pace in the first quarter of 2023. The trimmed mean for reported price changes in our quarterly survey questions remained at 6.0 percent for all firms. Price increases rose to 8.1 percent from 7.9 percent for manufacturers but fell to 4.4 percent from 4.6 percent among nonmanufacturers.\nLikewise, reported increases in prices paid and received were significantly less widespread than one year ago. Since year-end, reported increases for prices paid for inputs were also less widespread among all firms; however, increases in prices received for their own goods were more widespread, especially for nonmanufacturers.\nLooking ahead one year, the increases that firms anticipated in prices for their own goods subsided further to a modest rate \u2013 the trimmed mean for all firms fell to 4.0 percent in the first quarter of 2023, from 4.3 percent over the past two quarters. Previously, it had fallen steadily from 5.9 percent in the fourth quarter of 2021. The expected rate of growth edged down to 3.9 percent from 4.0 percent for nonmanufacturers and fell to 4.1 percent from 4.8 percent for manufacturers.\nManufacturing\nManufacturing activity declined modestly \u2013 after declining moderately in the prior period. The index for new orders was negative for the ninth straight month but was not as deep as last period. Moreover, the shipments index turned positive after dipping negative at year-end.\nContacts confirmed that demand slowed and backlogs fell. Demand tended to be slower for firms supplying construction-related sectors; however, one contact noted an early pickup in orders in anticipation of future infrastructure spending.\nExpectations among manufacturers for growth in six months remained muted. The index for future activity turned slightly positive, and the new orders index changed little since year-end. However, expectations for increases in shipments, employment, and capital spending over the next six months were less pervasive.\nConsumer Spending\nNonauto retailers and restaurateurs tended to report slight growth because of several positive factors: good weather, early tax refunds, and an easy comparison against year-ago sales, which were dampened by the Omicron wave. Tourism contacts reported steady activity but also noted that comparisons with the first quarter of 2022 \"may provide false hope.\" Auto dealers reported a slight uptick in sales in the new year as manufacturers began delivering more new cars. However, a builder noted that dozens of small businesses in its community neighborhoods were struggling, as their customers became increasingly budget conscious.\nNonfinancial Services\nOn balance, nonmanufacturing activity appeared to resume a slight pace of growth after two periods of little change. Growth was more widespread, as the share of firms reporting increases in sales and new orders edged out the share of firms reporting decreases. However, the difference was smaller than normal for nonrecessionary periods.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew modestly during the period (not seasonally adjusted) \u2013 slower than the prior period but faster than in the same period last year. Inflationary effects on home prices and other big-ticket items continued to boost loan volume growth during the current year relative to past years.\nDuring the period, District banks reported strong growth in home mortgages and other consumer lending, moderate growth in auto loans, and modest growth in commercial and industrial lending. Home equity lines declined modestly, and commercial real estate lending was essentially flat. Banks reported strong declines in credit card volumes \u2013 typical of the postholiday season.\nNonprofit contacts noted that some of their clients have begun charging basic food and utility expenses to credit cards and are using \"buy now, pay later\" online services for movies and dinners. Several contacts noted that as of the end of February, low-income households in our three states will lose significant supplemental SNAP benefits that were made available during the pandemic. Moreover, local food banks are contending with falling levels of donations, higher food prices, and staffing challenges.\nReal Estate and Construction\nHomebuilders reported an unexpected uptick in sales in early 2023. Contacts attributed the improvement to incentives, discounts on older inventory, and new homes built with smaller footprints and lower-cost features. Builders also noted that homebuyers may have resigned themselves to the current mortgage rate environment.\nExisting home sales fell moderately in most markets \u2013 following a modest decline in the prior period. Brokers noted that a sellers' market persists as new listings remain scarce. Housing affordability continued to decline.\nRequests for assistance with housing and utility bills continued to dominate the share of 211 requests in the three-state region, at 36 percent and 18 percent, respectively. In turn, 39 percent of the housing requests were for rental assistance.\nMarket participants in commercial real estate continued to report steady current construction activity but noted additional softening of the pipeline as more projects are delayed, canceled, or redesigned. Leasing activity continued to slow modestly. While demand for warehousing and life sciences space remained strong, concerns about other commercial real estate prompted at least one large law firm to gear up for handling distressed properties.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/surveys-and-data/regional-economic-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\nMarch 8, 2023\nThis report was prepared at the Federal Reserve Bank of New York based on information collected on or before February 27, 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\nOverall economic activity increased slightly in early 2023. Six Districts reported little or no change in economic activity since the last report, while six indicated economic activity expanded at a modest pace. On balance, supply chain disruptions continued to ease. Consumer spending generally held steady, though a few Districts reported moderate to strong growth in retail sales during what is typically a slow period. Auto sales were little changed, on balance, though inventory levels continued to improve. Several Districts indicated that high inflation and higher interest rates continued to reduce consumers' discretionary income and purchasing power, and some concern was expressed about rising credit card debt. Travel and tourism activity remained fairly strong in most Districts. Manufacturing activity stabilized following a period of contraction. While housing markets remained subdued, restrained by exceptionally low inventory, an unexpected uptick in activity beyond the seasonal norm was seen in some Districts along the eastern seaboard. Commercial real estate activity was steady, with some growth in the industrial market but ongoing weakness in the office market. Demand for nonfinancial services was steady overall but picked up in a few Districts. On balance, loan demand declined, credit standards tightened, and delinquency rates edged up. Energy activity was flat to down slightly, and agricultural conditions were mixed. Amid heightened uncertainty, contacts did not expect economic conditions to improve much in the months ahead.\nLabor Markets\nLabor market conditions remained solid. Employment continued to increase at a modest to moderate pace in most Districts despite hiring freezes by some firms and scattered reports of layoffs. Labor availability improved slightly, though finding workers with desired skills or experience remained challenging. Several Districts indicated that a lack of available childcare continued to impede labor force participation. While labor markets generally remained tight, a few Districts noted that firms are becoming less flexible with employees and beginning to reduce remote work options. Wages generally increased at a moderate pace, though some Districts noted that wage pressures had eased somewhat. Wage increases are expected to moderate further in the coming year.\nPrices\nInflationary pressures remained widespread, though price increases moderated in many Districts. Several Districts reported input costs rose further, particularly for energy and raw materials, though there was some relief reported for freight and shipping costs. Some Districts noted that firms were finding it more difficult to pass on cost increases to their consumers. Selling prices increased moderately in most Districts, with several Districts noting a deceleration. Home prices were generally flat or down slightly, while rents were reported to be steady or higher. Still, home prices and rents remained high, contributing to ongoing concerns about housing affordability. Looking ahead, contacts expected price increases to continue to moderate over the year.\nHighlights by Federal Reserve District\nBoston\nBusiness activity increased slightly on average. Retailers and restaurant owners reported modestly higher sales, and manufacturers reported a slightly slower pace of activity. Employment was about flat as wage growth remained above average. Prices increased slightly as nonlabor costs continued to ease. Contacts expected at least modest price increases in 2023.\nNew York\nAfter a sharp contraction, regional economic activity leveled off. The labor market has remained strong, with ongoing slight job gains and a pickup in wage growth. Inflationary pressures remained persistent as price increases picked up. Housing markets remained subdued but showed signs of picking up beyond the seasonal norm.\nPhiladelphia\nBusiness activity appeared to increase slightly during the current Beige Book period after declining last period. In the absence of a definitive COVID-19 wave, consumers responded positively. Employment rose modestly. Wage growth and price inflation continued to subside but still grew at moderate paces. Expectations improved despite continued cautious sentiment.\nCleveland\nThe District's economy contracted slightly early in 2023, in large part because higher interest rates and prices continued to weigh on household spending. Contacts in other sectors, including freight and manufacturing, often cited the weakness in household spending as contributing to softer demand in their own industries. Firms added workers at a slower pace as many expected softer business conditions to persist in the months ahead.\nRichmond\nThe regional economy grew at a modest rate in recent weeks. Retail spending, travel, and tourism picked up moderately while nonfinancial service and residential real estate activity picked up modestly. Manufacturing and commercial real estate activity was unchanged. Lending volumes and transportation contracted modestly. Employment and wages grew modestly. Price growth slowed slightly but remained elevated.\nAtlanta\nEconomic activity grew modestly. Labor markets improved slightly, but wage pressures persisted. Some nonlabor costs rose while others moderated. Retail sales were healthy. Auto sales were strong. Leisure travel was robust and business travel grew. Housing demand improved somewhat. Transportation was mixed. Loan growth was solid. Energy demand was strong. Agriculture activity remained mixed.\nChicago\nEconomic activity increased. Employment increased moderately; consumer spending increased modestly; business spending and manufacturing increased slightly; nonbusiness contacts saw little change in activity; and construction and real estate activity decreased modestly. Prices and wages rose moderately, while financial conditions were unchanged. Agricultural incomes were expected to be lower in 2023 than in 2022.\nSt. Louis\nEconomic conditions have remained unchanged since our previous report. Firms reported tight labor markets but slowing wage growth. Consumer demand was mixed but came in slightly above expectations. Homebuying activity slowed, but demand for commercial and industrial space grew.\nMinneapolis\nEconomic activity in the region grew modestly in recent weeks. Employment gains were moderate, and recruitment improved some. Price increases were modest and wage pressures were flat. Consumer spending declined, and struggles for construction and real estate firms continued. Minority-and women-owned firms reported steady activity but struggled with hiring.\nKansas City\nEconomic activity in the Tenth District declined slightly in February. Employment levels remained high and labor markets tight. Yet, overtime hours, hiring of temp workers, and job postings declined. Consumer spending continued to fall, primarily due to reduced discretionary spending, as spending on food, energy, and healthcare continued to rise. Prices rose broadly at a moderate pace, but rental rates for housing continued to increase at a robust pace.\nDallas\nModest economic growth continued, with a pickup in home sales and service sector activity but a slight contraction in manufacturing output. Job growth was moderate, and labor market tightness eased. The pace of input and selling price increases generally remained elevated. Outlooks were mostly negative, and contacts voiced concern about weakened demand, inflation, and higher interest rates.\nSan Francisco\nDistrict economic activity expanded modestly. Labor supply ameliorated, while wage and price growth moderated further. Demand for retail goods and services was strong. Manufacturing activity was unchanged on net, while conditions in the agriculture sector softened slightly. Residential real estate activity eased further, while demand for commercial spaces changed little. Lending activity rose slightly.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/2023/2023-01-da

"January 18, 2023\nSummary of Economic Activity\nModest growth continued in the Eleventh District economy overall. Growth accelerated in manufacturing but abated in the service sector. Retail sales and home sales fell further, while oil and gas activity expanded. Rising interest rates prompted further deterioration in loan demand. Local nonprofits cited higher demand for assistance amid rising household costs. Rainfall improved agricultural conditions. Employment growth remained moderate overall and wage growth stayed elevated. Prices climbed further although firms expect pressures to moderate somewhat next year but remain elevated. Outlooks were mostly pessimistic except for the energy sector, and many contacts voiced concern about weakened demand, a potential recession, and inflation.\nLabor Markets\nEmployment growth remained moderate overall. Hiring was robust in manufacturing and energy but slowed slightly in the service sector and stalled out in retail. Hiring difficulty remained a top business concern, particularly in energy, hospitality, education, and healthcare, though there are some signs of easing in other sectors. A restaurant said they turned away business in December due to staffing shortages.\nWage growth remained elevated. In a Dallas Fed survey of 265 executives in the service sector, average wage growth in 2022 was 7.4 percent. Reported wage growth was even higher in manufacturing and retail\u2014averaging 8.5 and 8.2 percent, respectively. Multiple manufacturing contacts mentioned investing in automation due to high labor costs. Looking ahead to next year, contacts overall expect to raise wages 5.6 percent, on average.\nPrices\nInput costs remained elevated, though upward pressure eased slightly in December, continuing the trend seen throughout most of 2022. Contacts reported input price increases of 9.6 percent last year, on average, and expect a 5.9 percent increase this year. In the energy sector, cost growth remained high but eased in the fourth quarter. Manufacturers noted cost increases in excess of 20 percent on certain items last year. Meanwhile, growth in selling prices did not ease in the latter part of 2022 but instead remained stubbornly high. Contacts said they raised prices by 7.4 percent last year and expect to push through price increases this year on the order of 4.7 percent amid increased consumer price sensitivity.\nManufacturing\nTexas factory output increased in December after stalling in November. New orders for manufactured goods continued to decline, however. Production growth was led by durable goods\u2014in particular fabricated metals and machinery, with some contacts noting increased demand from the oil industry as a driving force. Weakness continued in chemical manufacturing, and contacts noted slowing global demand for PVC and other materials used in interest-rate-sensitive sectors like construction and automobiles. Supply-chain issues continued to improve. Overall, outlooks weakened, with more than half of contacts noting waning demand and/or recession concerns. Other headwinds cited were elevated input costs, labor shortages, and higher labor costs.\nRetail Sales\nRetail sales continued to decline over the past six weeks. A clothing store noted both less traffic and lower average sales per transaction, while wholesalers of nondurable goods reported an increase in sales in December. Auto sales stabilized after declining last fall, though auto dealers continued to note that higher interest rates were hampering business. Outlooks worsened, with concern about a potential recession, rising interest rates, and inflation.\nNonfinancial Services\nService sector activity was flat in December, with growth abating amid reports of a slowdown in consumer spending. Business services and education and health saw a contraction in revenue while transportation services posted continued revenue gains, citing increased cargo volumes. Airlines reported unseasonably strong leisure demand but noted business travel had yet to fully recover from the pandemic. Activity in the leisure and hospitality sector held steady. Staffing firms reported solid demand for their services, though one noted a slowdown in some manufacturing and construction sectors. Outlooks deteriorated overall, with a majority of contacts citing weakening demand and/or potential recession as a primary concern going forward.\nConstruction and Real Estate\nActivity in the single-family housing market continued to decline. Home sales and prices fell further, and cancellations stayed elevated. In homebuilding, buyer incentives were widespread and construction costs were generally high, putting downward pressure on builders' margins. Outlooks weakened. Apartment leasing softened beyond seasonality, with occupancy and rents slipping modestly.\nDemand for office space remained somewhat weak, pushing up sublease space availability. Fundamentals in the industrial market stayed solid, but contacts expressed concern about the pipeline of new construction. Investment sales activity has slowed noticeably, as investors take a wait-and-see approach partly due to the higher cost of capital and economic uncertainty.\nFinancial Services\nLoan volumes declined for the third reporting period in a row, and loan demand fell further. Volume declines were across all loan categories but led by residential real estate, while commercial real estate and commercial and industrial loans experienced an accelerated decline from the prior period. Loan nonperformance increased slightly overall, with the rise stemming from residential real estate and consumer loans. Contacts again overwhelmingly reported loan price increases, and credit standards and terms continued to tighten. Business activity experienced a significant decline, and expectations for the next six months are for loan demand and business activity to decline further and loan nonperformance to increase.\nEnergy\nEnergy activity continued to expand during the reporting period, with a slight increase in the Eleventh District rig count over the past six weeks and sizeable increases in both oil and natural gas production in fourth quarter 2022. Contacts seemed confident that crude oil markets will remain tight for the next several years, keeping oil prices in the $80 to $90 per barrel range, which is high enough for most District producers to profitably drill new wells. Due to high demand for oilfield services and supply chain issues, the industry remained constrained on equipment and labor, and expectations were for activity to expand at a slow, steady pace this year. Outlooks improved overall, and most contacts expect increases in capital spending this year.\nAgriculture\nRainfall continued to improve soil moisture conditions, setting a good foundation for winter wheat and spring crops. Cotton exports declined, and contacts cited weak mill demand prompted by low consumer demand. Relatively high grain prices and promising soil moisture will likely favor an increase in grain acreage and reduction in cotton acreage next year.\nCommunity Perspectives\nNonprofits reported higher demand for their services during the reporting period. Housing affordability remained a key concern amid higher rents, and some struggling households have moved further away from urban cores, leaving them without public transportation access and further away from nonprofit resources. Evictions have risen notably in some areas. Food insecurity was another primary issue, as lower-income individuals faced challenges in deciding to pay for rent versus groceries when there was not enough money for both. Contacts said a lack of affordable childcare was stunting economic mobility for lower-income women, with one nonprofit noting some improvement in daycare availability but no relief yet in pricing. Community colleges report continued growth in career and technical program enrollment, and numbers are up from pre-pandemic levels. Overall community college enrollment is still down, but rebounding.\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"

New York

/beige-book-reports/2023/2023-01-ny

"Beige Book Report: New York\nJanuary 18, 2023\nSummary of Economic Activity\nEconomic activity in the Second District declined significantly in the latest reporting period and most business contacts do not expect activity to increase in the coming months. Input prices continued to increase but have decelerated noticeably and selling price increases have moderated somewhat. Hiring has slowed, wage growth has remained modest, and businesses reported that they plan to add staff, on balance, in the months ahead. Manufacturing activity weakened substantially in the final weeks of 2022. Consumer spending was mixed but somewhat weaker overall, while tourism has remained strong. The home sales and rental markets showed further signs of cooling, though concerns about housing affordability remain widespread. Commercial real estate markets stabilized, and construction activity has remained sluggish. Conditions in the broad finance sector were generally steady, but regional banks reported widespread declines in loan demand, ongoing tightening in credit, and rising delinquency rates.\nLabor Markets\nEmployment continued to expand, though at a more subdued pace than in recent months. A number of business contacts reported that it has become somewhat easier to attract and retain workers. A large upstate New York employer noted that turnover has slowed noticeably in recent weeks and that attrition rates have now fallen below pre-pandemic levels. Still, there continues to be strong demand for skilled workers\u2014particularly in IT, finance, and sales occupations. A New York City employment agency remarked that, despite recent layoff announcements, layoffs do not seem unusually high and job postings remain plentiful. Hiring plans for the first half of 2023 remained solid.\nBusiness contacts reported steady and modest wage growth, though one upstate employment agency noted some slowing. The steepest wage growth over the past month was reported from financial services firms. Businesses across all major industry sectors plan to raise wages in the months ahead\u2014particularly in wholesale trade, transportation, and leisure & hospitality.\nPrices\nPrice pressures, both current and projected, have eased noticeably. Business contacts reported that the prices they pay have continued to increase but to a much lesser degree than in recent months. Price pressures have abated most significantly in the trade, transportation, and manufacturing sectors. Looking ahead, fewer contacts foresee future escalation in prices paid than at any point since early 2021.\nSelling price increases were reported to be somewhat less widespread than in the last report. Notably, retailers reported modestly declining prices, and transportation firms indicated that their prices were flat. Retailers and wholesalers indicated that they planned to keep prices mostly steady in the months ahead, while businesses in most other sectors anticipate moderate price hikes.\nConsumer Spending\nConsumer spending has been little changed in recent weeks. Nonauto retailers reported that business was relatively sluggish over the holiday season, with some of the weakness attributed to difficulties in procuring supplies and staff. Auto dealers in upstate New York reported that sales of new vehicles were steady to modestly higher, helped by improvement in the supply chain. However, sales of used vehicles have softened further. Consumer confidence across New York State surged to its highest level in more than three years in December.\nManufacturing and Distribution\nManufacturers wound up 2022 on a bleak note, reporting the most widespread decline in activity since early in the pandemic. Contacts in the transportation & warehousing sector also noted declining activity, while wholesale distributors indicated flat activity. On a positive note, a number of businesses indicated that supply disruptions had eased. Looking ahead, manufacturers do not expect much improvement, while transportation, warehousing, and wholesale trade firms were more optimistic.\nServices\nService sector activity continued to weaken in the latest reporting period. Providers of professional & business services and education & health services reported ongoing declines in activity, while information firms noted a pickup in business. Contacts in the leisure & hospitality sector indicated some leveling off in activity, following weakening in the prior report. Looking ahead, information sector businesses expressed increased optimism about the outlook, but contacts in other service industries anticipated flat to modestly declining activity.\nTourism activity in New York City strengthened further in December. Hotel occupancy rates climbed above 80 percent, versus 60 percent a year earlier, and average room tariffs were up roughly 20 percent over the year. Moreover, visits to major tourist attractions, such as the Statue of Liberty, have rebounded to pre-pandemic levels. While attendance at Broadway shows has been mixed, high-profile musicals targeted towards visitors have reportedly fared quite well. Despite a dearth of visitors from Asia\u2014especially China\u2014the overall flow of international visitors has been fairly strong, though visitors are spending less, on average, due in part to the strong dollar.\nReal Estate and Construction\nThe residential sales and rental markets showed further signs of cooling in late 2022. Real estate contacts in upstate New York reported that prices have flattened out, and that sales volume and buyer traffic have continued to wane\u2014in part attributed to unusually harsh winter weather. In and around New York City, sales of both single-family homes and apartments fell fairly sharply, while prices were flat to down modestly. Still, throughout the District, the inventory of available homes remains quite low, as many sellers have decided not to list.\nResidential rental markets weakened further, though the high end of the market has shown some resilience. In New York City, rents have trended down modestly since peaking last summer, though they remain higher than a year ago; landlord concessions have also increased somewhat. Elsewhere, rents have generally been steady, though one contact in upstate New York noted that already high rents continued to trend up. Rental vacancy rates, though still quite low, have risen modestly.\nCommercial real estate markets generally appear to have stabilized, though at weak levels. Office vacancy and availability rates leveled off in New York City, edged up in northern New Jersey, but declined modestly across upstate New York. Office rents were steady to up slightly across the District; aside from New York City, office rents are near or above pre-pandemic levels. The industrial market has been steady as well, with vacancy rates little changed and rents trending up modestly.\nConstruction contacts reported continued weakening in business conditions and were fairly pessimistic about the near-term outlook. New office construction starts remained at depressed levels throughout the District, though there was some pickup in New York City and Long Island. New industrial construction has largely dried up. Multi-family residential starts weakened across most of the District but picked up modestly in New York City, though from low levels. A sizable volume of new apartment development is due to be completed in 2023.\nBanking and Finance\nContacts in the broad finance sector reported little change in business conditions. However, small to medium sized banks in the District reported widespread declines in loan demand across all segments\u2014especially residential mortgages. Credit standards continued to tighten, and loan spreads were little changed except on business loans, where they widened. Almost all bankers reported higher deposit rates. Finally, delinquency rates rose modestly, particularly on commercial mortgages.\nCommunity Perspectives\nWith pandemic assistance no longer available, there have been growing requests for local governments and nonprofits to provide emergency support for low-income households. Demand for mental health services also continued to increase. These challenges have been compounded by widespread staffing shortages. A dearth of affordable housing also remains a major concern. Finally, to support digital equity in the District, new infrastructure funds are expected to expand high-speed Internet access to those with more moderate means.\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"

Richmond

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"January 18, 2023\nSummary of Economic Activity\nOn balance, the Fifth District economy continued to expand slightly in recent weeks as consumer spending grew modestly but activity in other sectors declined. Manufacturing activity softened slightly, and new orders declined. District ports reported a moderate decline in activity, particularly for loaded import volumes. Trucking activity also slowed, partially due to a typical seasonal slowdown, and spot shipping rates decreased moderately. Overall, retail spending grew moderately as strong holiday sales helped lift revenues. Travel and tourism venues also reported moderate growth. Vehicle sales, however, remained low as higher interest rates deterred purchases. Residential real estate activity also softened due to elevated mortgage rates leading to lower sales volume with more seller concessions. Commercial real estate activity slowed moderately across all market segments and some commercial construction projects were cancelled or put on hold. Lending volumes reflected the pull back in borrowing demand and some banks reported increasing delinquency rates in their consumer portfolios. Nonfinancial services reported steady demand and revenues. Total employment increased only modestly with some employers noting being more cautious about hiring and others saying they couldn't raise wages any further. Overall, prices continued to grow strongly in recent weeks; however, some input prices eased.\nLabor Markets\nEmployment in the Fifth District increased modestly in recent weeks. A packaging firm reported that while they have not started layoffs, they have gotten much more selective in who they interview. Several contacts reported that retaining employees continued to be a major issue. One quick service restaurant stated that their company has great culture, but new hires don't stick around long enough to find out. Several contacts reported being at a breaking point on increasing wages as they cannot pass through costs anymore to consumers. Inflation has been a major drain on margins as firms raised wages multiple times to keep up with increased wage expectations for current and potential employees.\nPrices\nPrices continue to grow strongly in recent weeks. According to our most recent surveys, manufacturing and service sector businesses experienced robust year-over-year growth in prices received. Overall, input price growth remained strong; however, some manufacturers reported paying lower prices for freight and energy. There were several reports, on the other hand, that construction costs continued to rise reflecting higher materials prices and borrowing costs.\nManufacturing\nManufacturing activity in the Fifth District softened further in recent weeks. Shipments of finished products picked up slightly, but contacts reported a modest decline in new orders. One fabric manufacturer reported that some of their customers are reducing inventory levels due to a fear of decreased demand, resulting in a decline in orders. A furniture manufacturer saw a slowing of consumer purchases and expected this trend to continue in the next few months as fewer consumers remodel their homes. Supply chain disruptions showed signs of improvements as backlogs and vendor lead times both declined.\nPorts and Transportation\nFifth District ports reported a moderate slowdown in volume this period. Loaded imports were significantly down led by a decline in retail inventory, but loaded exports were flat or slightly up. The volume of empty containers leaving the ports continued to be strong. Dwell time at the ports shortened leading to less congestion and lower storage fees. As shipping lines had some freed-up capacity, spot rates continued to decline back to pre-pandemic price levels and were significantly under current contract rates. Due in part to an earlier and longer Chinese New Year, the ports were anticipating significantly lower import volumes in the first quarter of 2023.\nTrucking firms reported a usual seasonal slowdown in freight volume this period. Overall, retail shipping volumes declined slightly this period while commercial and industrial loads held up as some firms were still suffering from inventory shortages. Spot market rates decreased moderately this period and there were few increases in contract rates. Trucking firms indicated no difficulty hiring drivers and a few companies actually had scaled back hours and were not backfilling positions in response to the lower volumes. Maintenance remained an issue, which had caused trucking companies to have to maintain bigger fleets. Prices for new tractors and trailers have increased substantially and new equipment orders were back ordered about six months.\nRetail, Travel, and Tourism\nRetailers reported moderate growth in sales and revenues due, in part, to the holiday shopping season. A few contacts said that customers were still not as price sensitive as they would have expected and were not only interested in discounted items. One contact added that revenues were up because sales volumes were unchanged while their selling prices had increased. A car dealer said that rising interest rates have slowed vehicle sales but that was helping to get more inventory back on the lot.\nTravel and tourism increased moderately in recent weeks. Hotels reported that strong occupancy levels and higher room rates led to higher revenue. A hotel in South Carolina added that bookings were up for both leisure and business travel, particularly for small and mid-sized corporate events. Some hotels continued to limit services due to labor shortages, but one contact said they were able to use contract or temporary employment agencies to fill some food service and housekeeping positions.\nReal Estate and Construction\nThere was reduced market activity this period, partially due to usual seasonality, with a decline in the number of listings, decreased buyer traffic, and increased days on market. Respondents indicated that there were fewer closed and pending home sales as elevated mortgage rates and low housing inventory impacted volume. Sales prices have decreased modestly from their peak in the spring; however, sellers were offering more concessions to complete transactions. New home builders also were doing more discounting and/or providing incentives to sell their remaining housing inventory. New home construction costs were lower than their recent peak but still above pre-pandemic levels. There also was a significant pullback in investor activity in the single home market.\nOverall commercial real estate activity slowed moderately this period with reduced construction as well as lower leasing activity, investment volume, and asset values. Additionally, as companies consolidated their office space there was an increase in sublease inventory and vacancy rates. Most new commercial construction projects have been put on hold due to elevated construction costs and higher funding rates. There was decreased demand for office and retail space particularly in central business districts. Property owners were offering bigger concessions rather than lowering asking rents on new leases for both multifamily and retail. Capital market sales activity was down significantly due to higher interest rates.\nBanking and Finance\nLoan demand continued to be weak across all commercial and consumer loan types. This weakness was being attributed mainly to increasing rates and borrower apprehension about the overall economy. Some institutions noticed an increase in existing credit card line usage as well as home equity lines of credit. Deposit levels continue to drop although rates were increasing in line with treasury securities. Institutions continued to see a modest increase in loan delinquencies, especially in the consumer portfolio. Overall, institutions anticipated a moderate decrease in both loans and deposits in 2023.\nNonfinancial Services\nNonfinancial service providers reported stable demand for their services as well as revenue growth. Contacts expected to moderately increase wages in the coming year to maintain and grow their workforces. One professional services firm was budgeting for technology upgrades to remain efficient during this time of workforce uncertainty. Supply chain issues were improving, but this improvement was being offset by a decrease in demand from clients. Inflation and rising interest rates were still a concern for firms' customers, which added uncertainty to making business decisions.\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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"January 18, 2023\nSummary of Economic Activity\nEconomic activity in the Seventh District decreased slightly overall in late November and December. Contacts generally expected slow growth in the coming months, though many expressed concerns about the potential for a recession this year. Employment increased moderately; consumer and business spending were unchanged; nonbusiness contacts saw little change in activity; manufacturing decreased modestly; and construction and real estate decreased moderately. Many contacts indicated they were no longer facing supply chain disruptions. Prices and wages rose moderately, though at a slower pace than last report, while financial conditions tightened some. Agriculture incomes were strong in 2022.\nLabor Markets\nEmployment increased moderately in late November and December, and contacts expected a modest increase in employment over the next 12 months. Many contacts continued to report difficulty finding workers, though others said they were able to meet their hiring needs. One contact noted that worker attrition had slowed. Another said that offering longer but fewer shifts had attracted workers and helped those with childcare needs. Wage and benefit costs continued to increase, though at a slower pace than in the prior reporting period. Compensation increases were aimed both at attracting new workers and retaining existing talent.\nPrices\nPrices rose moderately in late November and December, which was a slower pace of increase than in the last report. Contacts expected a similar rate of price increases over the next 12 months. Producer prices rose moderately, with reports of higher overall energy and raw materials costs. One contact noted that shipping costs had largely stabilized, and another reported that declining fuel prices were lowering production costs. Consumer prices generally moved up due to solid demand and passthrough of higher costs, though there was growing consumer resistance to paying higher prices.\nConsumer Spending\nConsumer spending was little changed on balance. Nonauto retail sales for the holiday season edged up, slightly exceeding expectations. Categories that registered growth included consumer electronics, grocery, discount stores, cell phone plans, and specialized goods such as formal apparel and small kitchen appliances. Weaker spending categories included furniture and toys. Retailers increased promotions prior to Christmas and boosted them further after Christmas to sell off excess inventories. New vehicle sales were little changed, and dealers were concerned that rising inventories and financing rates would hurt profitability. Used vehicle sales decreased slightly, and prices continued their fall from peak levels earlier in 2022. Overall, leisure and hospitality spending was up a bit, while some airlines and cruise lines noted that the level of spending was well above last year's. Movie ticket sales were also up.\nBusiness Spending\nBusiness spending was little changed overall in late November and December. Capital expenditures remained stable on balance, with contacts highlighting purchases aimed at greater automation. Demand for commercial and industrial energy decreased slightly while residential energy consumption rose. Retail inventories remained elevated overall, and contacts said retailers were reducing orders and ramping up promotions to help pare them down. Vehicle inventory levels continued their slow and steady climb. In manufacturing, inventories were somewhat elevated, as supply issues continued to lead firms to hold unfinished products. That said, many contacts indicated they were no longer experiencing supply chain disruptions.\nConstruction and Real Estate\nConstruction and real estate activity decreased moderately over the reporting period. Residential construction activity declined modestly overall, led by a pullback in single family homebuilding. Contacts reported that multifamily construction and remodeling activity were stable. Residential real estate activity fell moderately. Home prices moved down modestly, but rents were up modestly. Nonresidential construction declined slightly. One contact said that while there is still work in the pipeline for the next 6 to 12 months, high interest rates were weighing on new projects, leading to worries that work will dry up later in 2023. Commercial real estate activity decreased moderately, with contacts reporting that obtaining financing for deals was very difficult. Prices were down moderately, while rents decreased modestly. Both vacancy rates and the availability of sublease space increased modestly.\nManufacturing\nManufacturing demand decreased modestly in late November and December. Contacts reported improvements in the availability of inputs, which helped them further reduce order backlogs. Steel production declined slightly in November as demand slowed. Fabricated metals demand was flat on balance, with contacts highlighting growth in defense industry sales but declining orders from the housing and automotive sectors. Several fabricated metals contacts noted long lead times for copper. Auto production decreased slightly, while heavy truck demand increased slightly. Heavy machinery orders were steady.\nBanking and Finance\nFinancial conditions tightened some over the reporting period. Participants in the equity and bond markets reported lower asset values and increased volatility. Business loan demand fell moderately, with contacts pointing to declines in commercial real estate lending. Business loan quality decreased slightly, though one contact noted that loan quality remained strong in multifamily housing as rents stayed high. Business loan standards tightened slightly. Consumer loan volumes fell modestly, with contacts continuing to note declines in mortgage lending in the face of higher rates. Consumer loan quality and standards remained the same.\nAgriculture\nAfter a strong year for District agricultural income, contacts expected lower but still solid returns in 2023. A contact suggested that many farmers will spend their gains on equipment and trucks, especially as availability at dealers had improved. With rivers rising, barge shipments returned closer to normal levels, easing shipping costs some. Furthermore, prices for inputs such as fertilizers, chemicals, and energy all moved down during the reporting period, and there was less concern about the availability of inputs. However, some contacts expressed worries about higher interest rates on farm loans. Soybean prices were higher, whereas corn prices were little changed. Egg and cattle prices continued moving up, while dairy and hog prices generally continued to move down. Most major agricultural prices ended 2022 higher than they were at the end of 2021.\nCommunity Conditions\nCommunity development organizations and public administrators reported little change in overall economic activity in late November and December. State government officials saw healthy growth in tax revenues over the reporting period. Demand for unemployment insurance remained low. Small business support organizations said clients continued to face margin pressures due to rising input costs, leading to increased loan delinquencies. In addition, higher interest rates were making small businesses reluctant to take on working capital loans. Nonprofit organizations said that uncertainty about the employment outlook was complicating low- and moderate-income households' long-term financial decisions, such as whether to pursue homeownership. Philanthropic organizations continued to face the challenge of balancing increased requests to address basic needs\u2014such as food insecurity\u2014with lower revenues.\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"

St Louis

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"Beige Book Report: St Louis\nJanuary 18, 2023\nSummary of Economic Activity\nEconomic conditions have remained unchanged since our previous report. Contacts reported tight labor markets but continued improvement in their ability to hire and retain workers of all skill levels. Firms continued to report input price increases, but the rate of increases has slowed as supply chain bottlenecks have eased slightly; manufacturing and healthcare firms reported that lead times for key inputs have improved over the past month. Consumer spending was mixed during the holiday season; some retail and hospitality contacts noted that activity was hampered by winter storms across most of the region during the holidays. Homebuying activity has slowed even beyond normal seasonal trends, and banks reported that loan demand slowed moderately.\nLabor Markets\nEmployment has remained unchanged since our previous report. The unemployment rate in the region has remained low, and many companies still reported being understaffed. Organized labor and staffing contacts reported high demand for workers who could fill positions immediately. A retail contact in Memphis noted difficulty in filling open positions and retaining employees. However, several firms reported slightly higher staffing levels and more applicants for open positions.\nWages have grown slightly since our previous report. Staffing shortages persist, and companies are continuing to raise wages to attract and retain new workers. One Arkansas brewery offered loans to employees to help with housing costs and considered buying property to rent apartments to employees. Other firms reported slowing the rate of wage increases. An education contact in Tennessee reported having to find other ways of retaining employees since salaries could be raised only minimally.\nPrices\nPrices have increased modestly since our previous report. Despite continued increases in nonlabor input costs for businesses, multiple contacts reported an inability to fully pass these higher costs on to consumers. Additionally, some manufacturing contacts reported lower nonlabor input costs, stemming from increased inventory availability. A contact in the auto industry reported lower prices for used and new vehicles as inventories grow. Multiple contacts cited higher interest rates as a driver for weaker demand, which in turn caused them to maintain or lower their prices. For businesses that reported increasing prices, the rate at which they were able to do so varied widely, with some contacts passing on only 5 percent of their costs increases and others passing on 75 percent. A contact in the home building industry cited labor costs as placing upward pressure on prices.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported generally lower business activity and a mixed outlook. A Louisville retail contact reported that Black Friday sales were spread out over a longer time period, which caused buyers to delay purchasing and wait for further discounts. In Memphis, consumer spending on holiday gifts lagged compared with other MSAs throughout the country. Memphis retailers reported weaker than expected sales.\nAuto dealers in Little Rock noted that inventories remain too low to meet demand at current prices, especially in used cars, and that they had a surprising surge in foot traffic shortly after Thanksgiving. The winter storm at the end of December forced restaurants in Memphis to close fully or partially, which negatively affected sales on one of the busiest days of the year. St. Louis hospitality contacts noted that business activity was lower in December compared with November, although banquet business exceeded expectations. Hospitality contacts have lower expectations for the upcoming months due to the increase in sicknesses, higher-than-average inflation, and staff shortages.\nManufacturing\nManufacturing activity has slightly decreased since our previous report. Firms have reported small increases in production but moderate decreases in new orders. A survey of manufacturing supply managers conducted by Creighton University hints at the early signs of a recession, with 60 percent expecting such an outcome. Manufacturing indicators have exhibited below-neutral growth in seven of the past nine months. Supply chain congestion has also started to improve for some companies, which is beginning to lower the price growth of manufacturing inputs and return inventories to normal levels. Firms remain optimistic that input prices and delivery times will continue to revert toward pre-pandemic levels in the coming year.\nNonfinancial Services\nActivity in the nonfinancial services sector remains stable since our previous report. Air freight and passenger traffic has slightly increased, while public transportation services continued to experience driver shortages and, consequently, route cancellations. A job-matching service in the St. Louis area is expanding services that match disabled job candidates with employers, and a housing-insecurity nonprofit built new homes and secured contracts to expand services.\nPublic sector reports were mixed. Public safety services are expected to decrease with the elimination of vacant positions in response to budget deficits in the St. Louis area, and water distribution services struggled to provide necessary maintenance and repairs due to revenue concerns. In northern Arkansas, parks and recreation services are expected to increase with staffing additions and a new proposal for expanded services.\nReal Estate and Construction\nActivity in the residential real estate market has continued to slow since our previous report. In November, month-over-month median rental rates on new leases fell in all four major District MSAs for both one- and two-bedroom apartments. Rates continued to slow or remained the same in all four major District MSAs during December. Building permits in the Midwest and South have continued to fall sharply since our previous report, even after accounting for seasonal factors. However, construction contacts continue to work through backlogs. Across the District, total home sales have dropped 4.2 percent since our previous report, and inventory has slowly started to increase\u2014up 2.75 percent\u2014during that time. Average time on the market for residential housing has also increased during the fourth quarter.\nBanking and Finance\nBanking conditions and lending activities in the District continued to soften but remained strong. Total loan growth saw only an uptick since our previous report, showing signs of slowing down from its steady and relatively fast increase between late 2021 and mid-2022. This is in line with the cooldown in loan demand that banking contacts observed toward the end of 2022. Commercial and industrial loan growth increased slightly, while consumer loan growth decreased moderately. Commercial real estate loans, however, still showed moderate growth compared with our previous report. Total deposits growth decreased moderately, but a Memphis contact noted that deposit rate competition has picked up among banks. Credit quality remains strong despite interest rate hikes, and the number of past-due loans is still low.\nAgriculture and Natural Resources\nDistrict agriculture conditions are favorable and have remained largely unchanged since our previous report. The percentage of winter wheat in the District rated fair or better decreased slightly from the end of November to the end of December. Rising commodity prices have pushed inflation-adjusted farm incomes to a near 50-year high, leading to an optimistic outlook for the upcoming year. However, input costs are on the rise as well, raising uncertainty on the overall effect on farmers' margins for 2023.\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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"January 18, 2023\nSummary of Economic Activity\nThe Ninth District economy grew slightly overall since the previous report. Employment grew modestly and the labor market remained healthy, although there were some signs that labor demand was softening. Wage pressures remained high but also appeared to lessen slightly. Prices increased modestly overall, and high food prices were negatively affecting low-wage workers. Activity increased in consumer spending, manufacturing, and energy. District agricultural conditions remained strong. Commercial and residential construction and real estate sectors were either flat or declined. Activity among minority- and women-owned businesses slowed slightly.\nLabor Markets\nEmployment grew modestly since the last report, with most District states seeing increasing payrolls. A December survey found that 44 percent of hospitality and tourism firms in Minnesota reported that they were hiring in some capacity, with more than half looking to increase year-round head count; 14 percent cut seasonal staff, but almost no one cut year-round staff. However, other smaller surveys of businesses across the District showed softer hiring sentiment in both November and December, and future hiring expectations were similarly flat. Job postings and other signs of hiring demand also continued to soften somewhat but remained healthy overall. Contacts reported small improvements in labor availability, but continued difficulty in hiring. Many businesses continued to adapt as a result. Said one contact, \"Retail and manufacturing are getting good at operating with less than a full crew.\"\nWage pressures fell slightly but remained at high levels. Firms reported minor softening in the pace of wage growth, more so for salaried than hourly workers. But overall pressure was still well above average. Nearly half of hospitality and tourism firms reported wage increases of 5 percent or more, but future wage expectations were notably lower. A Minnesota contact said that more employers were offering sign-up or retention bonuses rather than higher wages.\nPrices\nPrices increased modestly overall since the previous report. Two-thirds of respondents to a District business conditions poll reported no change to the prices they charged for their products and services in December from a month earlier; about half of firms said their nonlabor input prices were unchanged. The wholesale prices component of a regional manufacturing index decreased to a level just above neutral in December, its lowest reading since the early months of the pandemic. A producer of home furnishing products noted that raw materials prices have come down less than 10 percent, but \"we have had to reduce pricing by around 20 percent to get additional business.\" Despite reductions in many construction materials costs, a road construction contractor expected a 13 percent increase in concrete prices in 2023. Retail fuel prices in District states declined rapidly since the last report. Prices received by farmers in November increased from a year earlier for corn, wheat, soybeans, sugar beets, potatoes, hay, hogs, cattle, turkeys, chickens, and eggs; prices for chickpeas and canola decreased from a year ago.\nWorker Experience\nLow-wage workers in the Minneapolis\u2013St. Paul area reported continued pressures from higher food prices. Some said they found it increasingly difficult to pay their bills and were therefore accumulating credit card debt. A Minnesota labor contact said that the number of traveling nurses had declined but remained high. Many nursing program graduates were reportedly rethinking their choice to pursue a career in health care, as shortages have resulted in higher stress for existing workers. A workforce development contact reported that some former housekeepers had decided to start their own businesses rather than getting paid $5 per cleaned room by a hotel chain. Other workers were said to have left their jobs to start businesses in food, landscaping, and snow removal.\nConsumer Spending\nConsumer spending grew modestly since the last report, remaining at high levels. Retailers overall reported a decent holiday shopping season, with good initial traffic interrupted by severe winter weather. A South Dakota contact said that the shopping season started strong but ended \"somewhat weaker than many businesses anticipated\" because of poor weather that impacted not only customer traffic but also product inventories. A Minnesota mall reported December foot traffic was up over last year despite weather events, and anecdotal evidence indicated that shoppers spent more. Another mall contact reported that sales were up 8 percent over last year and that new leasing activity was encouraging. A suburban Minnesota mall estimated that sales rose by 5 to 10 percent, with high traffic volumes even during the week. \"Restaurants continue to knock it out of the park, with waiting periods from the time they open.\" A vehicle dealership with multiple locations saw sales of both new and used vehicles rise in December, year over year.\nConstruction and Real Estate\nCommercial construction fell slightly since the last report. Industry data suggested that revenue levels across the sector have not declined significantly. But firms reported slowing activity and that high project costs were propping up revenues. A contact in southeast Minnesota said that companies and their clients were \"choosing between delaying projects at normal prices or getting done on time at inflated prices.\" Sources also suggested that the pipeline of new projects out for bid was shrinking, though industrial and multifamily construction was still healthy. Single-family residential construction continued to decline. December permitting activity was much lower than a year ago in most of the District's larger markets. For example, single-family permits in the Minneapolis\u2013St. Paul region in December were less than half their levels from a year earlier.\nCommercial real estate was flat since the last report. Vacancy rates remained favorable in multifamily and industrial sectors even with new construction, but unfavorable in office space despite little new construction. Property sales were subdued due to higher interest rates and economic uncertainty. Residential real estate continued to decline for similar reasons. Closed sales in November and December were widely lower compared with last year. In Sioux Falls, South Dakota, December sales dropped by 48 percent year over year. In some markets, new listings declined as sellers waited for better market conditions, yet inventories of homes for sale increased with the large drop in sales.\nManufacturing\nDistrict manufacturing activity decreased slightly since the last report. Results from the Minneapolis Fed's annual survey of manufacturers indicated that firms overall saw increased orders, production, capital expenditures, and employment in 2022, with stable expectations for their firms in the year ahead. However, a regional index of manufacturing conditions indicated a mild contraction in activity in Minnesota and North Dakota in December from a month earlier, while activity expanded in South Dakota. Manufacturing contacts generally reported no change or a slight decrease in new orders. However, a producer of homebuilding inputs reported a drastic decline in new orders, and a custom manufacturer in Minnesota reported they have canceled all capital expenditures for the first quarter of 2023.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions were stable at high levels. Sector contacts reported that farm incomes and working capital remained strong heading into 2023. District oil and gas exploration activity increased slightly since the last report.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned businesses slowed slightly in recent weeks according to reports from contacts. Input and labor costs were reportedly diminishing profits for many. A small steel manufacturer reported success in doubling their workforce after offering health insurance for the first time, a move they made at the expense of profitability. Contractors reported that uncertainty due to ongoing material shortages and price increases was making it difficult to meet existing bids. \"We never know what we'll end up paying for materials,\" shared a Minnesota contact. \"Bids do not move with those changes and we cannot walk away.\" Food service businesses were said to be losing the hiring race to restaurant chains and other more established businesses.\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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"January 18, 2023\nSummary of Economic Activity\nSixth District economic activity grew at a gradual pace from mid-November through December. Labor market pressures eased somewhat, but wage pressures persisted. Most nonlabor cost increases moderated; however, food prices climbed, and freight costs remained elevated. Some firms' pricing power diminished. Holiday sales at District retailers were strong, and auto sales rose. Leisure travel activity was robust, and bookings for the first half of 2023 were strong. Housing inventory levels rose as home sales declined. Commercial real estate conditions weakened. Transportation activity continued to decline. Manufacturing demand remained steady. Deposit growth at financial institutions slowed, but loan growth was steady. Energy production remained strong, but winter weather caused storm-related outages and damage to powerlines. Agricultural conditions were mixed.\nLabor Markets\nLabor market pressures eased further since the previous report, but firms continued to describe labor markets as tight. Several contacts noted that entry-level roles were easier to fill; hiring for skilled positions remained challenging. Staffing was still a top concern and firms were largely intent on keeping talent even if demand slows; most indicated that they would strongly resist layoffs and would instead right size via attrition. Several employers required employees to return to the office and have become less flexible with remote work arrangements.\nMost employers reported persistent upward wage pressures. Many anticipate wage growth will remain elevated in 2023 but will ease somewhat. Several noted that they would be creating more equitable pay across their organization based on market survey results. Some contacts indicated that overall pay raises would be modest, but bonuses would be used to retain and recruit specific talent.\nPrices\nSixth District contacts noted most nonlabor input cost increases moderated over the reporting period, though price levels remained historically elevated. While domestic freight cost increases persisted, largely due to higher energy and labor costs, shipping container rates returned to near-\"normal\" pricing. Food prices rose significantly. Many firms described diminished pricing power due to elevated inventories and/or increased price sensitivity from customers. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth decreased in December to 3.8 percent, on average, down from 4 percent in November. Firms' year-ahead inflation expectations also decreased from 3.3 percent in November to 3.1 percent in December, on average.\nConsumer Spending and Tourism\nRetailers reported solid and healthier-than-expected holiday sales; however, many offered heavy discounts as consumers looked for deals. Some contacts noted that lower-income consumers continued to trade down and shifted to non-discretionary spending. Those stores catering to higher-income customers noted ongoing strength in demand. Auto dealers saw an increase in sales volumes compared to the last report as new and used car inventories improved.\nTourism and hospitality contacts reported strong demand for leisure travel throughout the holiday season. Hotel occupancy and attendance at tourism venues were greater than 2019 levels. Although bookings were strong through the second quarter of 2023, contacts expressed uncertainty over the second half of the year.\nConstruction and Real Estate\nDespite more moderate price growth and a recent drop in mortgage interest rates, housing demand in the Sixth District continued to deteriorate. Sales fell sharply across the region and inventory levels rose. Most homes sold for below the asking price and the number of days on market reached near pre-pandemic levels. Builders continued to reduce new home construction in response to declining demand. According to builder contacts, demand in the entry-level and second home markets was the weakest and cancellation rates remained high. A significant share of builders cut prices and increased incentives to attract buyers.\nCommercial real estate (CRE) contacts reported weakening market conditions in lower-tier office, luxury multifamily and owner-operator retail segments. The industrial sector was robust; however, contacts voiced concerns over future activity levels. The downward trend in the office sector has eased some as more employers require their staff to return to the office; however, heightened levels of sublease space remained an impediment to market recovery. A greater number of contacts shared concerns over declining CRE values as the bid-ask spread remained wide. More instances were noted of slowing or negative net operating income and rent growth. Contacts continued to report occurrences of declining asset prices and buyers seeking greater concessions.\nTransportation\nTransportation activity continued to slow from unsustainable pandemic levels. While some southeastern ports reported that breakbulk cargo volumes rose as shippers sought alternative ways to move cargo amid supply chain disruptions, container traffic decreased and was characterized as a return to more sustainable growth. Trucking tonnage also fell, and housing-related freight was noted as particularly weak. Railroads experienced declines in intermodal shipments of packaging materials, chemicals, and metals. Logistics firms involved in moving and relocation, \"big and bulky\" delivery services, and warehousing saw year-over-year volume declines as consumer and housing demand softened and firms reduced inventory levels. Most transportation contacts expect additional weakening of demand in 2023.\nManufacturing\nDistrict manufacturers noted steady demand and positive revenue growth, driven primarily by the ability to raise prices to offset higher input costs; however, margins were described as remaining pressured or even declining. Some firms reported plans to right size inventory levels, reverting back to \"just-in-time\" inventory management compared to pandemic-era \"just-in-case\" inventory approaches. Several manufacturers cited inflation and a strong dollar as headwinds in the coming year.\nBanking and Finance\nBanking contacts reported steady loan growth for a majority of portfolios, except for farmland and consumer loan growth remained positive. Yet, institutions cut investments in mortgage-backed securities as unrealized losses in securities portfolios increased. Deposit growth shifted primarily to time deposits as growth in all other deposits declined in recent weeks and institutions increased short-term borrowing to fund ongoing loan growth. Asset quality metrics showed a steady increase in the level of nonperforming assets.\nEnergy\nOil and gas contacts continued to report strong activity and increased production, although the pace of growth slowed over the reporting period. Gulf Coast refining was impacted by the winter storm that swept across the U.S. in late December, causing regional utilization to fall approximately 20 percent, though long-term damage to infrastructure was minimal. Utility providers across Sixth District states reported winter storm-related outages from damage to powerlines and surging demand. Energy contacts continued to describe ongoing investments in renewable projects, particularly hydrogen, carbon capture and storage, and offshore wind-energy development projects.\nAgriculture\nAgricultural conditions were little changed from the previous report. Demand for poultry dropped slightly but remained strong; demand for cattle and timber, as well as for some row crops, such as corn and soybeans, held steady. Florida citrus yields were down notably due to damage from Hurricane Ian. The cotton market continued to soften amid decreased demand from textile mills. Supply chain disruptions persisted, with several contacts reporting delays in receiving machinery and parts.\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"

National Summary

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"Beige Book: National Summary\nJanuary 18, 2023\nThis report was prepared at the Federal Reserve Bank of Cleveland based on information collected on or before January 9, 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\nOverall economic activity was relatively unchanged since the previous report. Five Districts reported slight or modest increases in overall activity, six noted no change or slight declines, and one cited a significant decline. On balance, contacts generally expected little growth in the months ahead. Consumer spending increased slightly, with some retailers reporting more robust sales over the holidays. Other retailers noted that high inflation continued to reduce consumers' purchasing power, particularly among low- and moderate-income households. Auto sales were flat on average, but some dealers noted that increased vehicle availability had boosted sales. Tourism contacts reported moderate to robust activity augmented by strong holiday travel. Manufacturers indicated that activity declined modestly on average, and, in many Districts, reported that supply chain disruptions had eased. Housing markets continued to weaken, with sales and construction declining across Districts. Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market. Nonfinancial services firms experienced stable demand on balance. Most bankers reported that residential mortgage demand remained weak, and some said higher borrowing costs had begun to dampen commercial lending. Energy activity continued to increase moderately, and agriculture conditions were generally unchanged or improving.\nLabor Markets\nEmployment continued to grow at a modest to moderate pace for most Districts. Only one District reported a slight decline in employment, and one other reported no change in employment levels. While some Districts noted that labor availability had increased, firms continued to report difficulty in filling open positions. Many firms hesitated to lay off employees even as demand for their goods and services slowed and planned to reduce headcount through attrition if needed. With persistently tight labor markets, wage pressures remained elevated across Districts, though five Reserve Banks reported that these pressures had eased somewhat. Some employers noted they have continued to offer bonuses and enhanced benefits to attract and retain workers.\nPrices\nSelling prices increased at a modest or moderate pace in most Districts, though many said that the pace of increases had slowed from that of recent reporting periods. Manufacturers in many Districts reported continued easing in freight costs and prices for commodities, including steel and lumber, though some said input costs remained elevated. Many retailers noted increased difficulty in passing through cost increases, suggesting greater price sensitivity on the part of consumers. In addition, some retailers offered more discounts and promotions than they had a year ago in order to move merchandise and clear out excess inventories. On balance, contacts across Districts said they expected future price growth to moderate further in the year ahead.\nHighlights by Federal Reserve District\nBoston\nBusiness activity was roughly flat, and employment increased moderately amid seasonal hiring. Prices increased modestly as nonlabor cost pressures eased. Wage growth was above average despite easier hiring conditions. Tourism activity posted strong gains, while home sales continued to fall. The outlook was mostly stable but worsened slightly amid real estate contacts.\nNew York\nEconomic activity contracted, led by an especially sharp decline in the manufacturing sector. Job growth slowed and labor shortages eased somewhat, but hiring plans remained fairly solid. Wage growth remained modest, while the pace of input and selling price increases slowed. Housing markets continued to cool, and loan demand fell.\nPhiladelphia\nBusiness activity appeared to decline slightly during the current Beige Book period after holding steady for six months. Wage and price inflation continued to subside but still grew at a moderate pace. Employment continued to rise slightly, although hiring plans grew more cautious. Current sentiment fell, but expectations improved.\nCleveland\nThe District's economy slowed slightly as 2022 drew to a close amid high interest rates and elevated costs and selling prices. However, the share of contacts reporting higher costs or selling prices declined noticeably from the middle of 2022. Looking ahead, firms expect softer conditions to persist in the near term but still plan to add workers to meet existing and expected demand for their goods and services.\nRichmond\nThe regional economy continued to grow at a slight pace, due in large part to moderate growth in consumer spending as manufacturing, transportation, real estate, and lending activity slowed. Employment rose more modestly this period compared to recent months and some firms noted hitting limits on wage increases. Price growth remained elevated in recent weeks.\nAtlanta\nEconomic activity grew at a gradual pace. Labor market tightness eased, but wage pressures persisted. Most nonlabor costs moderated. Retailers reported healthy holiday sales. Auto sales rose. Leisure travel was robust. Housing demand fell. Transportation conditions weakened. Overall loan growth was steady, but deposit growth slowed. Agriculture remained mixed.\nChicago\nEconomic activity decreased slightly. Employment increased moderately; consumer and business spending were unchanged; nonbusiness contacts saw little change in activity; manufacturing decreased modestly; and construction and real estate decreased moderately. Prices and wages rose moderately, while financial conditions tightened some. Agriculture incomes were strong in 2022.\nSt. Louis\nEconomic conditions have remained unchanged since our previous report. Labor shortages remained a key issue, though more contacts reported a slightly easier time hiring and retaining workers. The rate of input price increases slowed, and contacts reported improvements in shipping costs and delivery times. Consumer spending and travel were both mixed during the holiday season.\nMinneapolis\nEconomic activity in the region expanded slightly in recent weeks. Employment grew modestly, with labor demand softening but still healthy. Wage and price pressures remained high but lessened slightly. Holiday shopping was good overall but stymied somewhat by severe winter weather. Construction and real estate sectors continued to struggle. Inflation and high labor costs were hurting minority- and women-owned firms.\nKansas City\nEconomic activity in the Tenth District continued to decline slightly through the end of 2022. Though labor demand cooled further, contacts reported ongoing tightness and persistent wage pressures. Consumer spending declined recently, particularly for retailers and restaurants. Across goods and services, price growth slowed to a moderate, yet still-brisk, pace. Energy activity slowed modestly, facing headwinds from falling oil and gas prices.\nDallas\nModest economic growth continued, with an acceleration in the manufacturing sector but an abatement in the service sector. Retail sales and home sales fell further, while oil and gas activity expanded. Employment growth continued and wage and price growth stayed elevated. Outlooks were mostly pessimistic except for the energy sector, and many contacts voiced concern about weakened demand, a potential recession, and inflation.\nSan Francisco\nEconomic activity expanded modestly. Employment levels grew at a modest pace as labor supply improved. Wages and prices remained elevated but rose at a slower pace relative to the previous reporting period. Demand for retail goods and services was stable. Manufacturing activity was mixed, while conditions in the agriculture sector remained weak. Residential real estate activity weakened, and lending activity rose slightly.\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 18, 2023\nSummary of Economic Activity\nBusiness activity in the Fourth District slowed slightly since the previous report, though activity varied considerably by industry sector. District retailers indicated that sales over the holiday shopping season did not meet their growth expectations because inflation led households to spend more on necessities and less on discretionary items. Auto dealers, homebuilders, and residential realtors said that higher interest rates, along with persistent inventory shortages, constrained sales. Bankers reported that loan volumes declined further. By contrast, manufacturers said that demand increased slightly in recent months, particularly in goods categories with longer lead times. Looking forward, contacts are generally more pessimistic about the near-term outlook for demand. However, contacts' near-term hiring plans remained little changed, which suggest they will continue to hire. Upward wage pressures appeared to ease, as did the pressure on nonlabor input costs and selling prices.\nLabor Markets\nEmployment increased moderately in recent weeks despite slightly softer current business activity. Firms in manufacturing and professional and business services were most likely to report staff increases, while those in construction and freight were most likely to report staffing reductions. Reports of layoffs remained rare, and most contacts preferred to reduce employment through attrition when needed. One staffing services firm reported that demand had slowed noticeably in November and December, though the contact was \"hoping\" that it was a seasonal decline and would pick up in January. On balance, contacts expected to add more workers at a relatively steady pace in coming months.\nWage pressures eased over the past year, though they did not change meaningfully in recent weeks. There were a few new reports of increased worker availability, but most contacts suggested that labor markets remained very competitive, keeping wage pressures from easing further. While fewer firms raised pay compared to those that did a year previous, some offered their employees more generous yearend bonuses or accelerated the timeline for merit increases to help employees mitigate the impact of higher inflation.\nPrices\nCost and price pressures have also eased over the past several reporting cycles, though they changed little in recent weeks. Roughly half of contacts reported higher input costs recently compared to about three-quarters of them who reported the same this time last year. Manufacturers and nonresidential builders were most likely to report relief from rising input costs, often citing lower prices for steel, lumber, and freight. By contrast, costs were said to be rising for concrete, electronics, and electrical components. In many cases in which prices continued to rise, contacts pointed out that the rate of increase had declined noticeably. Looking forward, the share of firms expecting cost increases in the months ahead fell to 54 percent, its lowest since early 2021.\nThe share of firms raising selling prices was unchanged in recent weeks, at 45 percent, but well below the peak of 73 percent in the spring of 2022. Some contacts noted that they were not increasing prices to remain competitive, while others said they were waiting to see if input costs increase further. However, weaker demand led homebuilders to use more incentives and discounts to close sales, while general merchandisers and apparel retailers used more promotions over the holiday shopping season to move goods and reduce inventories.\nConsumer Spending\nRetailers reported further softening in demand as consumers faced continued pressure from inflation and increased interest rates. Multiple retail contacts said that holiday sales had fallen short of expectations, with one large general merchandiser noting that his customers continued to focus spending on everyday essentials while minimizing discretionary purchases. Reports from restauranteurs were mixed. While one fast food contact said her sales had increased as consumers \"dined down\" because of inflation, sit-down restaurants reported unchanged or decreased sales. Auto dealers continued to report flat or decreasing sales amid increased interest rates, higher vehicle prices, and limited inventory.\nManufacturing\nDemand for manufactured goods moved slightly higher in recent weeks. However, reports varied by industry segment. Demand increased for firms whose products have longer lead times, such as those producing parts used in commercial aircraft, and for manufacturers tied to the ongoing creation of new electric vehicle production capacity. By contrast, softer consumer spending led to a decline in orders for some firms as their customers rebalanced inventories. One packaging producer said that customer destocking had reduced demand for its cardboard-related products, leading to \"historically high downtime\" in production. While reports of supply chain disruptions were less frequent than in recent reporting periods, one HVAC producer said that her firm's sales had declined slightly because of customers' inability to secure necessary components. Manufacturers generally expected demand to change little in the coming months.\nReal Estate and Construction\nResidential construction and real estate activity declined further. Contacts continued to cite elevated interest rates as the main factor hindering demand. One real estate agent said that the housing market was in a recession and stated that the only reason that there had not been significant declines in home prices was because of extremely low inventory levels.\nDemand for nonresidential construction and real estate remained weak. Real estate brokers indicated that sales had dried up amid elevated interest rates. Despite tepid demand for new construction, nonresidential construction contacts were slightly less pessimistic about demand going forward. One general contractor was hopeful that funds from the Infrastructure Investment and Jobs Act would begin to result in more projects available for bid.\nFinancial Services\nOverall, lending continued to decline during the reporting period, a situation which bankers attributed to higher interest rates that are increasing borrowing costs. Bankers noted moderate slowing in commercial lending, and some contacts reported weaker loan pipelines. On the household side, lenders said that residential and auto loan volumes continued to decline as higher interest rates and selling prices dampened activity. Bankers indicated that delinquency rates for commercial and consumer loans remained low. Core deposits declined, and some lenders attributed this decline to customers' seeking higher-yielding alternatives and to increased deposit rate competition among banks. Looking ahead, bankers expected that loan volumes would continue to decline through the first quarter because of a decrease in applications in the pipeline.\nNonfinancial Services\nFreight activity continued to decline. One contact attributed the softening demand to the slowdown in home purchases and a decline in shipments of consumer goods as households shifted more of their spending to services. Another freight contact noted that demand had been diminished because of a reduction in imports. Demand for professional and business services increased on balance. One accounting firm noted that activity had increased in recent weeks because of yearend planning work, and another firm that provides digital authentication services noted that demand for its services remained strong as households continued to shift spending from brick-and-mortar stores to online businesses.\nCommunity Conditions\nNonprofit contacts suggested that job opportunities for lower-wage workers increased in recent months. Several noted that jobs in hospitality and retail were particularly plentiful, likely boosted by seasonal hiring. Contacts cited the largest barriers to lower-wage workers' participating in the labor force continued to be a lack of affordable childcare and transportation followed by flexible scheduling, wages, and whether those wages would make up for any loss of government benefits (the \"benefits cliff\"). Regarding affordable housing, a plurality of contacts was concerned about rising rents and the exhaustion of programs such as emergency rental assistance in 2022. Several contacts said these factors are likely to exacerbate a trend toward homelessness and overcrowding, and individuals might \"double up\" and move in with family or friends.\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"

San Francisco

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"Beige Book Report: San Francisco\nJanuary 18, 2023\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded modestly during the mid-November through December reporting period. Labor supply improved somewhat, and employment levels grew at a modest pace. Wages and prices rose at a slower pace relative to the previous reporting period. Demand for retail goods was stable, and activity in the consumer and business services sectors was strong. Demand for manufactured products was mixed, while conditions in the agriculture and resource-related sectors remained weak. Activity in residential real estate markets weakened further, while commercial real estate activity was flat overall. Lending activity rose slightly over the reporting period. Communities across the Twelfth District were challenged by elevated living costs and lack of affordable housing. Contacts expressed concern over a weaker outlook for the economy and increased overall uncertainty.\nLabor Markets\nEmployment levels grew at a modest pace during the reporting period as labor availability improved across the District. Job turnover and voluntary quits reportedly fell in recent weeks, and hiring difficulties eased in consumer services sectors such as retail, food services, and hospitality. Contacts reported strong competition for labor and difficulties attracting experienced talent in health care, legal services, manufacturing, and skilled trades. Several real estate firms and mortgage providers reported reducing the number of open positions in response to moderating demand and noted that recent hiring freezes and layoffs in the technology sector improved the size and quality of the applicant pool. Contacts in Alaska and Hawaii continued to report challenges filling entry-level positions, partly due to elevated shelter costs. Several employers noted that, despite overall economic uncertainty, they plan to maintain current employment levels to avoid the hiring challenges they have experienced throughout the pandemic.\nWages grew further, albeit at a slower pace. Workers continued to ask for higher pay and end-of-year bonuses in response to elevated living costs. Employers continued to use bonuses and comprehensive benefits packages to attract and retain talent and reported more willingness to push back against flexible work arrangement requests.\nPrices\nPrices rose at a slower pace relative to the previous reporting period, but overall price levels remained very elevated. Contacts cited wage pressures as the primary driver of the price inflation they have experienced in recent weeks. Several contacts, particularly in manufacturing and construction, reported plans to pass through last year's cost increases to their customers when annual contracts are renegotiated. Several sectors reported higher prices, including health care, food services, hospitality, insurance, and air travel. Conversely, gradually improving supply chains and cooling overall demand have resulted in stable or lower prices for many goods, including energy products, medical equipment, electronics, office supplies, and manufacturing inputs such as steel and lumber.\nCommunity Conditions\nCommunities across the District continued to highlight key issues such as high inflation, lack of affordable housing, and lower enrollment rates at community colleges and higher education institutions. Reports indicated people are working \"side hustles\" or multiple jobs to afford the elevated living costs, and concerns of evictions have increased of late as rent inflation further strained household budgets. Donation-dependent nonprofit and philanthropic organizations noted that tighter financial markets have resulted in significant drops in fundraising inflows. This reduction was partially offset by government funding in some areas, including parts of California and Nevada. Contacts also highlighted that the recent uptick in respiratory infections, including influenza, intensified worker and volunteer shortages at many community and social support organizations.\nRetail Trade and Services\nRetail sales were stable over the reporting period. Reports on holiday season sales were mixed, and retailers noted higher prices and healthier inventory levels compared with last year. Contacts also highlighted a continued shift in spending behavior away from in-store shopping to e-commerce. Sales for some consumer durables, such as automobiles, were reportedly up in recent weeks, and demand for wood products strengthened as consumers favored renovation projects over new home purchases. Labor availability eased somewhat but remained tight, and some contacts reported continued adoption of labor-saving technology to address worker shortages.\nActivity in the consumer and business services sectors was unchanged but remained strong on balance. Demand for health-care services picked up in recent weeks, in line with seasonal trends. Activity in the leisure and hospitality sector remained robust, although a Southern California contact reported a notable softening in demand for hotel stays. Demand for insurance and legal services was strong. A Southern California contact reported increased demand for marketing products recently as companies aimed to bolster brand recognition and employee engagement. Labor costs remained elevated and increased slightly in some sectors, such as health care and hospitality, but contacts noted that higher wages improved employee retention.\nManufacturing\nActivity in the manufacturing sector was mixed over the reporting period. Demand strengthened for capital equipment and manufactured intermediate goods in the packaging, logistics, and aviation industries. Conversely, demand for manufactured metal products, renewable energy equipment, and intermediate construction goods softened, partially due to slower activity in the residential real estate market. Capacity utilization in food manufacturing improved, although labor shortages continued to constrain production. Manufacturers reported that disruptions in labor markets and supply chains had eased but input costs remained elevated. Contacts in Utah highlighted strong overall conditions for local manufacturers, noting increased business migration to the state.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors remained generally weak. Overall domestic agricultural sales were up in terms of dollars but down in volume. Sales abroad varied by export market, with demand from Asian and European markets declining or remaining unchanged, while demand from the Middle East increased significantly. Global economic uncertainty and a generally strong dollar continued to put downward pressure on international demand. Adverse weather conditions negatively impacted agricultural yields across the District, including for cherries, grapes, and nuts. Seafood production was also down, partially due to closures of crab fisheries in Alaska. Contacts noted that supply chain bottlenecks ameliorated further, but transportation and materials costs remained elevated. One producer in the Pacific Northwest noted that demand for timberland remained high, partially due to growing private interest in opportunities for carbon offset investment.\nReal Estate and Construction\nResidential real estate activity weakened further in recent weeks. Demand for new and existing single-family housing fell modestly across the District, primarily driven by high prices and mortgage costs. Contacts reported that selling prices began to come down and rental rates were stable on balance. Construction of single-family housing dropped moderately as existing projects reached completion and starts fell modestly. Construction activity for multifamily housing varied across the District as activity was solid in Northern California and Washington but down in Oregon. Contacts noted some construction materials prices, such as wallboard, fell substantially, while other materials prices remained stable but high.\nConditions in the commercial real estate market were stable on net. Office leasing activity was weak, and vacancies remained elevated. Demand for industrial, medical, and retail space was generally strong, particularly in Nevada. Several contacts in the Pacific Northwest and California noted that overall commercial real estate activity softened in recent weeks due to higher interest rates. Construction of new commercial space remained strong in segments other than office space, although contacts commented that the shortage of construction workers continued to constrain new development.\nFinancial Institutions\nLending activity rose slightly across the District. Many contacts noted that demand for consumer loans, including for credit cards, home equity, and vehicles, has picked up in recent weeks. Conversely, residential and business lending activity slowed further, reflecting high interest rates and rising economic uncertainty. Competition for deposits tightened as deposit growth slowed, with one credit union financier mentioning the need to borrow funds to match loan demand. Credit quality remained strong, but bankers observed some general deterioration of late. Some business contacts reported pausing large borrowing and investment plans given the current economic uncertainty.\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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"January 18, 2023\nSummary of Economic Activity\nOn balance, business activity in the Third District appears to have declined slightly after holding steady since the first of July. Inflation and higher interest rates have dampened consumer demand for big-ticket items, including homes and autos. Employment continued to grow slightly even as labor demand eased; business contacts noted an increased willingness to work. Wage growth and inflation continued to subside (and reported price increases were less widespread), but both continued at a moderate pace. Overall, firms continued to note less difficulty in hiring and fewer supply chain disruptions. On balance, expectations for economic growth over the next six months improved slightly among all firms; however, expectations remained well below their nonrecessionary historical averages.\nLabor Markets\nEmployment continued to grow slightly, with small net increases among nonmanufacturers outweighing small net decreases among manufacturers. Some firms reported that they will reduce their temporary staffing first as their own production slows. Staffing firms have also noted some softness in demand for temporary workers. Contacts, including staffing firms, also noted that hiring has become easier, with some suggesting that workers are beginning to feel the need to be employed full time.\nStill, nearly all firms continued to describe staffing as their primary challenge. Many firms noted a high degree of job churn, which results in workers being hired into new industries for which they have no prior experience. Several contacts noted that some professional staff had left for higher salaries but then sought to return after experiencing their new firm's work environment.\nFirms continued to report that wage growth had subsided but remained in a moderate range. Wage inflation remained pervasive. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee remained at a little over 40 percent, while just over half of the firms reported no change and a few reported lower compensation levels. Most contacts expect future wage growth to return to near pre-pandemic rates.\nPrices\nOn balance, inflation continued to rise moderately, although reported increases were less widespread. Two-thirds of manufacturers reported no change in prices paid (for factor inputs) and almost two-thirds of nonmanufacturers reported no change in prices received (often from consumers). Moreover, the share of firms reporting increases less the share reporting decreases was at or below its nonrecessionary average for the difference between these two categories. Price increases were more commonly seen in the exchanges between firms for intermediate goods.\nMost contacts noted that prices were easing overall; however, most could also cite examples of price spikes for one or more production inputs. On balance, contacts also noted fewer supply chain disruptions, although some persist.\nAbout half the manufacturing contacts expected to pay higher prices over the next six months, and slightly less than that expected to receive higher prices for their own goods.\nManufacturing\nManufacturing activity declined moderately \u2013 after having declined modestly in the prior period. The index for new orders fell further and was negative for the seventh consecutive month. In addition, the shipments index turned negative, suggesting that firms have begun to work through their backlogs. Many contacts confirmed that demand was slowing, backlogs are being fulfilled, and companies are reducing their inventories. One firm that reported strong sales indicated that it was gaining market share from failing competitors, not economic growth.\nManufacturers expect the current slowdown to be relatively brief. The indexes for future activity and new orders trended higher and turned positive; the index for future shipments remained positive and trended higher. Moreover, expectations of increased employment and capital spending over the next six months became more widespread.\nConsumer Spending\nRetailers (nonauto) and restaurateurs offered mixed reports: A low-cost retailer reported that falling gas prices had driven stronger sales in December, but a high-end retailer exclaimed that \"December is not happening!\" A restaurant operator noted progressively weaker traffic from diners (on a year-over-year basis) each month this autumn into December.\nLow-income households expressed challenges in making their incomes stretch through the month. After requests for housing and utility bills, assistance with employment and income was the third-highest overall request for help on 211 calls in the three-state region. This was also true for New Jersey, individually, but in Delaware and Pennsylvania, food assistance rose to the third-highest request at 10 percent of all requests.\nAuto dealers reported modest declines in sales \u2013 noting that high prices, rising interest rates, and smaller year-end bonuses had dampened demand. New car prices had begun falling as inventory levels improved; however, a contact reported that most car manufacturers are scaling back production again as chip shortages are expected to continue through the first quarter, or later.\nTourism contacts reported that demand for lodging was falling slightly in most of the region. Consumers are still taking trips but are booking shorter stays, resulting in softness during the week. According to one contact, the pipeline for new hotel construction \"has fallen precipitously.\" With an expectation of little new supply over the next three to five years, room rates are expected to increase, while upward pressure on labor compensation is expected to ease.\nNonfinancial Services\nOn balance, nonmanufacturing activity appeared to hold steady for the second consecutive period; however, the share of firms reporting decreases in sales and new orders slightly edged out the share reporting increases.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew moderately during the period (not seasonally adjusted) \u2013 comparable with growth in the prior period and faster than in the same period last year. However, growth was less widespread, especially among some consumer segments. Inflationary effects on home prices and other big-ticket items continued to boost loan volume growth during the current year relative to past years.\nDuring the period, District banks reported strong loan volume growth in home mortgages and commercial and industrial lending and modest growth in commercial real estate lending. Home equity lines, auto loans, and other consumer lending were essentially flat. Credit card volumes grew robustly \u2013 typical of the holiday season.\nReal Estate and Construction\nHomebuilders continued to report weak demand and a modest decline in contract signings for new homes. Some smaller builders are able to maintain steady work by offering price concessions or by offering new lower-priced products with a smaller footprint and less costly features.\nExisting home sales fell modestly in most markets \u2013 following a steep decline in the prior period. Brokers noted that the softer market is shifting (slowly) back toward a balance between buyer and seller. Days on the market are lengthening, and home inspections are becoming the norm again. However, housing affordability worsened.\nRequests for assistance with housing and utility bills continued to dominate the share of 211 requests in the three-state region, at 32 percent and 23 percent, respectively. In turn, 42 percent of the housing requests were for rental assistance.\nMarket participants in commercial real estate continued to report steady current construction activity, although the pipeline is less full. Many contacts noted that higher interest rates, tighter credit, and current market uncertainty have delayed many deals, especially for land development. Demand remains strong for new space to serve industrial, warehousing, and the life sciences sector. Multifamily housing has begun to slow, and sentiment toward office space is turning increasingly dour. Leasing activity for office space has slowed modestly, and renewals are often seeking less space.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

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"Beige Book Report: Kansas City\nJanuary 18, 2023\nSummary of Economic Activity\nEconomic activity in the Tenth District continued to decline slightly through the end of 2022. Hiring activity slowed further, but the labor market remained very tight. Several segments of the service sector had modest declines in employment, but job openings remained elevated. Given the ongoing tightness in the labor market, wage pressures remained high overall, and businesses noted that wage growth still has momentum. Manufacturing activity continued to decline at a modest pace, but expectations firmed somewhat. Consumer spending declined recently, particularly at retailers and restaurants. Given the amount of leisure travel, contacts noted that retail spending was lower than expected. Additionally, retailers indicated they are dealing with a glut of inventories resulting from loosening supply bottlenecks. Those previously delayed retail goods now in inventories are reportedly not well aligned with current consumer demand, and so are being sold at steep discounts. Cost pressures for service businesses remained elevated, but the pass through to customers became more difficult recently. Across goods and services, price growth slowed to a moderate, yet still-brisk, pace. Growth in overall energy activity slowed across the District, as falling oil and gas prices were a headwind to new drilling and production.\nLabor Markets\nHiring continued to slow in the Tenth District as labor demand cooled, though the number of job openings and overall tightness of the labor market remained high. Employment remained mostly unchanged for manufacturing businesses, while employers in the service sector reduced their payrolls slightly. Reductions in employment were broad-based across service sectors but varied in scale across segments. Many restaurants and retail businesses reported modest declines in jobs, while a small number of technology and financial service businesses reported more substantial job losses. More contacts reported they reduced hours worked by employees in recent weeks, another indication of cooling labor demand.\nWhile hiring slowed, wages grew moderately. District contacts broadly indicated that wage growth continues to have momentum due to ongoing imbalances in the labor market. In particular, wage growth in the lodging sector, where employment shortfalls remain pronounced, increased robustly. Most contacts reported they expect wages to increase at either the same rate, or a pace that is slightly faster, than wage growth over the past year.\nPrices\nPrices increased at a moderate pace. Most manufacturing businesses reported that input price growth continued to slow in recent weeks, and most of those contacts reported that they are able to pass over 80 percent of higher costs to their customers. Conversely, businesses in the services sector indicated input price growth remains elevated, and less than 20 percent of cost growth is passed to consumers. Service businesses noted they are struggling to strike a balance between retaining customers and maintaining profitability. Most contacts report that their expectations for future price growth are moderating compared to last year but remain elevated above historical norms.\nConsumer Spending\nConsumer spending fell moderately over the past month, despite robust leisure travel activity. Restauranteurs and retailers reported that \"travelers just aren't spending like they used to.\" The lower propensity for travelers to dine out or shop, combined with adverse weather events and waning demand more broadly, led contacts to report a softer-than-expected beginning of the winter season. Travel and accommodation spending was elevated, driven by higher prices rather than higher volumes, as total occupancy remained subdued.\nCommunity Conditions\nMany non-profit organizations reported expanding their capacity recently in response to higher levels of household financial stress and food insecurity over the past year. One food bank in Kansas City reported that the number of sack lunches they provided tripled in 2022, with similar reports of heightened demand in other District cities. However, food bank contacts noted the increases in food and fuel costs earlier in the year coincided with declining donations, which depleted financial reserves and inhibited their ability to provide services in recent months. Difficulty meeting an increased demand for services was broad-based in the non-profit sector, with many organizations also citing difficulty recruiting volunteers and the health of their employees as major challenges to their operations.\nManufacturing and Other Business Activity\nManufacturing activity declined modestly with production levels, the length of backlogs and the volume of new orders all continuing to fall over the past few weeks. Changes in service sector business activity were mixed across segments. Sales were down broadly, however, tourism businesses noted sales growth remained moderate due to ongoing price growth. Although overall activity softened over the past few weeks, expectations for growth over the next 6 months increased moderately.\nDemand for goods at retail businesses fell slightly. The lower demand coincided with a glut in inventories after shipping bottlenecks loosened. Retailers reported they are now dealing with a mismatch between final goods held in inventories and the type of goods consumers are demanding, forcing businesses to heavily discount misaligned merchandise. Although international freight conditions have reportedly recovered, broad disruptions across various modes of inland domestic transportation remain.\nReal Estate and Construction\nSubleasing activity in commercial real estate increased rapidly in recent weeks. Commercial space previously occupied by tech sector businesses became increasingly available. Contacts reported they expect further acceleration in the amount of office space that will be offered on secondary markets in coming months. Accordingly, prices of subleased space dropped, and terms became more favorable for incoming tenants. In residential real estate, builders of new single-family homes noted an uptick in the number of buyer cancellations for projects underway. In recent weeks, those cancelled purchases were backfilled by secondary buyers seeking homes. However, contacts indicated they expect \"a bigger cliff of cancellations will hit builders in the spring.\"\nCommunity and Regional Banking\nLoan demand remained stable in the past month, except for residential mortgages, which continued to decline swiftly. Bankers experienced steady interest from borrowers across the Commercial and Industrial and Commercial Real Estate segments of their loan portfolios, despite higher interest rates on new originations. Although credit quality remained stable in recent weeks, contacts expected deterioration in the next six months as higher interest rates impair property valuations and borrowers' ability to generate sufficient cash flow for debt service, particularly in the CRE space. Deposits declined moderately this month as competitive rate pressures and inflationary dynamics eroded deposit balances. Nonbank financial institutions and firms with reduced liquidity drove deposit rates higher over the month.\nEnergy\nGrowth in overall energy activity slowed modestly in the Tenth District, as falling oil and gas prices were a headwind to new drilling and production. Contacts in the service segments of the sector reported little change in business activity. Despite several notable developments during the past month \u2013 in particular, G7 price caps and European sanctions on Russian oil exports and production cuts by OPEC \u2013 the overwhelming majority of contacts reported no changes to their production plans resulting from these events thus far. Looking ahead to later this year, most businesses indicated they expect oil and gas production to increase by less than 5 percent, as they expected prices to be slightly below levels necessary for more significant production increases. Several contacts also noted that ongoing delays in industry supply chains are expected to constrain production growth in 2023.\nAgriculture\nAgricultural economic conditions in the Tenth District were generally strong through the end of 2022 alongside elevated commodity prices. Prices of some key crops and livestock declined slightly during December but remained at a profitable level. Most contacts in the District reported gradual improvement in farm income and credit conditions, but others noted that drought had weakened conditions for some producers. Strong real estate values continued to bolster farm finances, but increased interest rates, high production costs, challenging weather conditions, and the outlook for commodity prices remained key concerns.\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"

Boston

/beige-book-reports/2023/2023-01-bo

"January 18, 2023\nSummary of Economic Activity\nBusiness activity in the First District was roughly flat on balance, with continued strength in tourism and further declines in home sales. Prices increased modestly, and many contacts reported that nonlabor cost pressures had eased considerably. Employment rose moderately, spurred by seasonal hiring in retail and hospitality. Wage pressures remained substantial. Some firms sought ways to boost productivity and profitability. Home sales fell sharply, and commercial leasing and investment activity were flat. Software and IT services firms enjoyed mostly strong and stable demand. Outside of real estate markets, where the outlook weakened slightly, most contacts remained optimistic for their own prospects, even though some deemed a recession as likely for 2023. No firms planned to make significant layoffs and most expected price increases to moderate moving forward.\nLabor Markets\nEmployment increased moderately on balance, spurred by a seasonal uptick in demand and easier hiring conditions. Wage growth proceeded at an above-average pace. A clothing retailer found it easier than expected to hire seasonal workers, especially positions involving remote work, but had to offer hiring bonuses to attract warehouse workers. Robust convention activity and holiday parties gave a moderate boost to food and beverage staffing at Boston-area hotels. In contrast, airline industry contacts found it very hard to fill positions and some restaurants cut hours in response to persistent staffing shortages. Firms in diverse sectors commented that wage growth was above average (if mostly stable) and that employment costs continued to eat into profit margins. Many contacts planned to focus increasingly on raising labor productivity and cutting costs. No firms planned to undertake significant staffing reductions, not even those that had experienced weak results recently.\nPrices\nPrices increased modestly on balance. Most contacts said that their output prices were flat since the previous report and that nonlabor cost pressures had retreated substantially. However, hotel room rates in the Greater Boston area increased sharply since the summer, in part for seasonal reasons, and landed well above their year-earlier levels. Cape Cod lodging prices posted a modest seasonal decline, but easily exceeded their comparable 2019 levels. A clothing retailer posted high single-digit markups earlier this fall but offered promotional discounts during the holiday shopping season. Retailers and manufacturers alike commented that nonlabor cost pressures had eased considerably in recent months, as the price of container shipments in particular fell sharply and supply chains improved. Prices at software and IT firms were up modestly on average, although one contact enacted \"more aggressive\" price increases in the second half of 2022. Moving forward, some contacts expected to hold prices firm or even to offer promotions to retain business, and others expected to face ongoing cost pressures\u2014linked largely to employment\u2014that could necessitate further price hikes. On balance, price increases were expected to moderate, however.\nRetail and Tourism\nFirst District retail contacts reported mixed sales, while tourism contacts saw strong increases in activity. A clothing retailer experienced softer demand throughout most of the fall, but sales rebounded during the holiday season, surpassing expectations for that period. Cape Cod retailers experienced strong fourth quarter sales, which a contact attributed to the fact that remote work arrangements have boosted the number of visitors to the Cape during the post-summer months. Accordingly, hospitality contacts on the Cape enjoyed a record-setting fourth quarter for occupancy and room rates. Airline passenger traffic through Boston increased steadily in recent months, reaching 93 percent of pre-pandemic levels, and cruise ship activity through Boston and into Maine accelerated during the same period. The Greater Boston hotel occupancy rate increased further, returning to pre-pandemic levels. Convention activity also increased sharply, and bookings into 2023 are in line to exceed 2019 levels. Three tourism contacts expressed concerns that inflation could crimp leisure spending in 2023, but none had seen any actual signs of a slowdown yet.\nManufacturing and Related Services\nRecent results were mixed across First District manufacturing contacts. A toy manufacturer reported a sharp decline in revenues in the third quarter, citing inflation\u2019s impact on lower-income consumers as one cause. A chemical manufacturer faced weaker demand from clients in the construction and automobile industries, and as competitor firms sought to shed excess inventories. Two consumer goods manufacturers had flat and moderately stronger sales in December, respectively, after each had seen slumping sales earlier in the fall; recent sales beat seasonal expectations in both cases. A frozen food producer experienced steady demand despite the fact that it had posted three large price increases in the last 18 months. One contact made a significant down-ward revision to its capital spending plans, and others held plans steady. Most contacts were more optimistic for 2023 than they had been earlier in the year. The toy manufacturer, however, expected a recession in 2023 and accordingly weaker sales.\nIT and Software Services\nDemand was strong and stable in the fourth quarter among most contacts. However, one firm experienced a moderate decline in bookings that was not unexpected, and that was attributed to a weakening macroeconomic environment. Contacts reported year-over-year revenue increases that ranged from moderate to very large. Where recent demand was strong, contacts attributed their results to the post-pandemic rebound of client firms and to the essential nature of certain IT services. Two firms said that higher employee-related expenditures had pinched their profit margins somewhat. Capital and technology spending was flat or, in one case, experienced a modest decline that was attributed to the rise of cloud-based computing. Contacts expected to see steady or slightly softer demand in the near term, but cited a variety of downside risks to activity, such as a seasonal spike in respiratory illnesses, ongoing inflation, and stock market volatility. Nonetheless, contacts expressed a high degree of confidence in their firms' prospects for longer-term success.\nCommercial Real Estate\nThe First District's commercial real estate market was relatively unchanged in recent weeks. The industrial market softened slightly, as rent growth slowed a bit, but vacancy rates remained very low. The office sector continued to experience high vacancy rates and flat rents. Conditions were stable in the retail property market, with food and beverage establishments experiencing the strongest demand. No significant acquisitions were reported for any property class, and new deals were said to be on hold until late in the first quarter of 2023. High interest rates continued to curtail borrowing activity, and refinancing occurred only out of absolute necessity. Concerning the outlook, contacts expected activity to be flat or to slow slightly on balance, but expectations differed by property type. While the industrial market was expected to continue to perform relatively well, the prospects for the office market weakened further, as some contacts feared that pending lease maturations would result in added vacancies. The outlook for the retail market was uncertain, as it was seen to depend heavily on the extent of any economic slowdown in 2023.\nResidential Real Estate\nHome sales posted substantial further declines in November, and closed sales were down by 20 to 30 percent on a year-over-year basis. For single-family homes, re-cent results represented a sharp slowdown in sales from the previous report, whereas for condos the recent sales declines were slight-to-moderate. A Boston contact at-tributed weak demand for homes as a response to persistent inflation and higher mortgage rates. The same contact added that some would-be buyers have left the market entirely and that the buyers who remain are searching for homes at a more careful pace, as the bidding wars and waived inspections that characterized the market in re-cent years have become quite rare. Inventories remained down on an over-the-year basis in Rhode Island, Massachusetts, and Vermont, but by a much smaller margin than in the previous report. In other markets, inventory growth accelerated substantially from the previous report. Prices increased slightly over-the-year, at about the same pace as reported last time. Contacts expected home prices to continue to level off in the near term, and stressed that, despite cooling demand, further inventory growth was still needed in order to achieve a more balanced market.\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"

Cleveland

/beige-book-reports/2022/2022-11-cl

"November 30, 2022\nSummary of Economic Activity\nFourth District business activity slowed slightly in recent weeks. For the first time since the end of the downturn in 2020, a plurality of contacts said that demand for their goods and services had weakened over the prior two months. Demand growth slowed in sectors that had exhibited strength recently (such as manufacturing and professional services) while demand in previously weak sectors (such as retail, construction, and freight) remained so. Lenders captured the sentiment of many of their customers when suggesting that higher interest rates, persistent inflation, and increased economic uncertainty were weighing on household and business spending. Contacts expected demand to decrease modestly further in the coming few months, and their plans for capital spending were lower, as well. Labor shortages persisted, even as worker availability increased somewhat and turnover decreased slightly. While wage and nonlabor input cost pressures were largely unchanged, upward pressure on selling prices eased further.\nLabor Markets\nEmployment growth in the District continued at a slight pace. Demand for labor remained solid, though there were more frequent reports of employers' opting to take down open job postings or declining to fill recently vacated positions. Reports of outright layoffs were rare and mostly concentrated in construction and freight, where demand has been particularly weak. Labor supply constraints appeared to ease somewhat, and there were scattered reports of reduced turnover. Still, nearly half of contacts indicated that finding workers with the right skills was the primary impediment to hiring. Looking forward, firms generally planned to add more workers to their payrolls in coming months, but at a slower pace.\nWith labor demand still exceeding labor supply, wages continued to rise. Most firms indicated that competition for workers remained intense, forcing them to raise pay in order to attract and retain workers. One homebuilder said, \"[even] while cutting staff. . . we will adjust all base compensation up by 5 percent next month. This effectively negates 50 percent of the savings [from recent layoffs].\" While wage pressures remained elevated, there were scattered signs that they were easing. For example, the share of contacts reporting pay increases over the prior two months fell below 50 percent for the first time in more than a year and a half.\nPrices\nIncreases in nonlabor input costs remained stubbornly broad based. Since the second quarter of 2021, the share of contacts reporting recent input cost increases has consistently exceeded 60 percent, while in the year preceding the pandemic, the share reporting higher input costs averaged 32 percent. That said, the magnitudes of cost increases appeared to be easing. Firms often reported that cost decreases on some inputs (such as lumber and steel) were offsetting price increases in others (such as transportation and petroleum-related products). In addition, several contacts noted that while costs were increasing, they were not rising as fast as previously. For example, one manufacturer reported, \"[cost] increases have been tapering off and are becoming far less frequent.\"\nReports of selling-price increases remained common, but noticeably less so than early in the year. In some cases, firms suggested they had paused price hikes following increases in prior periods. In others, reduced demand forced firms to cut prices. A manufacturer said that \"expectations [for weaker demand] have purchasers negotiating much lower prices from suppliers,\" and a homebuilder reported that \"incentives are increasing to motivate buyers to move forward\" as demand weakened across the housing market.\nConsumer Spending\nRetailers reported further softening in demand as consumers faced continued pressure from high food and gasoline prices and increased interest rates. One general merchandiser said sales from mid-October to early-November had declined noticeably from those of the previous year, and he was unsure if activity in his stores would rebound for the holiday shopping season. Reports from restauranteurs and tourism contacts were mostly positive, with many citing increased activity brought on by unusually warm weather and the upcoming holiday season. Still, others noted that price increases as a result of higher input costs had begun to slow customer demand. Auto dealers reported a decrease in sales, noting that customers remained wary of higher payments because of increased interest rates and higher vehicle prices.\nManufacturing\nDemand for manufactured goods flattened in recent weeks following a notable increase during the prior reporting period. While some contacts attributed the softening to expected seasonal fluctuations, others cited slowing in end markets and an increase in order cancellations. Still, a plurality of contacts said demand was unchanged. Manufacturers generally expected demand to hold steady in the coming months, outside of typical seasonal slowdowns. Manufacturers suggested that supply chain disruptions continued to ease somewhat, though they remained far from normal.\nReal Estate and Construction\nHousing demand continued to decline from levels that were already down significantly from recent peaks. Contacts noted that many potential buyers have found it difficult to qualify for mortgages amid higher interest rates. One homebuilder indicated that his firm's sales in the third quarter were worse than in three of the four quarters of 2008. Contacts did not expect demand would improve soon because interest rates are expected to remain high. One real estate agent stated that \"the snowball will continue to roll down the hillside with nothing to stop it.\"\nNonresidential construction and real estate activity also softened further. Contacts indicated that rapidly rising interest rates and growing economic uncertainty have led many businesses to hold off on new projects. One general contractor indicated that demand has slowed considerably because firms are unsure what business will look like over the next 12 months. The same contractor added that rising interest rates have made it very difficult to secure financing for the speculative construction projects on which the firm heavily relies. Furthermore, a real estate broker noted that many buyers, particularly real estate investment trusts, have left the market.\nFinancial Services\nOverall lending declined during the reporting period. Bankers noted that commercial lending recently began to weaken, and they attributed the weakening to higher interest rates. Some lenders observed a decline in commercial real estate lending, a situation which one contact said was related to clients' canceling planned projects because of higher interest rates. On the household side, bankers reported continued weakening in mortgage and auto lending. Lenders indicated that delinquency rates for commercial and consumer loans remained low. Contacts reported that the level of consumer deposits decreased slightly. Bankers anticipated overall loan demand would decline further in the near term.\nNonfinancial Services\nFreight contacts reported that demand slowed further in recent weeks. One freight contact noted that most of his firm's clients expect a soft fourth quarter and peak season. Another said that further declines in freight activity are likely because he expected goods purchases, housing demand, and factory output to fall in coming months. Professional and business services firms were also more downbeat relative to their views in prior periods amid growing economic uncertainty. One law firm noted that while clients have continued to move forward with projects, they have been exhibiting more caution. Additionally, a software company noted that customers had begun to pause spending on technology.\nCommunity Conditions\nSeveral nonprofit contacts reported that rising development costs increasingly constrained the supply of affordable housing for lower-income households and are likely to continue doing so. Both ongoing and new construction are affected. Contacts suggested that increases in building costs (materials and labor) are less likely to be passed on to lower-income homeowners, resulting in increased need for gap funding for projects. One Ohio contact summarized the situation well, stating that \"colleagues in our industry are going to produce fewer units because they are unable to make deals work due to the increases in costs and the unpredictability of 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"

Richmond

/beige-book-reports/2022/2022-11-ri

"November 30, 2022\nSummary of Economic Activity\nThe Fifth District economy expanded slightly, on balance, since our previous report. Manufacturing activity slowed mildly as new orders and backlogs declined while shipments remained flat. District ports saw overall activity decline as loaded exports decreased while import volumes only picked up slightly. Trucking companies reported a slight decline in volumes and in shipping rates. Retail spending grew modestly overall. New vehicle sales remained low but used vehicle sales picked up as prices eased and inventories improved. Travel and tourism grew modestly; business travel was notably strong for some hotels. Residential real estate activity declined as high home prices and elevated mortgage rates put a damper on demand. Commercial real estate activity also slowed overall, although class A office leasing held strong in some markets. Consumer and commercial lending declined moderately, and deposits increased more slowly as customers looked to earn higher interest elsewhere. Nonfinancial services reported declining demand and rising costs of labor, particularly for non-wage benefits. Overall, employment continued to grow moderately, and many firms still looked to fill open positions but struggled to find qualified workers. A majority of firms reported stronger wage growth compared to previous years. Price growth remained robust in recent weeks.\nLabor Markets\nEmployment in the Fifth District increased moderately in recent weeks and many firms indicated that they still had positions to fill. The supply of labor remained tight with several contacts noting difficulties finding workers with necessary skills. One company that was looking to hire an experienced worker decided to hire an entry-level worker instead and pay for their training. A staffing service noted a mismatch between candidates' and employers' preferences with many candidates wanting fully remote positions and businesses looking for employees to come to the office. A majority of firms indicated that they were increasing wages for new and existing staff by more than in the past few years.\nPrices\nPrice growth remained robust in recent weeks. According to our most recent surveys, both manufacturers and service sector firms reported continued strong year-over-year price growth in both prices paid for inputs and prices received from customers. Although the majority of businesses reported flat to increasing input costs, one contact noted that softening demand led to lower prices for their inputs, but the cost savings were not being immediately passed through to customers due to uncertainty about future price increases.\nManufacturing\nManufacturing activity in the Fifth District contracted slightly in recent weeks. On balance, new orders declined while shipments were unchanged as producers continued to work through their backlogs. A textile manufacturer noted that their overall decline in orders was driven by consumer facing products as demand for their commercial products held up. A medical supply manufacturer said that although they did see an increase in orders recently, the volume was below expected for what is normally a busy time of the year. Supply chain backlogs showed signs of easing as vendor lead times declined.\nPorts and Transportation\nRespondents indicated that they were beginning to see a decline in volumes with overall loaded freight down at most Fifth District ports. Import volumes were flat or up slightly this period, but loaded exports continued trending down. Import volumes were led by furniture, sporting goods, and heavy equipment. The volume of empty containers leaving the ports was robust. Dwell time at the ports declined, leading to less congestion and lower storage fees. Spot rates from Asia to East Coast ports decreased 33% from last period but remained above the pre-pandemic rates. Air freight volumes remained soft, with exports volume remaining down significantly.\nTrucking firms in the Fifth District pointed to a slight decrease in freight volumes this period, that were more than the usual seasonal slowdown. There continued to be solid demand with industrial customers, but retail shipping volumes declined modestly this period. Spot market rates decreased moderately due to expanded truckload capacity. Trucking companies noted that they were not hiring drivers as their current headcount could manage the existing volumes. New truck tractors and trailers were still backordered about one year. In addition, the cost of new 2023 equipment had increased substantially. Higher diesel fuel costs impacted overall transportation costs this period.\nRetail, Travel, and Tourism\nRetailers in our region reported modest growth in sales and revenue in recent weeks and rising inventory levels. A hardware store said that the number of customers was down considerably from last year, but revenue held up as the value of the average sale had increased. New vehicle sales remained low due to the combination of low inventory levels, rising prices, and higher borrowing costs. Used vehicle sales, on the other hand, increased moderately as more inventory became available and prices have started to come down.\nTravel and tourism increased moderately, on balance. A hotel in South Carolina reported a record month in October and a strong start to November due to strong business travel and steady leisure travel. Air travel was unchanged in recent weeks at moderate levels and was expected to pick up soon due to holiday travel. A winter resort in West Virginia was concerned that labor shortages would limit their ability to provide the full range of services for this holiday travel season.\nReal Estate and Construction\nDemand for housing slowed considerably this period with reduced buyer traffic and listings. Days on market and inventory levels have increased but were still below normal levels. Respondents indicated that there were fewer closed and pending sales due to higher interest rates and low inventory. In most markets in the Fifth District, home prices remained unchanged, but sellers were offering more concessions, such as temporary rate buydowns or paying closing costs, to complete sales. Buyers were not having any difficulty obtaining mortgages and there were no issues with appraisals. New home construction also slowed down this period, and builders were no longer acquiring new lots due to high building costs and economic uncertainty.\nCommercial real estate activity slowed this period in some Fifth District markets with reduced leasing and higher vacancy rates in retail, office, and industrial sectors. Market activity for Class A office space remained robust, especially in suburban markets, as companies were paying to upgrade to nicer workplaces in order to persuade employees to return back to the office. Capital market sales activity was down significantly due to higher interest rates. Rising interest rates and higher construction costs also had a dampening effect on new commercial real estate projects. New construction continued to experience supply chain disruptions as well as a shortage of skill workers.\nBanking and Finance\nRising interest rates continued to drive a moderate weakening of demand for both commercial and residential loans. Commercial loan demand was also being impacted by higher input costs as well as higher financing costs. Residential loan demand was mainly being impacted by higher interest rates. Demand for new auto loans also weakened, primarily due to lack of consumer demand. Deposit growth continued to slow as customers search for higher yields in other instruments. Delinquency rates continued modest increases, primarily in the consumer portfolio. Overall, institutions anticipated a moderate decrease in growth due to seasonality and rising rates.\nNonfinancial Services\nNonfinancial service providers continued to report moderate decreases in both growth and demand for their services. Contacts were also noting continued wage increases being necessary to maintain their workforces. An employment firm noted that overall employee compensation costs continued to rise as benefits become a valuable tool in both retaining and attracting employees. Another contact noted that once their current contracted work has been completed, they will start adjusting their hiring, as well as current workforce, to match current, lower demand. Inflation and rising interest rates continued to be a focus of contacts as well.\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

/beige-book-reports/2022/2022-11-ch

"November 30, 2022\nSummary of Economic Activity\nEconomic activity in the Seventh District was little changed overall in October and early November. Contacts expected slow growth in the coming months, with many expressing concerns about the potential for a recession in 2023. Employment increased moderately; manufacturing increased slightly; consumer and business spending were unchanged; and construction and real estate decreased modestly. Nonbusiness contacts saw little change in District economic activity. Prices rose rapidly, wages were up moderately, and financial conditions were unchanged on net. Agriculture profit expectations for 2022 were up a bit.\nLabor Markets\nEmployment increased moderately in October and early November, though contacts expected the pace of growth to slow over the next 12 months. Contacts continued to report difficulty finding workers across all sectors and skill levels, though worker turnover slowed and hiring was somewhat easier. Several contacts noted that despite a slowdown in sales, they were retaining workers because of earlier difficulties in hiring staff. Overall, wage and benefit costs increased moderately, albeit at a slower pace than the prior reporting period. Compensation increases were aimed both at attracting new workers and retaining existing talent.\nPrices\nPrices rose rapidly over the reporting period. However, the pace of price increases had moderated from the previous reporting period and contacts expected a further slowdown over the next 12 months. Producer prices increased moderately, with reports of higher energy, shipping, and raw materials costs. Consumer prices generally moved up due to solid demand and passthrough of higher costs. That said, there were signs of easing cost pressures. As an example, a grocer said suppliers continued to seek price increases, but that they were pushing back and winning some concessions.\nConsumer Spending\nConsumer spending was little changed on net over the reporting period. Nonauto consumer spending increased slightly, with contacts highlighting greater sales of movie tickets, furniture, appliances, and pet supplies. Spending on apparel decreased, while promotions increased. Retailers expected holiday sales revenues to be up some compared with last year due to higher prices, but unit sales were expected to be lower. New and used light vehicle sales decreased somewhat, with dealers indicating that high vehicle prices and interest rates were suppressing demand.\nBusiness Spending\nBusiness spending was little changed in October and early November. Retail inventories were elevated overall, and contacts said retailers are planning to pare them down to pre-pandemic levels. New light vehicle inventories improved modestly yet remained well below pre-pandemic levels. In manufacturing, inventories were still elevated, as supply chain issues continued to lead firms to hold \"just in case\" parts and partially finished products. Capital expenditures remained stable on balance, with contacts purchasing new equipment (some for automating processes) and upgrading software. Demand for commercial, residential, and industrial energy consumption increased slightly.\nConstruction and Real Estate\nConstruction and real estate activity decreased modestly on balance over the reporting period. Residential construction moved down modestly, largely in the single-family segment. Delays and cancellations increased for both single- and multifamily projects. One builder said that the market to purchase land for new development had dried up because builders are waiting for demand to come back. Residential real estate activity decreased moderately. Homebuyers were shocked by how quickly mortgage rates had risen, according to a contact. Home values were down modestly, but rents were up again. Nonresidential construction was little changed. Construction of industrial space and remodeling of office space held steady. That said, some projects were moving very slowly because of increases in building costs and interest rates. Material and labor costs remained elevated. Commercial real estate activity decreased modestly, and prices and rents moved down slightly. Contacts noted that some recent commercial deals were based on the assumption that interest rates would come down from present levels and that the borrower could refinance when they did. Both commercial vacancy rates and the amount of sublease space available increased slightly.\nManufacturing\nManufacturing demand was up slightly in October and early November. Contacts reported a small decrease in order backlogs. While production edged up, it continued to be held back by labor and supply chain challenges. Steel demand grew modestly and orders and production of fabricated metals were flat, with greater demand from the defense and energy sectors but less demand from construction. Auto production increased slightly, and contacts expected pent-up demand to support output through 2023. Heavy truck production grew modestly, and backlogs remained very large. Demand for heavy machinery was flat.\nBanking and Finance\nFinancial conditions were little changed on balance over the reporting period. Participants in the equity and bond markets reported net increases in asset values and lower volatility. Business loan volumes were flat overall, and contacts indicated that higher borrowing rates and elevated uncertainty were putting a damper on demand. Business loan quality decreased slightly, with one contact noting declines among clients in the capital goods, retail, and consumer durables sectors. Business loan standards tightened modestly. In consumer markets, loan volumes slowed modestly, with continued declines in mortgage lending in the face of higher rates. Consumer loan quality and standards remained the same.\nAgriculture\nOverall, expectations for District agricultural income in 2022 rose a bit, reflecting the strong corn and soybean harvests. Despite pockets of poor yields from drought, District corn and soybean yields were close to the records set in 2021. Barge shipments continued to be constrained due to low water levels on the Mississippi, pushing up shipping costs, limiting exports, and reducing the availability of chemicals and fertilizers. The costs of most inputs remained elevated. Corn prices were lower, while soybean prices moved higher. Dairy and hog prices were generally down, though egg and cattle prices were up.\nCommunity Conditions\nCommunity development organizations and public administrators saw little change in economic activity in October and early November. State government officials reported healthy growth in tax revenues over the reporting period. Demand for unemployment insurance remained low, though there were reports of layoffs at order fulfillment centers and mortgage lenders. Small businesses and nonprofit organizations continued to face hiring difficulties at the wages they could afford to pay. Nonprofits assisting low- and moderate-income households again noted that inflationary pressures were straining budgets, leading to food insecurity and strong demand for their services. Faced with declining revenues, however, nonprofit leaders were making tough choices on which services to provide and which to cut.\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"

New York

/beige-book-reports/2022/2022-11-ny

"Beige Book Report: New York\nNovember 30, 2022\nSummary of Economic Activity\nEconomic activity in the Second District continued to decline modestly in the latest reporting period. Business contacts have become increasingly pessimistic about the near-term outlook. Both selling prices and input prices have continued to increase at a fairly brisk pace, while wage growth has moderated. Hiring picked up slightly as worker shortages eased somewhat, though fewer businesses plan to add staff in the months ahead, and there have been some announcements of layoffs. Manufacturing activity picked up slightly. Consumer spending was mixed but little changed overall, while tourism has remained strong. The home sales market weakened noticeably, and the rental market also showed signs of softening, amidst growing concerns about housing affordability as evictions and homelessness have reportedly risen. Commercial real estate markets stabilized, and construction activity has remained sluggish. While conditions in the broad finance sector improved slightly, regional banks reported weakening loan demand, tightening credit, and rising delinquency rates.\nLabor Markets\nEmployment rose moderately as hiring picked up somewhat, and there were scattered signs of further easing in labor shortages. An upstate New York employment agency noted that hiring activity has remained fairly steady, led by strong demand for finance and tech workers, but indicated that the labor market has cooled. A New York City agency reported steady demand for workers and continued brisk hiring activity. Recent layoff announcements in New York City's finance and tech sectors have yet to yield any increase in job candidates.\nWholesale and transportation & warehousing firms reported a brisk pickup in employment, while leisure & hospitality firms reported a pullback in hiring. Information firms continued to report widespread increases in staff, and manufacturers reported moderate job growth. However, firms in almost all industry sectors have scaled back hiring plans somewhat for the months ahead.\nBusiness contacts across a wide range of industries reported some slowing in wage growth, as did employment agencies in both New York City and upstate New York. The steepest wage growth continued to be reported in the education & health and leisure & hospitality sectors. Businesses across all sectors continue to project widespread wage hikes in the months ahead.\nPrices\nBusiness contacts continued to note broad-based escalation in the prices they pay. The steepest increases were reported from the leisure & hospitality sector. Contacts across most industries expect continued widespread escalation in costs in the months ahead.\nSelling price increases remained widespread overall but slowed noticeably in the retail and education & health sectors. Retailers also do not plan any significant price hikes in the months ahead, whereas firms in most other sectors anticipate somewhat widespread increases in their selling prices.\nConsumer Spending\nConsumer spending has been little changed in recent weeks. Nonauto retailers reported that business has edged down and expressed widespread pessimism about the upcoming holiday season. Auto dealers in upstate New York reported scattered signs of a pickup in sales of new vehicles, as supply disruptions and chip shortages have eased somewhat. However, many dealers continue to face inventory shortages, hampering sales of new vehicles. Inventory levels are expected to increase somewhat in the coming months. Used vehicle sales also remain sluggish. Consumer confidence across New York State edged down in October but remained fairly high.\nManufacturing and Distribution\nFor the first time in a number of months, manufacturing activity expanded slightly in recent weeks, and wholesale trade activity edged up. However, contacts in the transportation & warehousing sector reported a slight dip in activity. Looking ahead, manufacturers have become increasingly pessimistic about the near-term outlook, while transportation, warehousing, and wholesale trade firms continued to express mild optimism.\nServices\nOn balance, activity in the service sector has weakened since the last report. Businesses providing professional & business and education & health services reported modest declines in activity, and contacts in the leisure & hospitality sector indicated more pronounced weakness. Moreover, contacts in these sectors have become somewhat more pessimistic about the near-term outlook, anticipating flat to declining activity in the months ahead.\nTourism activity in New York City remained quite strong in October and early November. Weekend hotel occupancy rates remained high, and midweek occupancies have risen to near typical pre-pandemic levels\u2014reflecting leisure visitors extending weekends with remote work and a gradual rebound in business travelers. Bookings for meetings at the Javits Convention Center and New York City hotels have also risen. International visitations have also continued to increase, especially from Europe, though the strong dollar has reportedly reduced spending per visitor.\nReal Estate and Construction\nThe home sales market weakened noticeably in recent weeks, and the rental market showed signs of softening. Real estate contacts in upstate New York reported softening demand, reduced sales activity and buyer traffic, fewer multiple offers, and price reductions. Similarly, in and around New York City, sales of both single-family homes and apartments fell, especially at the high end of the market, though prices have held steady. The inventory of available homes remains low across the District: it has drifted up slightly in upstate New York but has remained steady in and around New York City. With homes now taking longer to sell, many sellers have taken their homes off the market.\nResidential rental markets have weakened, except at the high end of the market, where many potential buyers are instead opting to rent. Overall, rents across New York City have declined, and concessions have edged up for the first time in a year. Vacancy rates across New York City, though still quite low, have risen modestly.\nCommercial real estate markets have shown further signs of stabilizing. Office vacancy and availability rates continued to edge up in New York City but were little changed elsewhere. Office rents were steady to up slightly across the District. The industrial market has been mixed, with rents resuming an upward trend but vacancy rates continuing to climb.\nContacts in the construction sector continued to report deteriorating business conditions but were somewhat less pessimistic about the near-term outlook than in the last report. New office construction starts remained exceptionally low throughout the District, though there was some pickup in New York City and Long Island. New industrial construction has largely dried up. In New York City, multifamily construction starts, though still quite low, have risen modestly in the latest reporting period, and there is a moderate volume of ongoing construction.\nBanking and Finance\nContacts in the broad finance sector report that conditions, though still poor, have improved slightly. Small to medium-sized banks reported lower loan demand across all segments and a widespread drop in refinancing activity. Credit standards were tighter, especially on business loans and commercial mortgages, while loan spreads remained essentially unchanged overall. Finally, delinquency rates increased for all categories of loans.\nCommunity Perspectives\nHousing affordability and food insecurity remain top concerns among communities across the District. As the post-pandemic evictions moratorium has expired, there has been a rise in evictions and homelessness across the region. Many New Yorkers in market rate housing face growing rent burdens as leases come up for renewal. Some households are forgoing healthier and more expensive food items to buy less costly bulk items, and the use of food pantries continues to increase. SNAP applications have increased due to high food prices, but staff shortages have impeded processing of these applications.\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"

Philadelphia

/beige-book-reports/2022/2022-11-ph

"November 30, 2022\nSummary of Economic Activity\nOn balance, business activity in the Third District appears to be teetering on the edge of a decline but managed to hold fast since the prior Beige Book period. Inflation has driven consumers to lower-priced items and lower-priced stores. Rising interest rates have discouraged consumers from buying big-ticket items, including homes and autos. Employment continued to grow slightly, despite the onset of some layoffs. Wage growth and inflation continued to subside but remained at a moderate pace. Overall, firms noted less difficulty in hiring and fewer supply chain disruptions. On balance, expectations for economic growth over the next six months deteriorated for all firms; however, the index for nonmanufacturers remained positive, while the index for manufacturers remained negative. Expectations for all firms remained well below their nonrecessionary historical averages. On average, conditions and sentiment appeared more positive in the Greater Philadelphia region than in the outlying areas of the Third District.\nLabor Markets\nEmployment continued to grow slightly; however, fewer firms reported increases, while more began noting decreases. The share of firms reporting employment increases fell below 20 percent for nonmanufacturing and manufacturing firms; firms reporting decreases rose to nearly 10 percent.\nStaffing firms noted that orders are soft across the board and are not keeping pace with the typical year-end hiring surge. Hiring freezes and staff layoffs have begun in the residential real estate sector; layoffs are expected to expand more broadly throughout the home construction sector in the first quarter of the year. Firms from many sectors reported preparations for a potential recession but also remain hesitant to lay off employees, given recent hiring difficulties.\nFirms continued to note that wage growth had subsided but remained elevated at a moderate rate. One staffing firm noted that recent year-over-year wage growth was down to 5.75 percent. Wage inflation is also becoming somewhat less widespread. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee fell to nearly 40 percent, while just over half of the firms reported no change and a few reported lower compensation.\nOn a quarterly basis, firms reported a lower expectation of the one-year-ahead change in compensation cost per worker, with a trimmed mean of 5.1 percent in the fourth quarter of 2022 \u2013 down from 5.8 percent in the third quarter and the lowest rate of increase this year. One large retail firm noted plans for 4.0 percent average wage increases next year \u2013 a bit higher than its norm. Although the firm's wage plan is lower than the expectations reported by other firms in the survey, the firm noted that it has managed to keep turnover rates low by maintaining a competitive wage within its sector.\nPrices\nOn balance, inflation continued at a moderate pace \u2013 comparable with the prior period, but an improvement from a third-quarter spike. Manufacturing firms drove the quarterly change; nonmanufacturing firms have noted moderate increases for most of the year.\nContacts reported that increases in prices received for their own goods and services over the past year fell in the fourth quarter of 2022. The trimmed mean for reported price changes in our quarterly survey questions fell to 6.0 percent from 7.2 percent in the third quarter of 2022 for all firms. Price increases ticked up to 4.6 percent from 4.5 percent for nonmanufacturers and fell to 7.9 percent from 10.4 percent among manufacturers. Moreover, price increases for nonmanufacturing firms were less widespread in recent months \u2013 for both inputs and prices received for their own goods.\nLooking ahead one year, the increases that firms anticipated in prices for their own goods held steady at a moderate rate \u2013 the trimmed mean for all firms remained at 4.3 percent in the fourth quarter of 2022. The expected rate of growth rose to 4.2 percent from 3.5 percent for nonmanufacturers and fell to 4.5 percent from 5.4 percent for manufacturers.\nManufacturing\nManufacturing activity continued to decline modestly. The index for new orders remained negative for a sixth consecutive month. Nevertheless, the shipments index remained positive at low levels, as firms continued to work through backlogs. Delivery times and inventories also continued to fall.\nManufacturing firms' expectations deteriorated. The indexes for future activity and new orders trended lower and were negative. On net, a small portion of firms continue to expect to increase employment and capital spending over the next six months.\nConsumer Spending\nOn balance, retailers (nonauto) and restaurateurs continued to report modest declines in sales. Contacts described lower traffic, lower spending per customer, and a need to offer discounts. In particular, low- and middle-income customers are spending less and shifting to lower-priced items.\nAuto dealers reported a slight increase in sales as more inventory has reached their lots. However, high prices and rising interest rates have discouraged buyers. As a result, dealers have a few cars left on their lots at the end of each week and used car prices are falling.\nOverall, tourism held steady \u2013 following a slight increase last period. Leisure travel remains strong, while business travel remains below 2019 levels. Moreover, the Philadelphia region has further to recover than the nation. Finding workers has become easier, but firms are beginning to take a wait-and-see attitude on open positions.\nNonfinancial Services\nOn balance, nonmanufacturing activity appeared to pause after growing slightly in the prior period. Firms were almost evenly divided in reporting increases, decreases, or no change in their sales and new orders.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew moderately during the period (not seasonally adjusted) \u2013 comparable to growth in the prior period, but much faster than in the same period one year ago. Growth was pervasive across major loan segments except auto lending. Inflationary effects on home prices and other big-ticket items continue to boost loan volume growth during the current year relative to past years.\nDistrict banks reported strong loan volume growth in home mortgages and commercial and industrial lending, moderate growth in commercial real estate, and modest growth in home equity loans and other consumer loans. Auto lending declined modestly. Credit card volumes grew modestly \u2013 a pace typical of the season. Credit counselors noted that more low- and middle-income households are putting basic expenses onto credit cards.\nReal Estate and Construction\nHomebuilders reported that contract signings for new homes plunged after declining slightly in the prior period. Their current backlog will carry construction through the first quarter with only a modest decline in activity, but not much further.\nExisting home sales fell steeply in most markets. Brokers reported that sales prices have begun to ease but remain high. They noted that high prices combined with rising interest rates have reduced housing affordability significantly and have driven potential buyers from the market.\nRequests for housing assistance continued to dominate the share of 211 calls; however, the share fell to 31 percent. Of the calls for housing assistance, 42 percent were for rental assistance as landlords continued raising rents. With winter approaching, the share of requests regarding utility bills rose further to 24 percent; assistance with employment or income also rose further, to 9 percent.\nMarket participants in commercial real estate reported steady current construction activity and a slight decline in leasing activity. Most noted examples of delayed deals and a significant reduction in credit availability \u2013 concluding that the current pipeline would carry construction through much of 2023, but activity might slow thereafter. The future demand for office space remained a major uncertainty, while contacts described the future impacts of the infrastructure bill as an opportunity, competition for tight resources, or both.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/surveys-and-data/regional-economic-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/2022/2022-11-kc

"Beige Book Report: Kansas City\nNovember 30, 2022\nSummary of Economic Activity\nReal economic activity in the Tenth District declined slightly in recent months. The pace of job growth slowed due to the combination of lower demand from employers and ongoing labor supply constraints. Though growth in labor demand reportedly cooled, employers still indicated they are using higher compensation and additional training to build their workforce over the next several months. Consumer demand fell slightly in recent weeks, both for lower-priced goods and for personal services. The volume of consumer purchases fell broadly, but higher prices led to modest increases in total consumer expenditures. Activity among services businesses grew slowly, with the exception of advertising activity, which fell sharply over the past month. Manufacturing production declined modestly. Although selling prices continued to rise at a robust pace, several contacts noted growth in the prices of construction materials and other manufacturing inputs slowed. Also, growth in rent prices moderated from recent highs. Commodity prices declined by a small amount. Despite lower crop prices and worse-than-anticipated consequences of drought in the region, farm incomes and ag credit conditions improved modestly.\nLabor Markets\nTenth District contacts reported employment growth was mostly unchanged, as many employers slowed their hiring efforts in recent weeks. Contacts reported the reduction in the pace of hiring is partially due to cooling labor demand coinciding with lower expectations for growth in sales. Businesses also pointed to ongoing difficulties finding employees with requisite skills amid still-elevated labor demand. To fill open positions, most contacts noted they continued to raise compensation levels and increased the level of on-the-job training they offered to underqualified hires. A few contacts alternatively noted they accelerated their planned investments in automation to alleviate labor supply constraints. Despite recent slowing in hiring, most contacts reported expectations for modest employment growth over the next 12 months, citing expectations for growth, overworked staff, and demand for more skilled workers.\nWages rose at a moderate pace, with most contacts noting ongoing efforts to raise starting wages across job categories to attract new hires. Firms also reported they have been adjusting wages and salaries more frequently than in previous years to retain existing employees, as the cost of bringing on new hires is becoming burdensome.\nPrices\nMost District contacts reported that selling prices continued to increase at a robust pace. However, input price growth slowed to a moderate pace, primarily due to easing growth in costs of manufacturing inputs. Although expectations that prices will continue to rise over the next six months were prevalent, a larger number of manufacturing businesses expected price pressures to ease somewhat over the medium-term. The cost of housing remained a significant source of inflationary pressure for households in the District. Rent prices continued to increase at a moderate pace, though the pace of rent price growth eased from its historic high over the past few months.\nConsumer Spending\nSeveral contacts indicated that consumer demand declined slightly in recent weeks. For example, hair salons and studios reported giving fewer haircuts, and restaurant owners indicated patronage fell modestly in recent weeks. Demand for consumer goods, particularly lower-to-middle priced items, also fell modestly. Yet, high-end entertainment venues and travel resorts reported ongoing strength. Although the total volume of purchases across goods and services fell, total spending increased slightly due to higher prices.\nCommunity Conditions\nSmall and micro enterprises reported tighter cash flows resulting from increased costs and slowing demand amid rising economic uncertainty. Small business contacts suggested banks demonstrated more risk aversion in their lending, exacerbating funding challenges for small businesses. When possible, business owners have been funding investments with cash as opposed to acquiring new debt. Also, contacts from community development financial institutions reported more business owners are utilizing non-traditional financing methods such as unsecured lines of credit and online finance firms that require higher interest rates, shorter terms, and more onerous repayment terms. Additionally, lender contacts reported that small business owners are exhibiting caution in their investment decisions, holding off on financing projects through the first half of 2023.\nManufacturing and Other Business Activity\nOverall activity among service providers rose modestly in recent months. Yet, several District contacts noted that demand for advertising services declined sharply in recent months. The decline was reported broadly across media types and across the types of goods and services being promoted. Though use of data storage and processing remained elevated, several businesses reported additional investments in software to diminish their use of data server services due to rising costs associated with high electricity prices. Manufacturing activity declined modestly in recent months as both revenues and total volumes of shipments fell. Several contacts noted that the availability of transportation services improved recently. Although growth slowed broadly, contacts across services and manufacturing reported favorable expectations for modest growth over the next 6 months.\nReal Estate and Construction\nMultifamily housing real estate activity declined abruptly in recent weeks. This decline arose despite a backdrop of elevated demand for housing across the District and declining prices for construction materials. The downshift was attributed solely to higher interest rates and the outlook for higher rates over the near term. Debt financing for multifamily projects became less available over the last several months, but brokers and builders indicated that private equity and other sources of capital diminished sharply in recent weeks. Although the number of new multifamily housing deals declined sharply, construction activity was mostly unchanged due to the backlog of projects already underway.\nCommunity and Regional Banking\nLoan demand weakened modestly in the past month. Bankers noted rising interest rates reduced demand for credit and pressured residential real estate valuations. Contacts expected further weakness in loan demand during the first quarter of 2023 amidst rising borrowing costs and economic uncertainty. Credit quality remained stable, but bankers cited concerns around performance of consumer loan segments in the coming months. Deposit levels were mostly stable, although rate-sensitive customers sought additional yield for their excess funds. Some contacts noted that deposit relationships are now being factored into loan pricing decisions as banks seek to generate and maintain liquidity. Finally, rising interest rates continued to pressure bond portfolio valuations, resulting in reduced tangible book value and impacting potential merger activity.\nEnergy\nTenth District energy activity expanded slightly compared to recent months. Although overall activity increased slightly, significantly lower natural gas prices, driven by higher production and export disruptions, resulted in a meaningful reduction in active natural gas rigs within the District. Higher oil prices over the last month provided a boost to oil drilling activity. The number of newly drilled wells rose faster in Colorado, Wyoming, and Oklahoma compared to growth in drilling activity in New Mexico. Well completion activity was up slightly across all major drilling basins within the District, bringing additional supply online. Business contacts continued to report high costs, with oil field services firms indicating a moderate increase in costs over the last month, albeit at a slower pace than earlier this year.\nAgriculture\nThe Tenth District farm economy generally remained strong despite slightly lower commodity prices and intensifying adverse effects of drought in certain areas of the District. Overall, farm income and credit conditions continued to improve modestly. However, contacts in areas most impacted by drought reported that farm income and liquidity were slightly lower than a year ago. As harvest neared completion, crop yields were generally expected to be less than average across all states and were particularly poor in Kansas and Oklahoma. Dry conditions also reduced hay production throughout the region and is likely to push feed expenses higher for many livestock producers.\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"

Boston

/beige-book-reports/2022/2022-11-bo

"November 30, 2022\nSummary of Economic Activity\nBusiness activity in the First District softened slightly amid mixed results. Employment was stable on balance, but labor demand weakened for some positions. Some pricing pressures eased, and others intensified, but most prices were about the same as in the last report. Wage growth was steady at a moderate pace, but competition for specialized workers remained intense in some cases. Restaurant owners in Massachusetts enjoyed robust demand despite having raised their prices in the past year. Office vacancies ticked up slightly amid very weak demand, and rising interest rates deterred new commercial construction and acquisitions. First District home sales declined further, and home prices declined in Massachusetts (but were stable elsewhere). Most contacts remained optimistic for their own results but expected some degree of economic downturn at the regional and national levels in 2023.\nLabor Markets\nEmployment was roughly steady, and wage growth stabilized at a moderate pace. Although headcounts were steady or up somewhat at most firms, one retailer recently enacted significant layoffs in response to weaker-than-expected results so far in 2022, and some manufacturers demanded fewer hours. At the same time, one manufacturer desired more workers but couldn't find them, and another hoped to raise headcounts significantly in 2023. Staffing firms reported that labor demand continued to exceed supply for many positions, but not across the board. They also reported that wage pressures remained intense for some positions but at least one employer cut its wage offers. Retailers and restaurant owners said that, although turnover had declined somewhat in recent months, hiring to offset attrition remained highly competitive. At least in the near term, contacts did not expect to make significant layoffs. Planned wage increases for 2023 ranged from 2 to 5 percent, slightly lower than 2022 rates. Nonetheless, labor costs were seen by several contacts as a bigger source of inflationary pressure for 2023 than nonlabor costs.\nPrices\nOutput prices among our contacts were about flat on balance since last report, and input price movements were mixed. Restaurant menu prices were up 8 percent from a year ago but mostly unchanged since last quarter, as contacts noted that food prices levelled off after an earlier period of steep increases. Restaurants faced a fresh hit to profits from increases in credit card fees. Used car prices fell rather abruptly in response to slumping consumer demand. Some auto dealers were caught short by the change, as they had acquired stock earlier at relatively high prices. An online retailer put renewed emphasis on cost-containment in order to keep prices low and improve profitability. Staffing firms complained of cost increases for recruiting software and database licenses. Most manufacturers held their output prices firm, but two enacted moderate price increases in August. Contacts in both manufacturing and retail reported that materials and other input costs remained high, but that input price growth had moderated recently or had even turned negative. For example, two contacts said that vendors had removed earlier surcharges and that energy and freight costs had declined a bit. Most contacts expected nonlabor input pricing pressures to ease further in 2023.\nRetail and Tourism\nAmong First District contacts, retail and restaurant sales were mixed in recent weeks. An online retailer experienced a slight reduction in sales volume from last quarter but said that increased promotions remained an effective way of boosting sales. A salvage store enjoyed a slight increase in sales and attributed a portion of the gains to increased cross-border commerce with Canada. A Massachusetts restaurant industry contact said that sales increased modestly throughout the state, including most of Boston, but that the downtown area continued to underperform relative to other neighborhoods. Demand was surprisingly resilient in response to the 8 percent average menu price increase of the past year, and restaurant meal tax collections in the state surpassed their 2019 levels, even after adjusting for inflation. A contact representing automotive dealers in the District said that higher borrowing costs had not yet impacted demand for new vehicles but that used car sales (and prices) had begun to return to more normal (pre-pandemic) levels after an extended period in which they were historically elevated. Contacts were optimistic on balance, especially those in the restaurant industry, but an online retailer faced near-term pressure to cut costs and automotive dealers faced potentially steep adjustment costs to accommodate increasing numbers of electric vehicles.\nManufacturing and Related Services\nContacts painted a mixed picture of the manufacturing economy in the First District this cycle. The widest variation in experiences occurred in the semiconductor industry, as one contact in that field said that demand was incredibly strong while another perceived that the industry had entered a recession. A furniture manufacturer reported that sales were down substantially both month-over-month and year-over-year. Employment was either stable or up for all our contacts. Although no contacts reported major revisions to their capital expenditure plans, one was considering pulling forward some capital expenditures due to concerns about higher future interest rates. The outlook ranged from extremely optimistic (for one semiconductor manufacturer) to very nervous (the furniture maker).\nStaffing Services\nFirst District staffing contacts experienced strong demand for their services, but revenue performance was mixed: two firms reported slight and moderate revenue declines in the third quarter, respectively, and a third enjoyed a moderate surge in revenues. Cases of weak results were attributed to shortages of qualified workers. Contacts also noted that the composition of labor demand shifted somewhat in recent months, as for example software developers were no longer in such high demand, while other specialized roles such as mechanical and electrical engineers remained highly sought after. Flu season has created an increasing number of positions for nurses, and the return of convention activity to Boston has generated more entry-level openings. Staffing firms and their clients competed intensely to hire and retain recruiting talent. In some cases, more flexible work arrangements were used as inducements to lure recruiters away from other firms. Contacts were neutral to optimistic regarding their own business prospects despite expressing concerns about the macroeconomic outlook. Nonetheless, none perceived a high risk of a severe recession in 2023.\nCommercial Real Estate\nCommercial real estate activity in the First District slowed slightly in recent weeks. In the office market, leasing was stable at a low level, vacancies edged up as tenants gave back space, and rents were nonetheless flat. In the industrial market, rent growth slowed somewhat, as leasing activity was held back by the lack of available space. The retail market was stable, with flat rents and vacancy rates, although demand for smaller retail spaces (such as restaurants) reportedly outpaced that for larger units. Few investment acquisitions were reported in any market, and large bid-ask spreads were common. Loans for new construction looked increasingly unfavorable and existing loans faced greater stress. The outlook turned slightly more negative on balance, and one contact perceived a recession in 2023 as a near certainty. Contacts were relatively optimistic about the industrial market and still quite pessimistic about the office market, while retail leasing activity was expected to mirror consumer demand.\nResidential Real Estate\nThe First District's residential real estate market continued to weaken in September and October, as sales slowed further, and prices fell considerably in some places. Closed sales were down over-the-year in all reporting markets (which exclude Connecticut), representing a moderate deceleration in sales for single-family homes and a substantial deceleration for condos. Contacts continued to cite sharply higher mortgage rates, inflation, and recession fears as the key factors holding back home demand. Massachusetts' home prices (including those in greater Boston specifically) declined by moderate to above-average margins in recent months. Outside of Massachusetts, single-family prices were roughly stable. On a year-over-year basis, condo price appreciation slowed in New Hampshire and Maine and increased in Rhode Island. Inventories fell again on a year-over-year basis in most markets, but selected markets, such as New Hampshire (both single-family and condos) and Boston (condos only) saw increasingly rapid gains in inventories.\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"

San Francisco

/beige-book-reports/2022/2022-11-sf

"Beige Book Report: San Francisco\nNovember 30, 2022\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded modestly during the October through mid-November reporting period. Labor market conditions remained tight, and employment levels grew at a modest pace. Wages and prices rose at a slower pace relative to the previous reporting period. Demand for retail goods was robust, and activity in the consumer and business services sectors trended up. Demand for manufactured products strengthened on net, while conditions in the agriculture and resource-related sectors were stable but weak. Activity in residential real estate markets weakened moderately, while commercial real estate activity was unchanged overall. Lending activity declined moderately over the reporting period. Communities across the Twelfth District, and lower-income households in particular, were challenged by elevated living costs. Contacts expressed concern over a weaker outlook for the economy and increased overall uncertainty.\nLabor Markets\nEmployment levels grew at a modest pace during the reporting period. The labor market remained tight despite some signs of easing. Employers generally mentioned ongoing difficulties in filling vacancies despite rising employee head counts. Labor supply was particularly constrained in agriculture, hospitality, health care, retail, food services, transportation, and skilled trades. Hotels and restaurants, in particular, continued to operate below capacity due to labor shortages, causing reduced hours of operation and restricted availability of add-on services. Contacts in Alaska, Hawaii, and Utah highlighted especially tight labor markets across most sectors. Conversely, contacts in other sectors observed some easing in hiring conditions with manufacturing, finance, and professional services reporting lower turnover and voluntary quits, as well as more applications per open position. Hiring freezes and layoffs have spread widely across the technology and entertainment sectors, and some contacts observed similar developments in the real estate sector. Contacts also highlighted a slowdown in hiring activity due to continued investment in automation and growing uncertainty for the economic outlook. A few contacts mentioned increased efforts in employee training.\nWages grew further but at a slower rate, especially for lower-paid positions. Reports indicated that workers continued to ask for higher wages primarily because of elevated costs of living, and employers continued to offer hiring incentives, retention bonuses, and comprehensive benefits packages. Workers' preference for flexible work arrangements remained, but employers observed more room to push back against such requests. A few contacts highlighted upward wage pressures from the increases in minimum wages regionally and ongoing discussions with labor unions.\nPrices\nPrices rose at a slower pace relative to the previous reporting period, but overall levels remained elevated. Ongoing rises in the costs of labor, raw materials, and input services led to higher final prices in several sectors, including hospitality, food services, business services, electronics, health care, pet care, insurance, and financial services. Conversely, gradually improving supply chain constraints, cooling overall demand, and high uncertainty for domestic and global economic outlooks have resulted in flat or lower prices for many products, including metals, lumber, wood products, some food (fish, bacon, and potatoes), and apparel.\nCommunity Conditions\nCommunities across the District continued to report high inflation, food insecurity, and lack of affordable housing as well as the heavy toll of overall economic uncertainty as key challenges for lower-income households. Nonprofit organizations reported a sharp drop in donations from both individuals and corporations in recent weeks and highlighted that these declines in funds have constrained them from meeting the elevated demand for behavioral health and substance use services as well as basic shelter needs. Contacts also noted that elevated operational costs and a limited ability to compete with larger corporations for labor led a number of small businesses and community service providers to close their operations.\nRetail Trade and Services\nDemand for retail products, although softening somewhat, continued to be robust. Contacts in the Pacific Northwest and Intermountain West reported strong retail sales that were backed by population and employment growth. At the same time, reports in the Mountain West noted inflationary pressures slowing down the demand for food at grocery stores. Labor shortages continued to hinder the retail sector despite higher wages. The outlook by retailers for the holiday season was generally positive, though holiday sales were expected to fall short of those observed last year.\nActivity in the consumer and business services sectors trended up. Stronger tourism supported higher demand for food and beverage services, hospitality, and air travel. A pickup in business travel and related events further boosted demand for leisure and hospitality services. Demand for insurance, legal, and banking services remained unchanged. One contact reporting shifting towards more online services partly due to higher costs and labor shortages. Laboratory testing and medical services ran at or near full capacity due to medical worker shortages.\nManufacturing\nDemand for manufactured products strengthened on net. Softer residential construction dampened demand for metals and lumber, although the impact was partially offset by home improvement investments by existing homeowners. Operational backlogs in food manufacturing have eased substantially as COVID-19 disruptions have ameliorated, allowing production to move to near capacity. A contact in the capital equipment industry noted continued supply disruptions in high-tech electrical components stemming from pandemic containment measures in Asia. Overall, the demand for capital equipment remained strong, driven by an overall increased push by businesses toward automation.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors were stable, albeit weak, during the reporting period. Farmers reported solid domestic and international demand for both fresh and processed foods, especially for dairy products and nuts, but noted that global economic uncertainty and a strong dollar continued to weigh down international demand for most domestic agricultural products. Limited rainfall throughout California has reportedly impacted summer crops, such as tomatoes, and is threatening expectations for various winter crops, especially leafy greens. Contacts reported meaningful relief in supply bottlenecks in recent weeks, although one producer noted persistent disruptions and delays at some ports in Asia stemming from pandemic containment measures. Utilities providers reported challenges meeting demand as labor and materials shortages persisted.\nReal Estate and Construction\nActivity in residential real estate markets weakened moderately compared to the prior reporting period. Demand for single-family homes fell overall due to elevated prices and rising mortgage rates, while demand for multifamily rental units remained strong. One contact in Southern California noted that potential homebuyers have opted to rent instead, and a Northern California contact reported a change in scope for some single-family construction projects, now built to rent rather than to sell. Selling prices across the District remained high but began to stabilize, with price reductions in some markets. Across the District, inventories remained limited but increased somewhat in recent weeks as homes took longer to sell. Residential construction activity declined notably across the District. Contacts largely attributed the decline to the rising cost of capital due to rising interest rates.\nCommercial real estate activity was unchanged overall. Demand for industrial space remained strong, and in some regions demand for retail space strengthened, while office space demand was subdued. One contact in Utah noted particularly weaker demand outside of the premium office space market. A contact in Northern California reported the pace of new commercial space construction continued overall but noted some slowing in warehouse construction.\nFinancial Institutions\nLending activity declined moderately in recent weeks. Contacts reported that higher interest rates and overall economic uncertainty led to a drop in demand for most commercial and personal loans, with notable softness in residential and commercial real estate lending. Conversely, credit card debt picked up recently. Credit quality remained high, although some contacts observed a slight deterioration. Deposits moderated, and in some cases fell, but liquidity remained elevated overall. Contacts reported tighter lending standards in response to increased economic uncertainty and noted signs of weakness in capital markets, investment banking, and asset management services.\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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"November 30, 2022\nSummary of Economic Activity\nModest growth continued in the Eleventh District economy. Expansion in manufacturing eased slightly while service sector growth ticked up. Retail sales and home sales fell further. Rising interest rates dampened loan demand, with loan volumes declining for the second consecutive reporting period. Activity in the energy sector continued to expand, though growth remained constrained by equipment and labor shortages. Local nonprofits cited higher demand for assistance amid rising household costs. Widespread rains improved drought conditions. While employment expanded at a solid rate and wage growth was generally high, there were reports of a slowdown in hiring and layoffs. Price pressures remained elevated but eased notably in retail. Outlooks were mostly pessimistic except for the energy sector, and uncertainty increased, with contacts voicing concern about inflationary pressures, weakening demand, and labor challenges.\nLabor Markets\nWhile employment growth stayed solid, it eased from the more robust pace seen in the summer. Among business executives responding to a Dallas Fed survey, 56 percent cited hiring or recalling workers in October, down from 62 percent in July. In the same October survey, 31 percent of firms said they were understaffed and looking to hire for new positions and another 20 percent noted being understaffed and looking to hire for replacement only. Labor markets remained tight, with numerous reports of hiring difficulties. A fabricated metal manufacturer noted that the firm was operating by prayer these days. Healthcare workers were in short supply, as were commercial truck drivers, auto technicians, restaurant, and oil field workers. In contrast, some contacts said that weakening demand, economic uncertainty, and rising costs were restraining hiring activity. Mortgage banking firms were under a hiring freeze, builders noted improvement in the availability of labor in certain trades, and there were reports of layoffs in the tech industry.\nWage growth remained high. A few service firms cited downsizing to reduce costs, but many contacts noted struggling to find qualified workers and offering higher pay to attract them. A staffing firm said that candidates were using job offers to negotiate pay increases with their current employers.\nPrices\nWhile input costs continued to climb, the pace of increases eased in the construction, manufacturing, and retail sectors. Growth in selling prices generally remained high, although some firms still commented that inflation was affecting their bottom line, prompting cost cutting. Manufacturers reported higher raw materials prices, and services firms said inflation and higher operating costs were a challenge. A restaurant commented changing their menu offerings due to higher costs and limited passthrough. Home prices fell, while airlines noted elevated ticket prices due to solid demand.\nManufacturing\nTexas factory output increased modestly in October. Growth was led by durable goods manufacturing. However, new orders for manufactured goods continued to weaken due to higher inventories and concerns surrounding a potential recession. A machinery manufacturer said that companies were being more careful about their spending, and a computer electronics manufacturer commented that demand for personal electronics had deteriorated, with weakness spilling over into other markets. Manufacturing tied to the upstream energy sector continued to experience rising demand and extended lead times for components and machinery over the past six weeks. Refineries and petrochemical manufacturers meanwhile reported softening demand, although the European energy crisis is expected to continue to boost Texas' refined and petrochemical product exports. Chemical manufacturers noted that increased production capacity and slowing demand for construction-related materials have squeezed polymer margins. Overall manufacturing outlooks were generally weak.\nRetail Sales\nRetail sales declined over the past six weeks. Auto sales weakened, hampered in part by high interest rates. A few building materials suppliers commented that they were surprised by the rapid slowdown in demand. Inventories continued to build, and outlooks worsened, with some concern about inflation, rising interest rates, compressed profit margins, and a weaker business climate.\nNonfinancial Services\nService sector activity expanded modestly during the reporting period, but outlooks were pessimistic. Revenue growth was mostly broad based, though some contacts noted slowing demand due to higher interest rates and inflation, among other factors. Transportation services firms reported mixed activity in sea and air cargo shipments and ridership. Airlines noted unseasonably strong demand for leisure travel and an uptick in business travel. Staffing services firms saw continued strong demand for their services.\nConstruction and Real Estate\nActivity in the housing market weakened further. Sales slipped again and contract cancellations stayed elevated as high mortgage rates priced buyers out of the market. Among the major Texas metros, Austin appeared to be the roughest market and was experiencing larger price declines to generate sales. Buyer incentives increased notably, putting downward pressure on home prices and builders' margins. Outlooks worsened, with contacts expecting further erosion in sales and home starts in the near term. Apartment leasing slowed and rents were flat to down during the reporting period. Office leasing remained soft and ample sublease space a concern, while fundamentals in the industrial market stayed solid. Contacts said that the higher cost of capital was pushing up cap rates and slowing investment sales activity.\nFinancial Services\nLoan volumes declined broadly for a second period in a row due to a steep decline in loan demand. Commercial real estate and commercial and industrial loan volume continued to contract, though at slower rates than over the prior six weeks, while residential real estate and consumer loan volumes declined notably faster. Loan nonperformance rose slightly. Contacts still overwhelmingly reported loan price increases, and credit standards and terms continued to tighten. Business activity experienced a greater decline over the past six weeks, and expectations for the next six months are for loan demand and business activity to decline further and loan performance to worsen.\nEnergy\nEnergy activity expanded slightly during the reporting period. The Eleventh District rig count was fairly flat, while well completions ticked up. Demand for oilfield services was high and the industry remained constrained by equipment and labor shortages. Outlooks were positive, with contacts expecting oil and natural gas prices to remain elevated enough to drive steady increases in energy activity for the foreseeable future, though concern about a slowdown in future economic growth increased.\nAgriculture\nWidespread rainfall somewhat improved pasture and soil moisture conditions, though a majority of the district remains in drought. Agricultural commodity prices remained strong, though contacts said unprecedented volatility in cotton markets as well as a relatively low cotton price compared with grain prices may prompt a significant drop in cotton acreage next year. Beef demand remained strong, and prices were up from six weeks ago but down from a year ago because of increased beef supply due to more animals moving to slaughter amid the drought this year.\nCommunity Perspectives\nNonprofits reported higher demand for their services during the reporting period. Contacts said that low- and moderate-income individuals were struggling to afford basic needs, such as rent and food, and that these struggles have recently worsened. Utilization of housing assistance has increased notably, and a school district executive mentioned that high home prices were a barrier to recruitment and retention of kitchen and custodial staff. Demand for food assistance rose, particularly among students, and food banks in some areas were unable to keep pace with the increased need. Childcare assistance needs rose as more families returned to the workforce due to depleted savings or decreased concerns surrounding COVID-19. Amid high demand for services, some nonprofit leaders noted challenges with soliciting donations and retaining talent.\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\nNovember 30, 2022\nSummary of Economic Activity\nEconomic conditions have remained unchanged since our previous report. Firms reported softening consumer demand, but labor shortages for high-skilled jobs remained a key issue. However, a rising share of firms reported being able to find and retain low-skilled workers. Upward pressure on wages remained strong in industries dealing with labor shortages, and contacts reported plans for continued wage increases in the upcoming year. Input prices for food and raw materials rose but softening consumer demand led to reports of some durable goods prices leveling out. Homebuying activity continued to decline, and rental rates in major District MSAs decreased for the first time this year. Loan demand softened slightly and delinquencies, while low by historical standards, have continued to rise.\nLabor Markets\nEmployment remains unchanged, although there were increased reports that labor tightness has been easing and will continue to do so. A St. Louis staffing contact noted that uncertainty over consumer demand has led some companies to cut seasonal workers. A contact in Memphis saw total applications for their restaurant rise in the last quarter, and another contact was able to increase employment by 15 percent. However, many companies are still reporting staffing shortages. An IT contact in St. Louis noted that a shortage of entry-level jobs has made it more difficult to backfill as experienced workers leave.\nWages have grown moderately since our previous report. Contacts reported pay increases were needed to retain employees. A union contact reported that members' wages have increased about 4-5 percent over the last year. A staffing contact reported that they expect firms will limit entry-level wage increases in 2023, but other contacts reported that additional wage increases will be needed to retain high-skilled workers, especially those with nationwide job prospects.\nPrices\nPrices have increased moderately since our previous report. Approximately two-thirds of contacts reported modest to moderate increases in prices charged to consumers. Approximately 85 percent of contacts reported higher or slightly higher nonlabor costs. Multiple contacts stated that higher food costs were driving higher prices for consumers. A contact in the agriculture industry reported that high input costs have pushed prices higher. Some industries, however, have seen prices level out or even decrease. A contact in the used car industry reported a \"downward trend\" for used car prices. A contact in the catfish industry reported pushback on higher prices, which led the business to decrease prices.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported mixed business activity and a mixed outlook. Retailers in Memphis reported that consumers have shifted to spending mainly on essentials in more affordable price ranges. Higher-income consumers are driving what growth exists in the retail sector. District auto dealers noted there has been mixed business activity for the past couple of months, with one dealership noting that consumers are starting to have a more cautious approach to buying cars.\nRestaurants in Little Rock have reported that their customer volumes are up 50 percent from last year and that they are optimistic about the end of 2022 and the beginning of 2023. St. Louis hospitality contacts noted that business activity was up this past month compared with previous months, though the outlook remains uncertain.\nManufacturing\nOverall, manufacturing activity has slightly increased since our previous report. Survey-based indices suggest that production, capacity utilization, and new orders have all slightly increased. Supply chain congestion and transportation issues continue to limit the availability of some key inputs for production, but contacts reported improvement in this regard. New orders and general demand are beginning to cool, but firms have maintained production by working through their long backlog of orders. The labor market also appears to be loosening; one construction tools manufacturer in Fayetteville increased its staff by 40 percent and reported having no issues filling positions. On average, firms reported they expect slight increases in production, capacity utilization, and new orders in the coming quarter.\nNonfinancial Services\nActivity in the nonfinancial services sector remains unchanged since our previous report. Transportation activity, most notably air traffic and freight, has slightly decreased. Demand for trucking services has decreased since our previous report, which has led to some declines in shipping rates. However, input costs have continued to rise, especially equipment, insurance, wages, and diesel fuel. The trucking industry's driver shortage has been exacerbated by new regulations that require accredited training for drivers in Kentucky.\nA shortage of registered nurses persists across the District. Rural healthcare services in Mississippi have continued to shrink and rely on investment from medical institutions in urban areas. In Northwest Arkansas, however, more primary care services are being offered due to the opening of health clinics in elementary schools and investment in benefits personalization firms.\nReal Estate and Construction\nThe residential real estate market has slowed modestly since our previous report. Contacts reported demand has slowed due to 7-percent mortgage rates. Pending home sales have decreased and inventory is up. Louisville contacts reported closings are down about 30 percent in the past few months. The rental market has also seen a slowdown. Rental rates in October decreased across many parts of the District. All commercial real estate contacts reported sales falling short of expectations. High vacancies in the office rental market remain the same since our previous report. Construction contacts reported the pipeline of ongoing projects continued to be strong but demand for new projects has decreased since the previous report.\nBanking and Finance\nBanking activity in the District has decreased slightly since our previous report. Bankers indicated that overall loan demand has softened compared with last quarter. Due to the past year's interest rate increases, mortgage loan demand continues to decline moderately. Commercial and industrial loan demand saw only a slight decrease. Delinquency and watch-list loans remain manageable, despite a continued uptick in delinquency rates since last quarter. Banking contacts in Louisville expect rising interest rates to pressure banks to start increasing their deposit rates. According to Little Rock banking contacts, both credit and debit card usage at major retailers experienced declines in the last quarter, notably due to increased EBT usage.\nAgriculture and Natural Resources\nDistrict agriculture conditions have remained unchanged compared with the previous reporting period. Production forecasts for corn and cotton have increased slightly, while forecasts for soybeans remained unchanged and rice declined. On a year-over-year basis, however, production levels for cotton and soybeans are expected to be slightly higher, while corn production is expected to slightly decline and rice production is expected to moderately decline. While production has remained relatively steady, contacts in the District remain concerned over rising input prices, specifically fertilizers and feed.\nDistrict coal production declined modestly in October, with seasonally adjusted production decreasing about 9 percent over the previous reporting period. Production has improved modestly over the previous year, increasing 5.4 percent over this time last year.\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 30, 2022\nSummary of Economic Activity\nThe economy of the Sixth District grew at a tepid pace from October through mid-November. Labor market pressures eased modestly, and turnover improved somewhat. While wage pressures remained elevated, some moderation was reported. Most nonlabor cost increases slowed, but food prices rose, and freight costs remained elevated. Pricing power was mixed. Low-to-moderate income households experienced declines in financial well-being as the rising cost of living strained household budgets. Retailers reported stable demand, on balance, and new auto sales were robust. Leisure travel activity was described as healthy as compared with pre-pandemic levels, and business and convention bookings improved. Housing demand weakened and inventory levels rose. Transportation activity weakened. Deposit growth at financial institutions slowed. Damage from Hurricane Ian was widespread across southwest and central Florida with agriculture and tourism being the sectors most impacted.\nLabor Markets\nLabor market pressures eased modestly, but attracting and retaining talent remained a top concern for many firms. Most employers played \"catch-up\" to fill open positions while only a few indicated that they were hiring for growth. Finding qualified candidates was reported as nearly impossible, so firms increased investments in training new hires. Turnover eased somewhat, but employees continued to be drawn away by higher wages, advancement, and greater schedule flexibility. Labor shortages were most acute in skilled construction, childcare, education, and healthcare.\nMost employers reported upward wage pressures, although several indicated that pressure had eased in recent months. Looking ahead, expectations for wage growth were mixed; some anticipate wage growth will moderate or level off as demand subsides, while others anticipate inflation, combined with continued labor market tightness, could push wage growth higher than planned. A few contacts mentioned that they will be discontinuing off-cycle increases and going back to an annual cadence.\nPrices\nDistrict firms noted most nonlabor cost increases have moderated, and some costs, like lumber and steel, declined. While supply chains were reported as stabilizing, domestic freight costs remained elevated above historical norms, causing some companies to bring materials transport in-house as a way to achieve efficiencies. Food prices continued to rise due to many factors, including global supply issues resulting from the Russia/Ukraine war. Increasing labor costs were factored into final pricing by some firms. Pricing power was mixed, and many contacts noted reduced margins. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth remained unchanged at 4.1 percent, on average, in October. Firms' year-ahead inflation expectations also remained unchanged from September at 3.3 percent, on average.\nCommunity Perspectives\nCommunity organizations reported signs of declining consumer financial health for low-to-moderate income households in recent months. The rising cost of groceries, fuel, and rent strained household budgets, resulting in increasing demand for food pantries and rental assistance programs. Competition from all-cash buyers and low housing inventories continued to reduce already limited housing options for low-to-moderate income households. Access to affordable childcare and public transportation, particularly in rural areas, has worsened since the pandemic and remains a barrier to labor force participation. Nonprofit service providers noted an uptick in the number of clients relying on side gigs to make ends meet or as pathways to financial self-sufficiency.\nConsumer Spending and Tourism\nRetailers reported that aggregate consumer demand had not changed materially, on balance, since the previous report. However, low-to-moderate income consumers continued to trade down for certain goods. Some contacts noted they were beginning to see some slowing of demand by middle-income consumers. Automobile dealerships reported strong new vehicle sales as inventory levels improved.\nTourism contacts reported solid leisure travel activity as compared with 2019 levels. Business and convention travel has begun to normalize back to pre-pandemic levels. Hurricane Ian damaged hotels along beaches in southwest Florida, and uncertainty exists around when these hotels will reopen due to a lack of available labor and construction supply issues.\nConstruction and Real Estate\nHousing demand continued to deteriorate as mortgage rates rose and affordability further declined. Existing home sales dropped sharply and inventory levels rose in most markets. Although home prices remained above year-ago levels, monthly sales price growth continued to moderate. The new home market decelerated at a faster rate, with a sharp decline in new orders and a rise in cancellations. Builders pulled back on starts but the inventory pipeline remained elevated, with the bulk of units to be delivered through the first quarter of 2023.\nCommercial real estate (CRE) contacts reported healthy but slowing market conditions; however, industrial real estate appeared robust. Contacts voiced concerns over a future slowdown that could further erode activity levels. The slowing in activity was consistently associated with lower-tier office, luxury multifamily, and owner-operator retail driven by more restaurant closings. Contacts reported concerns about declining CRE values as the bid-ask spread widened. Contacts cited more instances of slowing/negative rent growth, rising expenses, and slowing/negative net operating income growth.\nTransportation\nTransportation activity declined since the previous report. Inland waterway freight movements were impeded by low water levels on the Mississippi River. Air cargo contacts noted a dip in revenue year over year, which was attributed to inflation curbing consumer demand for goods. District transportation contacts noted minimal impact to supply chains from Hurricane Ian.\nBanking and Finance\nActivity slowed at financial institutions, particularly deposit growth. Banks reported increases in other types of funding besides traditional deposits, such as brokered deposits and borrowings from the Federal Home Loan Bank. Unrealized losses in securities prompting some institutions to reclassify securities from available-for-sale to held-to-maturity. Still, except for farmland loans, all major loan portfolios grew. Asset quality metrics were stable, although the level of nonperforming assets increased slightly. Financial institutions increased their provision for credit losses over concerns about a potential economic downturn. Improved earnings were driven by a higher net interest margin offsetting lower noninterest fee income.\nEnergy\nOil and gas contacts reported strong demand amid ongoing supply constraints. Crude oil production rose, and refiners maintained high utilization rates. Contacts noted that the region faced challenges with low supplies of diesel fuel, as high prices in the Northeast limited pipeline deliveries to the Southeast. Several firms reported growing investments in energy production, as well as increasing renewable energy project backlogs, including investment in hydrogen, carbon capture, renewable natural gas, and wind-energy development projects. Utility providers reported increased power usage across all customers.\nAgriculture\nAgricultural conditions remained mixed. Cotton growers reported further softening of demand from textile manufacturers. Tariffs imposed on rice from India kept demand for domestic rice strong. Demand for chicken and cattle exceeded supply. In Florida, Hurricane Ian destroyed several herds of livestock and numerous crops, and citrus industry contacts expect damage to trees from the storm will exacerbate already strained production from disease in the coming years.\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"

Minneapolis

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"November 30, 2022\nSummary of Economic Activity\nThe Ninth District economy grew modestly overall since the previous report. Employment grew slightly since the last report, with some moderation in job openings. Wage pressures remained high. Price pressures remained strong amid signs of deceleration. Business survey respondents reported decreased sales in October on balance from a month earlier. Activity increased in consumer spending, tourism, commercial real estate, energy, and manufacturing. Commercial and residential construction decreased, and residential real estate activity continued to decline. District agricultural conditions generally remained strong through harvest season. American Indian-owned business enterprises reported disproportionately acute challenges with labor availability and input costs.\nLabor Markets\nEmployment grew slightly since the last report. Total job openings have softened, but labor demand continued to be healthy overall. Significantly more firms reported plans to hire more workers compared with those cutting staff. Among those holding back on hiring, some pointed to lower sales, but a far greater share said lack of available labor was a bigger factor. Fewer than 20 percent businesses reported that they would lay off workers in the face of a moderate revenue decline. Half reported that total headcount would remain steady or rise if revenues dropped, and the remainder would reduce headcount by attrition. Construction firms reported that recent and future activity was slowing, yet one-third reported that they have been looking to hire more full-time, year-round employees, and a negligible share had cut workers.\nWage pressures remained high. A majority of businesses across different sectors said they were increasing wages and salaries for most job categories, and increases were larger than in the past. Separate polls of construction and professional services firms found high shares reporting average wage increases of more than 5 percent, though expectations for future increases were modestly lower. A staffing contact said that holiday hiring has pushed seasonal wages notably higher, with entry-level shelf-stocking positions reaching $25 an hour. \"This is craziness.\"\nPrices\nPrice pressures were persistently strong since the previous report amid some signs of deceleration. Most firms responding to a business conditions poll reported raising final prices in October from a month earlier, but there was a slight increase in the share who reported dropping their prices. Two-thirds of respondents said their nonlabor input prices increased in the past month. While lumber prices continued to decrease over the reporting period, construction firms reported that prices for most other building materials remained high in recent months; most contractors identified input costs as one of their top challenges. Manufacturing contacts noted that while certain raw materials prices were decreasing, prices for most electrical components and other parts increased further. Survey respondents and other contacts reported sharp increases in employee health insurance rates for 2023. Home heating costs were forecasted to increase sharply in the region this winter, largely due to a significant spike in natural gas prices over the last year. Retail fuel prices in District states decreased moderately since the last report.\nWorker Experience\nParticipants in a roundtable discussion shared that American Indian workers and households had seen their budgets tighten, as prices that were already disproportionately higher on reservations continued to climb. Childcare, transportation difficulties, and COVID-19-related disruptions were reasons why many reservation residents could not find or maintain employment. Some graduates of tribal police training were reportedly taking off-reservation jobs because the pay was much higher. Many workers leaned on their elders and social networks to curb reservation challenges and scarcities. \"We take care of each other here; we find a way to get what we need,\" shared a participant. \"We're lucky.\"\nConsumer Spending\nConsumer spending grew slightly since the last report, remaining at high levels. Early reports on holiday spending were cautiously upbeat, with consumer sentiment expected to be solid despite budget pressures from inflation and rising interest rates. Sales in retail and other consumer segments in Minnesota and South Dakota remained robust. Montana lodging and accommodation tax collections in October were strong, and hotel occupancy in most Minnesota markets was at very healthy levels. Vehicle sales were slow, with some signs of falling demand compounded by low inventories. A Minnesota import-auto franchisee noted that \"daily traffic of customers has decreased significantly.\" Recent passenger activity at District airports remained healthy because of strong leisure demand.\nConstruction and Real Estate\nCommercial construction fell slightly since the last report and showed signs of future slowing. Industry data suggested that construction spending and overall activity held up relatively well, but firms reported that backlogs had shrunk compared with the same period last year. Firms also reported a notable decline in new projects out for bid. Industrial and multifamily segments reported steadier activity and outlooks, and government contract work was also reportedly more active. Labor demand remained healthy overall. Residential construction was widely lower and more pessimistic in its outlook. Single-family permitting levels were notably below year-ago levels in most parts of the District.\nCommercial real estate rose slightly overall since the last report, with continued divergence in different segments. Vacancy rates in industrial and multifamily sectors remained low despite significant new construction. Retail vacancy rates have declined in some markets thanks to comparatively little new construction. Office vacancy continued to increase. A Bozeman, Montana, contact said professional employees were not returning to the office, putting downward pressure on demand and increasing subleasing activity. Residential real estate continued to decline. Closed sales in October were widely lower across the District compared with last year, and often by sizable amounts, including 31 percent across Minnesota. Contacts in Montana reported that banks were laying off several dozen staff related to slowing mortgage activity.\nManufacturing\nDistrict manufacturing activity increased moderately since the last report. A regional index of manufacturing conditions indicated increased activity in Minnesota, North Dakota, and South Dakota in October from a month earlier. Contacts mostly reported solid recent sales and/or strong backlogs, but some noted softening new orders, and a few reported steep recent declines. Printing industry contacts generally reported solid recent demand; one contact noted that the inflationary environment has allowed them to widen their profit margins by increasing their prices more than their input costs. A producer of semiconductor manufacturing equipment noted that overseas sales dropped precipitously following new restrictions on sales of such equipment to China, a major export market.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions remained strong through harvest season. According to the Minneapolis Fed's October agricultural credit conditions survey, nearly three-quarters of lenders reported farm incomes increased from July through September compared with the same period a year earlier. Farm household spending, capital spending, and loan repayment rates also increased on balance, while demand for loans fell. However, cattle ranchers in Montana reported culling herds due to high feed costs and lack of available hay in the drought-stricken state, and were reportedly reducing their planned capital expenditures for 2023. District oil and gas exploration activity increased slightly since the last report, while output increased moderately.\nMinority- and Women-Owned Business Enterprises\nAmerican Indian businesses reported being impacted by widespread hiring and retention challenges but faced disproportionate struggles with offering competitive wages and benefits. A tribal leader shared that despite offering wages above $30 an hour, casinos were having difficulties attracting blackjack dealers and were paying for the few inexperienced applicants to take classes. The CEO of a food-processing firm on a District reservation shared that the price of essential packaging inputs had increased threefold and shipping costs for them increased fivefold, in the last two years. \"It has been a struggle,\" they commented. \"If prices keep going up, I will go out of business.\"\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\nNovember 30, 2022\nThis report was prepared at the Federal Reserve Bank of Boston based on information collected on or before November 23rd, 2022. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nFederal Reserve Banks collect information for the Beige Book from a variety of business and nonbusiness sources. As of November 30, 2022, seven Banks now include individual community sections with information from nonbusiness sources, while the remaining Banks will continue to include such information within the existing structure of their District reports.\nOverall Economic Activity\nEconomic activity was about flat or up slightly since the previous report, down from the modest average pace of growth in the prior Beige Book period. Five Districts reported slight or modest gains in activity, and the rest experienced either no change or slight-to-modest declines. Interest rates and inflation continued to weigh on activity, and many contacts expressed greater uncertainty or increased pessimism concerning the outlook. Nonauto consumer spending was mixed but, on balance, eked out slight gains. Inflation pushed low-to-moderate income consumers to substitute increasingly to lower-priced goods. Travel and tourism contacts, by contrast, reported moderate gains in activity, as restaurants and high-end hospitality venues enjoyed robust demand. Auto sales declined slightly on average, but sales increased significantly in a few Districts in response to higher inventories. Manufacturing activity was mixed across Districts but up slightly on average. Demand for nonfinancial services was flat overall but softened in some Districts. Higher interest rates further dented home sales, which declined at a moderate pace overall but fell steeply in some Districts; apartment leasing started to slow, as well. Residential construction slid further at a modest pace, while nonresidential construction was mixed but down slightly on average. Commercial leasing weakened slightly, and office vacancies edged up. Bank lending saw modest further declines amid increasingly weak demand and tightening credit standards. Agricultural conditions were flat or up a bit, and energy sector activity increased slightly on balance.\nLabor Markets\nEmployment grew modestly in most districts, but two Districts reported flat headcounts and labor demand weakened overall. Hiring and retention difficulties eased further, although labor markets were still described as tight. Scattered layoffs were reported in the technology, finance, and real estate sectors. However, some contacts expressed a reluctance to shed workers in light of hiring difficulties, even though their labor needs were diminishing. Wages increased at a moderate pace on average, but a few Districts experienced at least some relaxation of wage pressures. Opinions about the outlook pointed to stable or slowing employment growth and at least modest further wage growth moving forward.\nPrices\nConsumer prices rose at a moderate or strong pace in most Districts. Still, the pace of price increases slowed on balance, reflecting a combination of improvements in supply chains and weakening demand. Retail prices faced downward pressure as consumers increasingly sought discounts. Prices fell for some commodities, including lumber and steel, but food prices increased further or remained elevated in some Districts. Housing rent growth started to moderate in some Districts and home prices grew less rapidly or declined outright amid weak demand. Inflation was expected to hold steady or moderate further moving forward.\nHighlights by Federal Reserve District\nBoston\nBusiness activity softened slightly amid mixed results. Employment levels and prices were mostly unchanged. Wage growth was steady at a moderate pace. Restaurant owners enjoyed robust demand. Real estate markets weakened further. Most contacts remained optimistic for their own results but expected some degree of economic downturn in 2023.\nNew York\nEconomic activity declined modestly. While job growth picked up slightly and labor shortages eased somewhat, hiring plans weakened. Wage growth slowed, while the pace of input and selling price increases remained elevated and was little changed. Regional banks reported weakening loan demand, tightening credit, and rising delinquencies. Businesses were increasingly pessimistic about the outlook.\nPhiladelphia\nBusiness activity held fast during the current Beige Book period even as it teetered on the edge of decline. Although wage and price inflation continued to subside, their elevated levels and rising interest rates have subdued consumer spending in many sectors. Employment continued to rise slightly, although some firms have begun layoffs. Expectations deteriorated.\nCleveland\nDistrict business activity slowed modestly in recent weeks as previously robust sectors saw some softening while previously weak sectors remained weak. Still, firms continued adding to their payrolls, and stiff competition for workers kept upward pressure on wages. Input cost increases remained widespread, but a smaller share of contacts reported increases in selling prices.\nRichmond\nThe regional economy grew slightly on balance, as retail spending, travel, and tourism picked up and offset declines in activity in manufacturing, real estate, and nonfinancial services. Employment grew moderately and many firms still looked to fill open positions and were raising wages by more than in recent years. Price growth remained strong in recent weeks.\nAtlanta\nEconomic activity grew slightly. Labor market tightness eased, but wage pressures continued. Most nonlabor costs moderated. Retailers reported stable consumer demand. Demand for new autos was robust. Leisure travel activity was steady and business travel improved. Housing demand declined. Transportation activity weakened. Deposit growth at financial institutions slowed.\nChicago\nEconomic activity was little changed. Employment increased moderately; manufacturing increased slightly; consumer and business spending were unchanged; and construction and real estate decreased modestly. Nonbusiness contacts saw little change in District economic activity. Prices rose rapidly, wages were up moderately, and financial conditions were unchanged on net. Agriculture profit expectations for 2022 were up a bit.\nSt. Louis\nEconomic conditions have remained unchanged since our previous report. Labor shortages remained widespread, but a rising share of firms were able to find and retain workers. Homebuying activity continued to slow, and rental rates fell for the first time this year. Transport demand fell, but the industry continued to struggle with rising input costs and a shortage of drivers.\nMinneapolis\nEconomic activity in the region expanded modestly in recent weeks. Employment grew slightly and job openings softened but firms generally reported maintaining hiring plans. Price pressures were persistent despite some isolated anecdotes about decelerating inflation. Early reports on holiday spending were cautiously upbeat. Labor market pressures on Indian reservations were more acute than elsewhere.\nKansas City\nReal economic activity in the Tenth District declined slightly. Job growth was subdued as labor demand cooled. Prices continued to rise at a robust pace, but several contacts noted growth in prices of construction materials and other manufacturing inputs slowed. Multifamily housing real estate activity declined abruptly in recent weeks, while energy activity expanded slightly. Farm incomes grew slightly, despite adverse drought conditions.\nDallas\nModest economic growth continued, though persistent declines were seen in retail spending, home sales, and lending activity. Job growth was solid but there were reports of layoffs and a slowdown in hiring. Input and labor cost increases continued, prompting cost cutting and downsizing for some firms. Outlooks were generally pessimistic, with contacts again citing concerns about inflation, labor challenges, and slowing demand.\nSan Francisco\nEconomic activity expanded modestly. Employment levels grew at a modest pace amid tight labor market conditions. Wages and prices rose at a slower pace relative to the previous reporting period. Demand for retail goods and services trended up. Manufacturing activity strengthened, while conditions in the agriculture sector were stable but weak. Residential real estate activity weakened, and lending activity declined moderately.\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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"October 19, 2022\nSummary of Economic Activity\nGrowth in the Eleventh District economy continued at a modest pace overall. Expansion in manufacturing activity picked up a bit while service sector expansion eased slightly. Retail and home sales fell. Loan demand declined for the first time in nearly two years, amid rising interest rates. The energy sector continued to expand but growth was constrained by equipment and labor shortages. Local nonprofits reported increased demand for assistance as household costs rose. Drought conditions eased but the relief came too late in the growing season for row crop producers. Solid employment growth continued, though some contacts reported a hiring slowdown. Wage growth remained elevated but eased slightly. Selling price growth eased slightly as well, amid reports of greater difficulty passing on cost increases to customers. Outlooks were generally pessimistic outside of the energy industry, and uncertainty remained elevated. Contacts primarily voiced concern about inflation, labor shortages, and weakening demand.\nLabor Markets\nSolid employment growth continued, with a slight pickup seen in the energy sector. There were, however, scattered reports of a slowdown in hiring amid weaker demand and recession fears. Labor markets nevertheless remained quite tight. Commercial truck and bus drivers were in very short supply, as were healthcare workers. Several contacts noted an inability to find skilled tradespeople. Industries that require onsite work were having difficulty competing for workers with industries that can offer remote work and flexible hours. Some employers have rebranded undesirable positions to attract workers. A few contacts noted a higher degree of apathy among workers towards attendance and work quality. Some contacts said their growth plans were being constrained by an inability to bring on and retain sufficient staff. Among 384 Texas business executives responding to a Dallas Fed September survey, nearly half cited labor shortages as a primary concern around their firm's outlook.\nWage growth eased slightly but remained high. Employees continued to demand higher pay, and companies responded in an effort to recruit and retain employees. Some contacts noted losing employees to competitors or other industries offering higher pay. A staffing firm said they were seeing a lot of workers switching jobs to attain higher wages.\nPrices\nInput costs continued to climb at about the same elevated pace as during the prior period, while growth in selling prices continued to ease. Manufacturers reported higher raw materials prices driven by supply-chain constraints, particularly from overseas suppliers. Services firms commented that the ripple effect of inflation was a challenge, and numerous contacts noted greater difficulty passing on cost increases to customers. A restaurant said their biggest concern was customer pushback on menu price increases. Retailers also said customers were starting to push back on pricing. Fuel prices moved lower over the past six weeks, but airlines noted increases in ticket prices amid solid demand and higher labor and non-fuel costs.\nManufacturing\nTexas manufacturing output increased moderately during the reporting period, picking up pace from the more modest expansion seen over the summer. Growth was led by durable goods manufacturing such as machinery and high tech. New orders for manufactured goods continued to weaken, however, with contacts citing customer concerns surrounding inflation and potential recession. A luxury product manufacturer said they expect sales to fall as customers cut discretionary spending, and a personal electronics manufacturer said they also expect weakness going forward. Manufacturing tied to the upstream energy sector continued to experience rising demand over the past six weeks, while petrochemical companies and refineries reported slowing demand. The energy crisis in Europe is expected to boost demand for Texas petrochemical producers and refineries, though it has prompted some new supply-chain shortages of components produced there. Overall manufacturing outlooks were more pessimistic than optimistic, with contacts pointing to rising interest rates and a weaker business climate as headwinds.\nRetail Sales\nRetail sales declined over the past six weeks, as inventories continued to build. Auto sales weakened, hampered in part by vehicle production delays, labor shortages, and high prices. One contact said new vehicle inventory bottomed out in August and has begun to rise, and continuous improvement is expected in the fourth quarter. Overall outlooks worsened, with some concern about rising interest rates and compressed profit margins.\nNonfinancial Services\nService sector activity expanded at a more modest pace during the reporting period. Revenue growth was broad based, though some contacts noted weaker demand. Transportation services firms reported higher cargo volumes and ridership. Airlines noted unseasonably strong leisure travel in the third quarter. Staffing services firms reported strong demand, with increases in requests for both low and high-skill workers. However, several contacts noted a pullback in customer activity amid recession worries. Service sector outlooks were largely unchanged overall.\nConstruction and Real Estate\nActivity in the housing market remained weak. Sales slipped further and contract cancellations were highly elevated in part due to rising mortgage rates pricing more buyers out of the market. Buyer incentives increased, putting downward pressure on home prices and builders' margins. Outlooks worsened, with contacts expecting further deterioration in sales and starts. Apartment leasing moderated, though year-over-year rent growth remained solid. Office leasing ticked up, but uncertainty was elevated. Fundamentals in the industrial market stayed solid. Contacts noted that the higher cost of capital was pushing investors to the sidelines.\nFinancial Services\nLoan demand declined for the first time in nearly two years, and overall loan volume decreased over the past six weeks. Volume declines were seen in all loan categories, but the steepest came in residential real estate lending. Loan nonperformance varied by category but was largely unchanged overall. Loan pricing continued to rise notably, with 85 percent of contacts reporting an increase\u2014the largest share since the survey began in 2017. Credit standards and terms tightened further. Looking six months ahead, contacts expressed greater pessimism than in the prior period and expect loan demand and general business activity to decrease and loan delinquency to increase.\nEnergy\nEnergy activity continued to expand. The Eleventh District rig count was mostly flat over the past six weeks while well completions ticked up. Demand for oilfield services was high, but the industry was constrained by equipment and labor shortages. Outlooks were strong, with contacts expecting oil and natural gas prices to remain high enough to prompt an upward trend in energy activity for the foreseeable future.\nAgriculture\nSignificant rainfall early in the reporting period greatly improved drought conditions across much of the district, though soil moisture has begun worsening again in recent weeks. Many areas experienced little-to-no row crop production as a result of the drought, causing fields to be plowed under. Significant culling of cattle herds continued, though the pace slowed slightly as much-needed rainfall greened up pastures.\nCommunity Perspectives\nNonprofits reported increased demand for services among the communities they serve over the past six weeks. Utilization of food assistance rose, and multiple contacts noted seeing increased use by middle-income individuals seeking to subsidize their household budgets amid rising inflation and rent. Demand for utility assistance spiked. Contacts were mixed on childcare assistance\u2014some noted a lack of demand while others noted a lack of affordable childcare options, as many daycare centers closed down during the pandemic or cannot operate at full capacity because of labor shortages. Contacts reported an uptick in demand for English language classes and workforce training to help workers obtain higher-paying jobs.\nFor more information about District economic conditions visit: 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"

Kansas City

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"Beige Book Report: Kansas City\nOctober 19, 2022\nSummary of Economic Activity\nEconomic growth in the Tenth District was modest, though employment growth maintained momentum as prior job openings were filled. However, contacts highlighted several indications of cooling labor demand, including less willingness to replace workers who leave, less willingness to post new positions and a slight deceleration of wage growth from recent highs. More households reportedly turned to gig work or other contract work to supplement their income amid rising prices. Most businesses reported expectations that growth in cost pressures will persist, and also reported better ability to pass on those costs to customers. In healthcare, contacts suggested upcoming negotiations of reimbursement rates could lead to an acceleration of price growth for health services. Spending on leisure travel was robust, but overall consumer spending held steady over the past month. Manufacturing production growth continued to decelerate. Still, few businesses reported plans to reduce their production capacity or cancel existing expansion plans. Contacts expected energy markets to remain tight due to past periods of underinvestment, which drove increases in employment within the sector in several District states.\nLabor Markets\nEmployers in the Tenth District continued to add jobs at a moderate pace during September, as momentum from past job openings kept hiring activity elevated. However, commentary from a broad set of contacts pointed to signs of cooling labor demand. For example, businesses in several industries reported they would be much less likely to backfill positions, if workers were to leave. Many other businesses reported that they do not plan to post new job openings in coming months, indicating uncertainty about the outlook in slowing planned hiring. Reports from residential real estate, venture capital and start-up sectors stood out as areas where worker layoffs were evident and labor demand was declining. Hardly any District businesses indicated they were hoarding excess labor.\nContacts reported expectations that wage growth is likely to slow to a moderate pace in coming months. Although wage growth is expected to slow from recent highs, most businesses indicated the increase in labor costs being budgeted for in the coming year remains well-above historical norms. Moreover, manufacturers indicated they continue to expect wage growth to exceed historical levels, even though overall demand growth has become more sluggish.\nPrices\nPrices continued to increase at a robust pace. Most businesses indicated an improved ability to pass on higher prices to customers over the past few months, particularly for hospitality and retail businesses. Most contacts expect cost pressures to remain persistent over the next six months, broadly citing financing, energy, labor and shipping and transportation costs. Additionally, contacts in healthcare noted an upside risk to persistent price pressures over the coming months stemming from upcoming healthcare contract renegotiations. As an exception, contacts expected cost pressures for building materials to further diminish over the coming months.\nConsumer Spending\nHousehold spending was mostly unchanged over the past month. Hoteliers in the District indicated that leisure travel grew solidly from already elevated levels, even as room prices picked up significantly across locations. Contacts in the hospitality sector indicated this past September was the best on record, although parts of Wyoming still felt the effects of heavy rains earlier in the summer that dampened leisure travel to the area. Car sales remained subdued across District states. While auto sales were previously held back by supply constraints, the primary headwind to sales shifted recently to rising interest rates.\nCommunity Conditions\nSeveral contacts reported a recent rise in the number of low- and moderate-income workers seeking non-traditional employment arrangements \u2013 gig work or other contract work. Reports were mixed on drivers. Many contacts suggested individuals are increasingly taking on multiple jobs via app-based work or have adopted \"side- hustle\" microbusinesses to augment their incomes amid rising household expenses. Alternatively, other reports indicated more people eschewed formal employment in pursuit of flexible work schedules. Access to affordable child care and reliable transportation have worsened recently due to inflationary pressures, particularly for low-to-moderate income households. Several contacts suggested gig work provided greater opportunities to remain engaged in the labor force.\nManufacturing and Other Business Activity\nManufacturing activity decelerated further over the past month, primarily due to declines among durable goods and fabricated materials manufacturers. Despite slowing growth in overall manufacturing activity, few contacts indicated any plans to reduce their production capacity in coming months. Most businesses reported they intend to follow through on any existing plans for market expansion or capital plans to increase their scale of production. Several contacts noted rising interest rates are weighing heavily on expected future capital expenditures, as some prospective projects no longer \"pencil out.\" Activity among service businesses remained firm as contacts reported moderate growth through September. The majority of businesses in both service and manufacturing sectors indicated they did not hold excess inventories of production materials. Few contacts indicated they plan to expand their inventories in coming months, as they seem \"right-sized\" or somewhat too large given their current outlook.\nReal Estate and Construction\nSingle family housing construction declined at a moderate pace, compounding previous declines, which contacts attributed to higher interest rates. Existing home sales and brokerage activity also fell swiftly. In contrast, the new development, new construction and level of transaction activity for multifamily housing all continued to grow at a solid pace across the District. Contacts indicated that housing shortages are driving persistent rental price pressures, and suggested that excess demand for multifamily housing construction will persist over the medium term. Several contacts noted that building material prices eased in recent months, further supporting ongoing construction in multifamily housing projects.\nCommunity and Regional Banking\nLoan demand weakened modestly in the past month amidst rising economic uncertainty and borrowing costs. Bankers noted particular weakness in demand for commercial and industrial Ioans and commercial real estate loans, as businesses pared back their borrowing in the face of economic headwinds. Credit quality remained unchanged, but contacts continued to expect deterioration over the next six months against the backdrop of inflation and higher repayment costs. Deposit balances declined due to rate competition and investment opportunities outside depository institutions.\nEnergy\nTenth District energy activity expanded at a moderate pace. Business contacts reported an expansion in drilling activity, revenues, and profits. Additionally, energy businesses continued to hire and expressed an ongoing willingness to grow their work force in coming months. However, filling open positions remained challenging, especially for skilled labor. Contacts continued to express optimism around prospects for their businesses, anticipating that energy markets will remain tight due to past underinvestment within the oil and gas sector. Cost pressures remain an issue, although input costs are increasing at a slower pace than earlier this year. Higher costs of capital, labor, and equipment drove a robust increase in the reported energy commodity prices needed to meaningfully expand drilling activity. Similarly, the prices for upstream oilfield services firms rose moderately. Despite these persistent cost pressures, most contacts reported a willingness to add additional capital expenditures and expand their businesses amidst still elevated energy prices.\nAgriculture\nFinancial conditions remained strong due to still elevated crop prices. However, contacts reported several adverse developments tied to drought and input costs. At the start of the fall harvest season, nearly one-third of corn and soybean crops were in very poor condition in some District states, heightening concerns about reduced yields. Exceptionally dry conditions also contributed to lower river levels, higher transportation costs, and lower crop prices in some areas in September. In the livestock sector, hog prices declined moderately over the past month, but remained slightly above year-ago levels. Cattle prices continued to increase alongside reports of additional herd liquidations, due, in large part, to higher feed and transportation costs.\nFor more information about District economic conditions visit: 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"

St Louis

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"Beige Book Report: St Louis\nOctober 19, 2022\nSummary of Economic Activity\nEconomic conditions have declined slightly since our previous report. While there were anecdotal reports of easing in the labor market, firms continued to report difficulties recruiting and retaining employees and wage pressures persisted. In the services sector, firms reported softer demand but many were still unable to operate at desired volumes due to a lack of workers. Many firms reported difficulties passing on input price increases due to increased consumer pushback. Homebuying slowed in the real estate sector, and demand for rental properties rose. While supply chain issues eased slightly, new construction decreased as builders focused on working through backlogs. Overall banking conditions remained unchanged, though contacts expect non-residential loan growth to begin to level out soon.\nLabor Markets\nEmployment has remained unchanged since our previous report. Contacts across the region continued to report difficulty filling positions and retaining workers. Some employers reported that increased flexibility and benefit policies implemented to improve retention are starting to bring about improved retention. However, there were still widespread reports of skilled tradespersons and technicians being poached by competitors. Contacts noted particular difficulty staffing weekend and late-night shifts. To improve recruiting and retention, some employers have focused on post-secondary institutions; one freight contact reported that the number of firms at a training center's career fair had tripled as firms sought to sign-on students prior to graduation.\nWages across the District have grown moderately since our previous report. Healthcare contacts reported raising wages by 7-10% this year, but the rate of wage growth has begun to slow recently. A recent survey of Arkansas firms noted 90% of trucking fleets raised their pay an average of 11% over the past year.\nPrices\nPrices have continued to increase moderately since our previous report. Although input costs have increased across the board, contacts reported mixed results in their ability to pass through costs to consumers. A contact in the catfish industry, however, noted that they were hesitant to increase prices due to consumer pushback. Other sectors, like healthcare, food service, and nonprofits, were unable to pass on costs to consumers and instead cut services or reduced margins. A contact in the car industry reported no transfer of costs to consumers due to low demand for new cars. However, a contact in the hotel industry reported increased consumer prices of 15-20% due to increased labor costs and renegotiated contracts with suppliers.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported mixed business activity and a mixed outlook. Retailers in the District noted that customers are changing shopping patterns due to high inflation; customers are becoming less brand loyal and are purchasing less on average. An auto dealer in Little Rock reported their sales are strong, especially in pre-owned cars; while they have a positive outlook for the upcoming months, they noted that customers are starting to have affordability issues because there is less inventory of lower-cost pre-owned cars. Hospitality contacts reported mixed business activity for this past month, with one St. Louis contact noting that inflation continues to hurt their customer base.\nManufacturing\nManufacturing activity has remained unchanged since our previous report. Firms have reported slight upticks in production but slight downticks in new orders. Production has remained stable despite the drop in new orders due to the large order backlog. Input costs have remained high, and manufacturers have lost some of their sales volume when raising sales prices. Firms also continued to struggle in maintaining adequate staffing. One agricultural equipment manufacturing company noted that they have been selling more equipment to individual households lately, as it appears household improvement projects are on the rise. Supply chain conditions have improved slightly since our previous report, but manufacturers expect shortages and delays to remain a significant constraint for the next 6 months.\nNonfinancial Services\nActivity in the nonfinancial services sector has decreased slightly since our previous report. Transportation contacts reported that labor remains a critical issue, especially in transportation facility security and regional aviation. One Louisville-area contact reported canceling of passenger services due to shortages of low-skilled labor. As input costs and the cost of borrowing funds have increased, the affordability of transportation has decreased across the District, driving low-income consumers out of the market for vehicles and tickets. Across the District, rural medical facilities are cutting services, notably labor and delivery services, due to increased costs of labor, equipment, and pharmaceuticals. While demand for travel nurses has leveled off, healthcare contacts do not expect the nursing shortage to subside. One nursing school in Missouri experienced a 30-40% reduction in enrollment as well as a shortage of nursing educators.\nReal Estate and Construction\nThe real estate market has slowed since our previous report. In commercial real estate, vacancies remain high for office and retail space. Small floorplan suburban office space is in high demand, but elsewhere demand for office space remains low. Since our previous report, residential and industrial real estate markets continued to have low inventory, inventory has increased, and pending home sales have decreased. Multiple contacts reported companies offering to sell entire subdivisions at discount prices due to concerns about future demand. Elevated prices and rising mortgage rates have driven some prospective home buyers to renting, which has led to further increases in rental rates since our previous report. Still, the speed at which residential and industrial rental rates are increasing has slowed since our previous report.\nResidential and industrial construction has slowed as interest rates have increased and banks are less willing to lend. Commercial real estate construction remains extremely slow. Supply chain issues and lead times have lessened since our previous report. Some contacts are continuing to order supplies in advance to avoid future disruptions. One hotel construction contact recently ordered 100 toilets 15 months in advance of project completion and is storing them in a warehouse.\nBanking and Finance\nBanking conditions in the District are largely unchanged. Real estate lending activity remains low since interest rates have increased, but overall loan demand has increased slightly compared with a year ago. Memphis-area banking contacts expect overall loan growth to start slowing soon. Since last quarter, commercial and industrial loans have seen growth, while consumer loan growth is roughly the same. Credit quality remains strong, as past-due and problem loans remain at historic lows. Banks reported that upward pressure on deposit rates is increasing. One Memphis contact reported receiving a growing number of calls from deposit customers regarding rates, which have reached as high as 2%.\nAgriculture and Natural Resources\nDistrict agriculture conditions have declined modestly since our previous report. Production and yield forecasts declined for corn, rice, and soybeans from August to September. Crop yields have remained stable for corn, fallen for rice and soybeans, and improved for cotton from August to September. However, crop yields have fallen consistently compared with 2021. District production and yields have been affected by extreme weather conditions such as drought, flood, strong winds, and hail.\nAgriculture contacts remain concerned about rising input prices, global supply chain disruptions, and the extremely competitive nature of the current labor market. Fertilizer prices are up 30% in 2022 after increasing 80% in 2021. Supply chain issues have continued to be a challenge, with one grain processer reporting waits of 48-50 weeks for packaging materials. Contacts do not foresee these conditions changing for the next 6 months.\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 19, 2022\nThis report was prepared at the Federal Reserve Bank of Dallas based on information collected on or before October 7, 2022. 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 expanded modestly on net since the previous report; however, conditions varied across industries and Districts. Four Districts noted flat activity and two cited declines, with slowing or weak demand attributed to higher interest rates, inflation, and supply disruptions. Retail spending was relatively flat, reflecting lower discretionary spending, and auto dealers noted sustained sluggishness in sales stemming from limited inventories, high vehicle prices, and rising interest rates. Travel and tourist activity rose strongly, boosted by continued strength in leisure activity and a pickup in business travel. Manufacturing activity held steady or expanded in most Districts in part due to easing in supply chain disruptions, though there were a few reports of output declines. Demand for nonfinancial services rose. Activity in transportation services was mixed, as port activity increased strongly whereas reports of trucking and freight demand were mixed. Rising mortgage rates and elevated house prices further weakened single-family starts and sales, but helped buoy apartment leasing and rents, which generally remained high. Commercial real estate slowed in both construction and sales amid supply shortages and elevated construction and borrowing costs, and there were scattered reports of declining property prices. Industrial leasing remained robust, while office demand was tepid. Bankers in most reporting Districts cited declines in loan volumes, partly a result of shrinking residential real estate lending. Energy activity expanded moderately, whereas agriculture reports were mixed, as drought conditions and high input costs remained a challenge. Outlooks grew more pessimistic amidst growing concerns about weakening demand.\nLabor Markets\nEmployment continued to rise at a modest to moderate pace in most Districts. Several Districts reported a cooling in labor demand, with some noting that businesses were hesitant to add to payrolls amid increased concerns of an economic downturn. There were also scattered mentions of hiring freezes. Overall labor market conditions remained tight, though half of Districts noted some easing of hiring and/or retention difficulties. Competition for workers has led to some labor poaching by competitors or competing industries able to offer higher pay. Wage growth remained widespread, though an easing was reported in several Districts. Some businesses said elevated inflation and higher costs of living were pushing wages up, coupled with upward pressure from labor market tightness. Contacts expect wage growth to continue as higher pay remains essential for retaining talent in the current environment.\nPrices\nPrice growth remained elevated, though some easing was noted across several Districts. Significant input price increases were reported in a variety of industries, though some declines in commodity, fuel, and freight costs were noted. Growth in selling prices was mixed, with stronger increases reported by some Districts and a moderation seen in others. Some contacts noted solid pricing power over the past six weeks, while others said cost passthrough was becoming more difficult as customers push back. Looking ahead, expectations were for price increases to generally moderate.\nHighlights by Federal Reserve District\nBoston\nBusiness activity in the First District was up slightly, employment increased modestly, and wage increases were moderate. Prices were mostly flat and pricing pressures eased. Travel and tourism enjoyed robust growth, while retail sales growth and manufacturing demand slowed somewhat. Real estate markets weakened further on rising interest rates. The outlook turned more pessimistic as recession fears spread.\nNew York\nEconomic activity contracted at a modest pace, while employment continued to grow modestly with labor shortages easing somewhat. Pricing pressures remained persistent, though wage growth slowed a bit. Tourism remained strong, while consumer spending was flat and manufacturing activity weakened slightly. Businesses were increasingly pessimistic about the outlook.\nPhiladelphia\nBusiness activity remained flat during the current Beige Book period. Manufacturing, consumer spending, new home construction, and existing home sales declined. Employment grew slightly, but talk of a recession rose. Firms reported wage pressures continued to subside, but growth maintained a moderate pace. Price growth slowed to a moderate pace. Hiring, supply chains, and price growth remained key challenges for most firms.\nCleveland\nBusiness activity was generally flat in the District, though reports varied considerably across sectors. Contacts were less optimistic about the near-term outlook amid persistent inflation and higher interest rates. Still, firms plan to add workers in coming months, though more are taking a wait-and-see attitude toward hiring. Upward cost and price pressures eased further, but the relief was uneven.\nRichmond\nEconomic activity was little changed as consumer spending grew at a modest rate, but a number of sectors reported flat to somewhat declining growth. Employment grew moderately and the overall labor market remained tight. Many firms continued to report labor shortages, rising wages, and use of non-wage incentives to recruit and retain staff. Prices grew strongly on a year-over-year basis, but growth moderated slightly in recent weeks.\nAtlanta\nEconomic activity expanded slightly. Labor markets improved, but wage pressures continued. Some nonlabor costs moderated. Year-over-year retail sales were flat. Leisure travel activity softened while business travel strengthened. Housing demand declined. Commercial real estate conditions were mixed. Manufacturing activity was strong. Transportation demand remained mixed. Banking conditions were steady.\nChicago\nEconomic activity was little changed. Employment increased moderately, business spending was up slightly, consumer spending was little changed, manufacturing declined slightly, and construction and real estate activity moved down modestly. Wages rose rapidly, as did most prices. Financial conditions tightened moderately. Agriculture profit expectations for 2022 remained positive. Inflation continued to put pressure on household budgets.\nSt. Louis\nEconomic conditions have declined slightly since our previous report. Although firms reported softening demand and increased price sensitivity, labor shortages continued to restrict activity. Firms struggled to pass on input price increases. Rising interest rates slowed homebuying activity and new construction. Contacts expect little improvement in supply chain issues and consumer demand in the upcoming months.\nMinneapolis\nThe region's economy expanded slightly since August. Employment grew slightly and wage pressures remained high. Inflationary pressures eased but stayed strong. Manufacturing growth continued, though some firms reported a softening in incoming orders. Consumer spending increased, but saw some weak spots. Home construction and sales remained soft, while commercial building and leasing activity improved slightly.\nKansas City\nThe Tenth District economy expanded at a modest pace. Employment grew moderately based on the momentum of past job postings, but showed signs of cooling. Contacts reported an increase in the use of gig work to supplement household income amid rapidly rising prices. Energy activity expanded at a robust pace. Drought conditions adversely impacted crop harvests in some District states, but financial conditions among farmers remained strong.\nDallas\nModest economic growth in the district continued overall, though declines were seen in retail sales, home sales, and lending. Employment grew solidly but wage growth eased slightly. Selling price growth eased slightly as well. Outlooks were generally pessimistic outside of the energy industry, with contacts voicing concern about inflation, labor shortages, and weakening demand.\nSan Francisco\nEconomic activity expanded modestly. Hiring activity grew at a modest pace amid tight labor market conditions. Wages and prices increased further, albeit at a slower pace. Retail sales grew and demand for services strengthened. Conditions improved modestly in the manufacturing sector but worsened somewhat in the agriculture sector. Residential real estate activity eased further, and lending activity dropped slightly.\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 19, 2022\nSummary of Economic Activity\nEconomic activity in the Second District continued to contract at a modest pace in the latest reporting period, amidst ongoing but somewhat less severe worker shortages and supply disruptions. Business contacts have become more pessimistic about the near-term outlook. Increases in both selling prices and input prices have persisted, while wage growth has shown signs of slowing. Businesses continued to hire, albeit at a somewhat slower pace than in recent months, and there have been scattered reports of layoffs. Manufacturing activity weakened slightly. Consumer spending remained flat, while tourism has been increasingly robust. The home sales market continued to soften, and the rental market appears to have leveled off, as concerns about housing affordability persist. Commercial real estate markets were slightly weaker overall, and construction activity continued to trend lower. Conditions in the broad finance sector deteriorated, and regional banks reported widening loan spreads and weakening loan demand.\nLabor Markets\nEmployment continued to increase modestly, with some signs that labor shortages have eased a bit. One upstate New York employment agency noted that hiring activity has remained steady, led by solid demand for tech workers, while the supply of available job candidates has increased somewhat. A New York City agency also reported steady demand for workers overall; despite some layoff announcements, mostly in the finance sector, it has yet to see any significant increase in available candidates. Leisure & hospitality firms reported a marked pickup in hiring, and businesses in wholesale trade, information, and professional & business services reported that they continued to hire, on net. Firms in almost all industry sectors plan to add staff in the months ahead.\nContacts in the construction, transportation, and information industries reported some slowing in wage growth, as did employment agencies in both upstate and downstate New York. In the education & health and leisure & hospitality sectors, however, wage growth remains strong. Businesses across all sectors continue to project widespread wage hikes in the months ahead.\nPrices\nMost business contacts noted ongoing broad-based escalation in the prices they pay, at about the same pace as in the prior report. However, construction and transportation sector contacts indicated some slowing in the pace of cost increases. There were also scattered reports of price declines for certain products, such as lumber and fuel. Contacts across most major sectors expect continued widespread escalation in costs.\nSelling price increases have slowed noticeably in the manufacturing sector but not in the service sector. A sizable and steady share of businesses in both sectors said they plan to raise prices in the months ahead.\nConsumer Spending\nConsumer spending has been little changed in recent weeks. Nonauto retailers reported that business has picked up slightly, buoyed by the post-summer return to the office and solid tourism, but are planning for tepid holiday season sales. One retail contact noted that the return to the office for some workers boosted sales of formal wear, while sales of home goods and casual apparel have been sluggish. Auto dealers in upstate New York reported that sales of both new and used vehicles were little changed at subdued levels in the latest reporting period due to a combination of lack of inventory and weaker demand. Inventory levels are expected to increase somewhat in the coming months. Consumer confidence across New York State remained fairly high in September.\nManufacturing and Distribution\nFollowing a sharp decline in the prior reporting period, manufacturing activity declined slightly in recent weeks, and wholesale trade businesses reported a slight dip in activity for the first time this year. In contrast, transportation & warehousing firms reported a pickup in growth. Manufacturers reported that supply disruptions have diminished slightly, while contacts in the distribution industries report more marked improvement. Looking ahead, businesses in all these sectors have grown increasingly pessimistic and do not expect much of a pickup in the months ahead, though they do expect supply disruptions to ease further.\nServices\nActivity in the service sector has continued to weaken since the last report. Professional & business service firms report fairly widespread declines in activity, and contacts in the education & health and information sectors indicated slight weakening. Businesses in these sectors have become somewhat less optimistic about the near-term outlook and anticipate little or no growth in the months ahead.\nIn contrast, leisure & hospitality businesses reported a marked pickup in activity and expressed mild optimism about the outlook. Tourism in New York City has continued to show strength, buoyed by high attendance at recent major events\u2014notably UN General Council, Climate Week, and Comicon. Hotel occupancy rates are at or above pre-pandemic levels, running around 90 percent in September, room rates are at record highs, and year-ahead bookings have steadily trended up. An industry expert noted that companies that have gone fully remote have increasingly been using conferences and trade shows to bring people together. Attendance at Broadway shows has climbed, and a record 19 new shows are opening this season.\nReal Estate and Construction\nThe home sales market continued to cool in September, and the rental market showed signs of leveling off. Across the District, both buyer traffic and sales volume have diminished, bidding wars have reportedly become less prevalent, and price reductions have grown more common. In New York City, both sales volume and signed contracts have declined markedly over the last couple months but are at fairly normal levels. The inventory of homes on the market across New York City has remained mostly steady at low levels, while real estate contacts in upstate New York reported a slight increase.\nResidential rental markets, which had been growing increasingly tight for most of the past year, appear to have leveled off in recent weeks, though at elevated levels. Rental vacancy rates across New York City have risen modestly.\nCommercial real estate markets have been mostly flat, on balance, since the last report. Office markets were steady to slightly firmer, with vacancy rates little changed but rents rising modestly across most of the District. The industrial market, on the other hand, has weakened: vacancy rates rose, albeit from very low levels, and rents leveled off. Retail rents were flat, while vacancy rates rose modestly from already high levels.\nContacts in real estate and construction continued to report deteriorating business conditions and expressed increasingly widespread pessimism about the near-term outlook. New multi-family construction starts have been steady to somewhat lower, while new commercial construction has been moribund. There is a moderate volume of ongoing construction\u2014both multi-family and commercial\u2014but that too has trended down.\nBanking and Finance\nRegional bankers reported declines in loan demand across all loan segments, and almost all respondents indicated lower rates of refinancing activity. Credit standards generally remained unchanged across all loan categories. Loan spreads widened, most notably for business loans, and deposit rates continued to rise. Delinquency rates were unchanged across all loan categories.\nCommunity Perspectives\nInflation remains a major concern among many people in the District. Community leaders worry that many residents will have difficulty affording heat and other utilities as winter approaches. Housing affordability and food insecurity remain ongoing concerns in the region, especially in light of rising utility costs. Communities, school districts, and tribal territories across some of the rural parts of the District indicated the need for adequate broadband access, though targeted programs have provided some relief.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/2022/2022-10-ph

"October 19, 2022\nSummary of Economic Activity\nOn balance, business activity in the Third District has continued to hold steady since the prior Beige Book period. Consumer spending on food and manufacturing declined modestly, while most other sectors were little changed. Activity in a few sectors remained below pre-pandemic levels. Employment continued to grow slightly. Wages and prices grew at a moderate pace \u2013 a slower pace of growth in prices compared with the prior period. Firms continued to indicate that wage and price pressures were, in fact, easing, but remained a challenge. Firms also cited some easing of the ongoing challenges in hiring and supply chains. On balance, expectations for economic growth over the next six months increased for nonmanufacturing firms. Among manufacturers, expectations improved but remained negative. Expectations for all firms remained well below their nonrecessionary historical averages. On average, sentiment appeared more positive in the Greater Philadelphia region compared with the outlying areas of the Third District.\nLabor Markets\nEmployment continued to grow slightly. Contacts described a heightened expectation of a recession, and businesses intensified preparations for a downturn: Multiple firms instituted a hiring freeze, others initiated planning for layoffs if business conditions did not improve, and one firm noted broad-based layoffs were already under way. While the share of firms reporting employment increases declined for the second consecutive period, the share remained near 25 percent for nonmanufacturing firms and near 15 percent for manufacturing firms.\nOverall, most firms still describe hiring and retention as a top concern. Most firms \u2013 90 percent of manufacturing and 83 percent of nonmanufacturing \u2013 reported labor supply as constraining business operations to some extent in the third quarter of 2022. Several contacts noted firms were hesitant to lay off employees, given the difficulty they have experienced hiring workers in recent years.\nFirms continued to note that wage growth subsided in recent months. One staffing firm noted that recent year-over-year wage growth \u2013 at about 8.5 percent \u2013 was down nearly half (from 16 percent in December). However, wage inflation remains widespread and appears to have maintained a moderate pace. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee edged down below 50 percent \u2013 the first time this share fell below 50 percent since September 2021. No firms reported lower compensation.\nPrices\nOn balance, prices rose moderately over the period \u2013 slower than in the prior period. Several contacts noted the rate of price increases had relented. However, price growth remained widespread. The share of manufacturers reporting higher prices for factor inputs declined, while those receiving higher prices for their own products edged higher. The share of nonmanufacturers reporting higher prices for their inputs rose, as did the share receiving higher prices from consumers for their own goods and services.\nAbout 60 percent of the manufacturing contacts continued to report they expect to pay higher prices over the next six months, and just over half continued to expect to receive higher prices for their own goods.\nManufacturing\nOn average, current manufacturing activity appeared to decrease modestly \u2013 following a slight decline in the prior period. The index for new orders fell from an already negative reading. The shipments index also declined, but remained positive, as firms worked through backlogs.\nDespite the decline in manufacturing activity from the prior period, a majority of the firms estimated increased total production growth for the third quarter of 2022 compared with the second quarter. Nearly all firms reported labor supply and supply chains as constraints to capacity utilization.\nManufacturing firms' expectations remained subdued. The indexes for future activity and new orders trended higher but remained well below historical averages for nonrecessionary periods; the index for future activity remained negative. About one-quarter of the firms expect supply chain disruptions to improve over the next three months, while one-fifth expect them to worsen.\nConsumer Spending\nOn balance, retailers (nonauto) and restaurateurs reported overall sales declined modestly from the prior period, during which sales held steady. Contacts attributed the decline in sales to both a slowdown in customer traffic and smaller purchases per visit.\nAuto dealers reported little change to the weak level of sales observed during the prior period, and sales remain significantly below the levels in 2019. Contacts noted that inventories have improved slightly but remained extremely low. While constrained supply makes it difficult to observe demand, one contact reported that high prices and rising interest rates appeared to reduce demand by pricing some potential customers out of the market.\nOverall, tourism continued to grow slightly. Business travel continued its recovery but remains well below 2019 levels. Bookings for domestic leisure travel remained strong, particularly at shore and resort locations. However, one contact noted that the amount of money guests spend at their leisure destinations declined modestly in recent months.\nNonfinancial Services\nOn balance, nonmanufacturing activity appeared to continue growing slightly. The indexes for general activity at the firm level, sales, and new orders increased from the prior period. The share of firms reporting increases in general activity increased, while the share of firms that reported decreases was relatively stable.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew moderately during the period (not seasonally adjusted) \u2013 at a faster pace than in the prior period, and comparable with the same period in 2019. Growth was balanced, as all loan segments grew modestly to moderately during the period. Inflation is contributing more to the growth during the current year relative to past years.\nLoan volumes continued to grow at a moderate pace for home mortgages, with multiple contacts noting an increase in volume of adjustable-rate mortgages. Volumes also grew moderately for commercial and industrial loans, in part reflecting a return to banks from borrowers who previously relied on the bond market for funding, according to a lender. Credit card volumes continued growing moderately \u2013 a pace typically experienced this season of the year.\nReal Estate and Construction\nHomebuilders reported that contract signings for new homes were down slightly \u2013 contract signings declined modestly in the prior period. Furthermore, contacts noted that traffic of prospective buyers also slowed noticeably in recent weeks.\nExisting home sales continued to fall slightly. While prices continued to rise on a year-over-year basis, contacts noted that the percentage of houses selling for more than the asking price declined, and the average number of days houses are on the market increased. Housing affordability remained a challenge, and rents remained high. The share of 211 calls that sought assistance for housing have edged lower since the prior period, to 34 percent of total calls \u2013 41 percent of those were for rental assistance. Calls for help with utility bills edged up to 21 percent, and calls regarding employment and income edged up to 8 percent.\nOn balance, construction activity and leasing activity for commercial real estate continued to hold steady. The markets for industrial/warehouse space and institutional projects remained strong. Rents for multifamily housing and industrial/warehouse space were little changed. Contacts noted that high input prices remain a challenge for construction, even as price growth continued to slow. Multiple contacts reported that long-term land development and multifamily projects have been delayed as interest rates rise and inflation concerns persist.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/surveys\u2010and\u2010data/regional\u2010economic\u2010analysis\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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"October 19, 2022\nSummary of Economic Activity\nEconomic activity in the Fifth District was little changed, on balance, with varied reports of growth across sectors. Manufacturing activity was unchanged as new orders softened, allowing producers to work through their backlogs. District ports saw strong activity, partially due to ships being diverted from West Coast ports. Trucking companies, on the other hand, reported a decline in demand leading to increased capacity and lower spot rates. Retail spending rose modestly although there were some reports that customers were pulling back spending on nonessential goods. Travel and tourism declined slightly, on balance, as leisure travel experienced a typical seasonal slowdown while business travel picked up. Residential real estate activity slowed, and inventories remained very low. Commercial real estate activity also slowed overall despite continued growth in the industrial and multifamily segments. Loan demand softened modestly although demand for auto loans held up. Nonfinancial services reported mild but flattening growth and continued to report labor challenges, leading some to look to invest in labor saving technology. Overall, employment grew moderately since our last report and firms continued to report challenges finding workers. Wage growth continued but some firms said they were nearing the top of what they could raise wages to while others looked to incentive programs to retain workers. Prices continued to grow strongly on a year-over-year basis but price growth eased slightly off recent peaks.\nLabor Markets\nSince the last report, the Fifth District labor market remained tight while employment grew moderately. Firms were worried that the lack of labor was impacting their customer experience. A quick service restaurant reported service interruptions in food deliveries, trash collection, and landscaping. Additionally, some firms reported reaching a ceiling on wage increases to attract and retain workers. One firm implemented productivity incentives to retain workers that could pay out up to $36,000 a year. High school and college students returning to school has been especially impactful this year. One firm reported losing 40-50% of its workforce when the high school opened, further straining their ability to maintain consistent hours of operation.\nPrices\nPrices continued to rise strongly in recent weeks albeit at a slightly slower pace of growth compared to recent months. According to our most recent surveys, manufacturers reported robust year-over-year increases in prices received from customers, but growth eased somewhat from the peak set a few months ago. Likewise, service providers continued to report strong year-over-year price growth and a slight easing from the peak in August. Firms in both sectors saw a moderation in input price growth with several contacts noting that freight and energy prices have come down somewhat in recent weeks.\nManufacturing\nFifth District manufacturing activity was unchanged this period. Overall, the lack of qualified workers continued to be a significant issue for manufacturers. Survey contacts reported high labor turnover as employees often switch back-and-forth between companies depending on who is paying more. The supply chain was showing some improvements as shipments were up and backlogs have improved. Manufactures were able to clear backlogs as the volume of new orders decreased. Manufactures, especially in retail, reported pessimism about future economic conditions as they expect consumers to pull-back somewhat on discretionary spending.\nPorts and Transportation\nFifth District ports indicated that demand was strong this period due to ship diversions related to continued labor negotiations at West Coast ports. Imports again outpaced exports with some improvement in loaded exports; however, exports of commodities and rolling stock trended lower. Import volumes at the ports continued to be led by heavy equipment and furniture. There was higher than normal dwell time of containers due to inland constraints. Spot shipping rates continued to decline as carriers had some freed-up capacity. Air freight volumes remained low due to reduced overall capacity and rates also declined slightly this period.\nTrucking companies indicated that demand slowed, and capacity had loosened up slightly. Spot market rates decreased moderately this period, but contract rates remained the same or increased slightly. Several contacts stated that they felt like they no longer had an ability to raise rates with their customers. Trucking firms reported that they were not having trouble hiring or retaining drivers, but still had an issue getting parts to maintain existing fleet and that the cost of parts had increased dramatically. Delivery of new equipment was delayed as manufacturers continued having difficulty completing orders due to supply chain disruptions.\nRetail, Travel, and Tourism\nRetailers in the Fifth District saw modest growth in sales and revenue in recent weeks despite lower foot traffic. Although total retail sales were up, several contacts noted that big ticket sales were down slightly. There were a few reports that consumers were pulling back spending on nonessential goods like artwork, home d\u00e9cor, and higher-end beauty and wellness products. A small consumer appliance producer said that sales were down slightly compared to previous months but were still very strong compared to pre-pandemic levels. Overall, inventories declined modestly.\nTravel and tourism declined slightly, overall. Leisure travel declined modestly, however business travel reportedly picked up. A hotelier in South Carolina said that the decline in leisure travel was typical for the time of year, but revenue remained strong because average room rates were up compared to last year. Several food service contacts reported mild sales declines in recent weeks. One restaurant group added that they were struggling to maintain their typical hours due to staffing challenges.\nReal Estate and Construction\nRespondents indicated that as interest rates rose, market activity for housing decreased while housing inventory for sale, both new and existing, were at all-time lows. In the last month, both closed and pending sales were down and sales prices had decreased modestly. Conversely, demand remained strong in some urban markets that had strong job growth. There were no issues with buyers qualifying for mortgages, but more buyers again were considering adjustable-rate mortgages. In terms of residential construction, sales decreased dramatically this period; some builders were now offering incentives, price reductions and free upgrades to sell existing new home inventory.\nCommercial real estate activity market activity slowed this period with weakening demand except in the industrial and multifamily segments, which continued to experience strong leasing demand, low vacancy rates, and increasing rental rates. Market activity for Class A office space, especially in suburban markets, remains strong with rental rates unchanged. Retail vacancy rates were good, but issues around high construction costs had put a constraint on new projects. Capital market activity diminished, and sale prices declined due to increased capitalization rates. Overall, new commercial real estate construction continued to suffer from supply chain disruptions for materials and difficulty finding skill workers.\nBanking and Finance\nLoan demand weakened modestly across all commercial loan types, with interest rates and cash flow concerns driving demand lower. Residential mortgage demand continued to drop due to rising rates. Auto loan demand, especially used autos, remained stable with inventory issues still plaguing the new car market. Deposit growth was slowing with some respondents noting inflationary pressures on depositors driving this trend. Some institutions continued to note that delinquency rates were still moving upward, although at a measured pace, and mainly in the consumer portfolio. Loan quality continued to be stable with no changes noted by institutions.\nNonfinancial Services\nNonfinancial service providers were starting to report flattening growth and demand. Contacts continued to note that increasing costs and finding employees are major concerns to their firms. One respondent noted that they are investing more in capital expenditures and business processes to combat these trends. Firms also mentioned rising wages continued to be a challenge to both hiring and retaining employees. Some firms were resorting to non-traditional compensation schemes to remain competitive as well. Rising interest rates and inflation pressures continued to be a top focus of respondents.\nFor more information about District economic conditions visit: 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"

San Francisco

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"Beige Book Report: San Francisco\nOctober 19, 2022\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded modestly during the mid-August through September reporting period. Hiring activity grew at a modest pace, and wages rose further amid tight labor market conditions. Inflation remained elevated, albeit with some indication of slight moderation. Retail sales grew moderately, and activity in the consumer and business services sectors was reportedly strong. Manufacturing output grew modestly, while conditions in the agriculture and resource-related sectors worsened somewhat. Residential real estate activity eased further but demand for multifamily housing remained strong. Activity in commercial real estate was flat on balance. Lending activity decreased slightly over the reporting period. Communities across the Twelfth District were challenged by housing affordability and elevated living costs. Looking ahead, contacts expected overall economic conditions to weaken and highlighted their increasingly uncertain outlook, with several respondents citing a possible economic downturn in Europe as a significant headwind.\nLabor Markets\nHiring activity grew at a modest pace during the reporting period as labor markets remained tight across most sectors. Reports indicated increased employment levels despite difficulty attracting workers in manufacturing, health care, retail, professional services, and skilled trades. Real estate and construction firms as well as financial services providers reported further easing of labor supply constraints, partly due to slower activity in the housing market. Employment in leisure and hospitality remained far below target levels despite some reported increase in job applications. Airlines have adjusted their schedules in recent months to better reflect crew availability and continued to develop in-house training programs to help meet future demand. Some contacts reported continued investment in automation to address persistent labor shortages. Reports indicated some improvement in employee retention, but many employers continued to highlight persistently high turnover rates. Several contacts noted that worsening housing affordability has made it more difficult for firms to fill entry-level positions in urban areas. One contact reported a notable uptick in applications for evening shifts as people sought a second job to supplement their income. Due to an increasingly uncertain outlook, many contacts narrowed down their future hiring plans to critical positions.\nWages continued to grow, albeit at a slower pace. Reports indicated that elevated costs of living, particularly for essential expenses such as food and rent, continued to drive wage pressures upward. Employees across a range of sectors continued to demand more comprehensive benefits, flexible work arrangements, and up-front hiring incentives. However, there were several reports of hourly workers favoring higher pay over expanded benefits amid elevated price inflation.\nPrices\nPrice levels remained highly elevated despite reported moderation in the rate of increase. Reports noted persistent inflation across industries and products, including prices for food, insurance, health care, legal services, packaging, and some manufacturing products, such as plastic and cardboard, due to continued cost pressures from materials and labor. Lumber prices also rose recently but were still significantly below their pandemic highs. Energy prices, although notably down since June, ticked up in recent weeks, and several contacts said fuel surcharges were still widespread in freight and manufacturing. Nevertheless, cooling overall demand helped alleviate some price pressures, and contacts noted more stable prices for used vehicles, construction materials, and airfares. Contacts generally expected cost pressures to persist over the coming months.\nCommunity Conditions\nHousing affordability, homelessness, and food insecurity continued to challenge communities across the district. Contacts emphasized the uneven impact of ongoing inflationary pressures and overall economic uncertainty on lower-income households and communities. Nonprofit organizations reported challenges meeting demand for behavioral health and substance misuse services. Contacts also reported an undersupply of basic shelter needs which have increased due to hiring difficulties and a notable drop in donations in recent months. Several contacts also raised concerns about worsened academic performance during the pandemic across all groups, particularly among lower-income students.\nRetail Trade and Services\nRetail sales grew moderately on balance. High tourism volumes in large metropolitan areas supported strong demand for retail goods, while other parts of the District saw signs of cooling due to further declines in consumers' discretionary spending. Reports indicated that demand has picked up for home improvement goods as homeowners invested more in their homes. Tight labor supply continued, although retention rates in some retail sectors reportedly increased. Supply chain disruptions continued easing, improving delivery times and allowing some retailers to realign inventory to more optimal levels. Contacts from across the District reported low retail vacancy numbers.\nConditions in the consumer and business services sectors continued to improve. The leisure and hospitality industry saw improvements as COVID-19 travel restrictions eased further for visitors from abroad. A Las Vegas contact highlighted record growth in air travel volumes, while contacts from Southern California and Hawaii noted strong demand for hospitality services. Demand for other services, including food and legal services, picked up, and activity in the health care and wellness sectors continued to be robust.\nManufacturing\nManufacturing activity grew modestly during the reporting period. Demand increased for many products, including packaging equipment, renewable energy equipment, manufactured foods, personal care products, outdoor gear, and some building materials. Meanwhile, metal production and recycling slowed down somewhat. Capacity utilization inched upward on net, while some capital spending plans were deferred due to perceived economic uncertainty. Input and transportation costs remained elevated. Supply chain disruptions and the war in Ukraine continued to hinder manufacturing, especially production of aluminum. Nonetheless, supply issues continued to ease, improving access to raw materials. A metal fabricator noted that backlogs have become more manageable, and overtime has become less necessary. One contact in the energy sector mentioned that energy use by manufacturers largely held steady over the reporting period.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors worsened somewhat. Overall demand for produce, fruits, and seafood was unchanged. However, labor shortages, transportation delays, elevated input prices, drought conditions, and wide temperature fluctuations continued to hinder production, especially for cherries, pears, and apples. Weaker global activity and an appreciating dollar reduced demand in international markets for domestic agricultural products, especially wheat, nuts, raisins, and tree logs. One producer mentioned that increased energy costs in Europe have prevented European farmers from refrigerating and storing fresh fruit, increasing their immediate supply in the region and heightening competition in export markets. Capital spending in the logging sector remained strong, but one contact in the Pacific Northwest mentioned that persistently high timberland valuations hindered production.\nReal Estate and Construction\nResidential real estate activity softened further. Demand softened for single-family homes due to increasing mortgage rates, and elevated costs for some materials added strain for new home construction projects. Home prices remained high but fell in some areas, such as in parts of Nevada. Housing inventories were still low, especially in Alaska, but started to rise in some other areas. The search for affordable housing has kept demand for multifamily units strong and rental rates high. Despite some easing, ongoing labor and supply shortages continued to delay construction projects. One contact in Arizona specifically raised concerns about the availability of refrigeration and air conditioning equipment.\nActivity in the commercial real estate market was flat on balance. Construction of industrial and warehouse facilities remained strong, especially in the Mountain West. One contact in Utah mentioned additional demand for public facilities such as airports and prisons. Conversely, demand for office space was weak throughout the District, and vacancies rose. Contacts attributed this weakness to ongoing remote work arrangements and general economic uncertainty.\nFinancial Institutions\nLending activity decreased slightly over the reporting period. Loan demand softened, chiefly due to decreased applications for single-family mortgage origination and refinancing on account of higher interest rates. Demand for multifamily and industrial construction loans was more resilient. Economic uncertainty has reportedly led businesses to approach borrowing more cautiously, reducing originations for corporate loans. Demand for auto loans remained elevated. Credit quality remained high, although a few contacts observed some slight deterioration, and competition for loans remained brisk. Liquidity was elevated, but deposits moderated somewhat despite paying higher rates. Financiers in the private equity and venture capital space reported overall declines in investment and valuations, including in clean energy markets.\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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"October 19, 2022\nSummary of Economic Activity\nFourth District business activity changed little in recent weeks, on balance, though it varied considerably by sector. On the one hand, contacts said that higher interest rates dampened demand in rate sensitive sectors such as automobile sales, residential real estate, and nonresidential construction. On the other hand, manufacturers experienced increased demand with some reportedly benefitting from inventory replenishment and easing supply chain disruptions (which have not yet normalized), and professional and business services firms reported further increases in demand from already high levels. Looking forward, firms were generally more pessimistic about the near-term outlook than during the prior reporting period, a situation which likely contributed to lowered capital spending plans as well. Labor demand was solid, although fewer contacts reported adding staff to their payrolls than in the previous period. While cost and price pressures remained high, contacts again reported modest relief in recent weeks.\nLabor Markets\nEmployment continued to increase, albeit at a slower pace. Slower employment growth in recent cycles is mostly a function of fewer firms adding to their staffing levels and more holding steady. A much larger share of contacts (roughly 60 percent, on average) indicated that staffing levels were unchanged in the September-October timeframe, compared to the share in the first quarter, when roughly 40 percent reported the same. One logistics contact said, \"We would normally be hiring more people at this time but economic uncertainty has put our expansion plans on hold.\" A small (15 percent) but increased share of contacts reported reducing their staffing levels, and nearly half of these were in construction. Looking forward, the net share of contacts planning to add staff in coming months remained positive, but smaller than during prior periods.\nWage pressures remained elevated. After trending down through much of the year, the percentage of contacts reporting higher wages was unchanged in recent weeks, at a little more than 50 percent. Contacts indicated that wage increases remained necessary to retain talent amid a shallow pool of labor, which one described as \"more of a puddle than a pool.\" Several contacts said that labor markets are still tight and likely to remain so, keeping upward pressure on wages for the near future.\nPrices\nCost pressures remained high, though they eased further in recent weeks. The share of contacts reporting higher costs was unchanged from the prior reporting period, but the share reporting a decline in input costs was at its highest in more than two years. Among the latter was a national retailer who said that product costs were still high, but lower than in the early spring and summer. Freight costs, which have been a pain point for most firms, continued to fall. In many cases in which firms' overall input costs rose, the rate of increase slowed. As one manufacturer stated, \"material prices have leveled off and we are not seeing the large increases we were seeing in the first and second quarters.\"\nSelling price pressures remained elevated though they too lessened further recently. The share of contacts reporting an increase in selling prices dipped below 50 percent for the first time since April 2021. However, the relief was uneven. One manufacturer acknowledged that the firm was raising prices for smaller customers more so than for large companies, and a freight hauler noted that prices were falling in some regions while rising in others. In addition, a national discount retailer said that prices had come down in areas where demand had fallen, even as its costs remained higher.\nConsumer Spending\nRetailers reported weaker sales as consumers cautiously managed their budgets because of rising food and gas prices. One general merchandiser noted consumers continued trading down on items, most recently to canned goods from fresh foods. On balance, restauranteurs and tourism contacts reported that sales increased from those during the summer months. Still, some reported guest counts had slowed, and that consumers had less spending power because of inflation. Auto dealers reported flat or decreasing sales, noting that consumers had become wary of higher payments because of increased interest rates and higher vehicle prices.\nManufacturing\nOn balance, demand for manufactured goods strengthened, with several contacts noting that sales had increased compared with those of previous months. Some reportedly benefitted from inventory replenishment and easing supply chain disruptions. Still, the largest share of contacts said demand was unchanged. Supply chain disruptions persisted, and while some contacts indicated that these disruptions had eased somewhat, they remained far from normal. Manufacturers' expectations for the coming months were mixed, with some expecting continued easing of supply chain issues that would boost demand and others predicting a decline in activity.\nReal Estate and Construction\nResidential construction and real estate activity declined further as interest rates increased and buyer confidence weakened. One real estate agent noted that increased mortgage rates have greatly impacted entry-level homebuyers, while declines in the stock market have reduced the amount of funds available for higher-income homebuyers. Residential construction contacts reported that new home sales also continued to fall. One homebuilder stated that, \"I think we are seeing the downturn we have been expecting and hearing of elsewhere for some time.\" Contacts did not expect demand to recover anytime soon because interest rates were expected to continue rising.\nDemand for nonresidential construction and real estate also weakened amid rising interest rates and elevated construction costs. One general contractor noted that his firm's clients have begun to delay plans for new projects as interest rates and inflation continued to rise. Despite a slowdown in construction and sales activity, leasing activity has remained strong, particularly for industrial space. Going forward, contacts anticipated demand would continue to decline as interest rates increase further and consumers reduce spending.\nFinancial Services\nOverall growth in lending stalled during the reporting period. While bankers noted that commercial lending remained strong, contacts reported that high interest rates continued to dampen demand for new residential mortgages and refinancing, and for auto loan originations. Lenders indicated that delinquency rates for commercial and consumer loans were still low, although a few bankers noted a slight uptick in delinquencies on auto and small-business loans. Contacts reported that consumer deposit balances decreased slightly, and some bankers indicated that customers were moving deposits to higher-yield accounts. Bankers expected overall loan demand to decline in the near term because of interest rate expectations.\nNonfinancial Services\nDemand for professional and business services remained strong while demand for freight services weakened further. Professional and business services firms reported that demand for digital authentication services and software solutions remained robust. In particular, one contact noted an increased need for fraud prevention systems. Contacts anticipated demand for their firms' products and services would remain strong going forward. Freight contacts reported a decline in demand and overall orders. One freight contact attributed the softening in demand to clients having caught up on their order backlogs. Freight firms expected demand will decline further.\nCommunity Conditions\nAccording to a semiannual survey of nonprofit service providers, low- and moderate-income households saw modest deterioration in their financial wellbeing and affordable housing conditions over the past six months. Roughly one-third of respondents said inflation contributed to the decline in financial wellbeing, with one respondent stating that higher prices \"caused families to make different decisions regarding expenses, particularly food and travel.\" Several contacts noted that affordable housing options were being lost to out-of-town investors who were buying existing rental properties and increasing rents. In eastern Kentucky, contacts noted that the scarcity in affordable housing was exacerbated by July's flood. Job availability remained elevated even though a slightly higher share of survey respondents indicated that it had eased somewhat.\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"

Minneapolis

/beige-book-reports/2022/2022-10-mi

"October 19, 2022\nSummary of Economic Activity\nNinth District economic activity increased slightly over the reporting period. Employment grew slightly, though the volume of job openings moderated. Wage pressures remained high. Price pressures eased slightly but remained elevated. Activity increased in consumer spending, tourism commercial construction and real estate, and manufacturing. Residential construction and real estate activity lagged further behind year-ago levels. Agricultural conditions generally remained strong heading into the harvest season. Minority- and women-owned business enterprises reported mixed conditions.\nLabor Markets\nEmployment grew slightly since the last report. Total job openings have moderated; firms have reportedly reconsidered some job openings due to recession concerns or extreme difficulties in filling them. But recent surveys continued to find healthy overall demand; recruiting and staffing contacts concurred. Labor supply remained tight, however. Asked about operating challenges, a Minnesota manufacturer commented, \"If I could check the labor availability box twice, I would.\" Turnover was also problematic, often for nonwage reasons, such as schedule flexibility, said a staffing contact. \"Many are losing more out the back door than they can bring in.\" Sources suggested that applicant volume had improved slightly, but candidate quality did not. One contact noted that a recent applicant had held seven food or retail jobs in the past 10 months, yet had been promoted to supervisor in the previous two jobs. \"It shows how desperate some employers are getting.\"\nWage pressures remained high. A large share of employers reported that compensation costs increased compared with the previous month, and that trend was expected to continue. A North Dakota contact said workers considering switching jobs for higher pay often saw higher counteroffers from existing employers. A Wisconsin firm said wage pressure was growing again with the start of holiday hiring. A retailer reported strong acceleration in entry level pay, but stopped offering sign-on and retention bonuses due to ineffectiveness.\nPrices\nPrice pressures eased slightly since the last report, but remained elevated. Two-thirds of respondents to a September survey of District firms reported that their nonlabor input prices increased from a month earlier. About 40 percent had slightly increased their prices charged to customers, a decreasing share from recent months, while about 10 percent of firms said their selling prices went down. Firms' outlooks for prices over the coming month moderated slightly. The wholesale price component of a regional manufacturing conditions index slowed in September to a level that, while still inflationary, was at its lowest since August 2020. Contacts reported that paper prices levelled off recently and lumber prices fell briskly. Retail fuel prices in District states rebounded slightly in recent weeks to levels similar to the previous report. Prices received by farmers increased in August from a year earlier for all major Ninth District crops and animal products.\nWorker Experience\nHigher prices continued to put pressure on many low-and mid-income workers, according to several contacts. A labor contact in the hospitality sector said that a less cash-dependent, post-COVID economy was affecting tipped workers negatively and pushing them away from the industry. In Minnesota, a labor contact said that major hospitals were offering high salaries and attractive incentives to recruit new staff but were not making the same investments to retain existing staff. The number of travel nurses also remained high, but it was beginning to decrease, raising hopes that some may return to full-time employment. A public sector labor representative reported that several employers were holding back hiring \"until there was a major need for it,\" while some others were merging departments to leverage existing staff.\nConsumer Spending\nConsumer spending grew slightly since the last report. Tourism contacts reported decent overall activity, particularly for accommodation businesses, with occupancy surpassing pre-pandemic levels in some places. A resort owner in northern Minnesota said, \"It's been so busy I'm looking forward to resting\" during the fall shoulder season. Recent airline travel grew modestly in much of the District year over year, with the exception of Montana, where the continued closure of Yellowstone entrances has reduced the number out-of-state travelers. Visits to national parks elsewhere in the District were also down. However, end-of-summer fairs and festivals reported strong attendance and spending. Retail contacts reported softer revenues during the last month, but were optimistic about future sales. A Montana vehicle dealership with multiple offices said truck and car sales were flat in August and September and slow overall, as the industry has completed a calendar-lap of slower sales stemming from inventory shortages. Sales of recreational and marine vehicles have also slowed due to economic concerns and higher financing costs.\nConstruction and Real Estate\nCommercial construction rose slightly since the last report. Industry data indicated that both new and active projects were higher over the most recent four-week period (ending mid-September) compared with a year earlier, after having declined for much of the summer. Industrial and multifamily segments continued to drive overall activity. Anecdotal reports were more pessimistic, but large firms generally were performing much better than small ones. One firm said it was not seeing activity decline but was getting more calls from subcontractors looking for work. Residential housing remained subdued, with single-family permitting below year-ago levels in most parts of the District.\nCommercial real estate grew slightly. Multifamily and industrial sectors continued to see healthy demand, and retail vacancy rates improved thanks to sustained consumer demand and low levels of new construction. Office vacancy rates remained high. The share of in-office workforce continued to rise slowly, and leasing interest has reportedly seen small improvements, though concessions remained high to attract new lessees. Residential real estate continued to lag due to higher mortgage rates. Increases in median sales value have also begun to moderate.\nManufacturing\nManufacturing activity increased modestly overall since the previous report. A regional index of manufacturing conditions indicated increased activity in Minnesota, North Dakota, and South Dakota in September from a month earlier. About half of manufacturing respondents to a September survey of District firms reported that orders decreased from the previous month, but the outlook for October orders was positive. Some manufacturing contacts noted that supply chain pressures had eased recently (for example, shipping containers were more widely available), though they remained a challenge. An electronics producer said their backlog of orders was large enough to last through 2023 even if new business slowed significantly. A printing firm reported new orders dipped slightly after a few very strong months. However, a packaging producer said new orders were \"very soft\" and a metal products producer noted substantially lower quoting activity for early 2023, which halted all their capital investment plans.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions improved modestly and remained strong overall heading into harvest season, even as elevated input costs bit into producer margins. Early indications pointed to solid harvests and good crop conditions throughout most of the District, with the exception of portions of Montana heavily affected by drought. District oil and gas exploration activity was unchanged since the last report but well above levels from a year ago.\nMinority- and Women-Owned Business Enterprises\nActivity among minority- and women-owned business enterprises (MWBEs) in the District was mixed. An almost equal number of firms reported higher sales and profits as those who did not in the latest monthly business survey. Demand for workers remained elevated and hiring challenges persisted. An entrepreneur in the construction industry expressed concern that more skilled workers were being \"absorbed\" by larger employers and leaving smaller firms scrambling for talent. A Minnesota contact reported productivity had declined because many new hires were \"just getting the work done and not going above and beyond.\"\nFor more information about District economic conditions visit: 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"

Boston

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"October 19, 2022\nSummary of Economic Activity\nBusiness activity in the First District was up slightly on balance, and employment increased modestly. Wage increases were moderate on average, but wages stabilized in many cases. Prices were mostly flat, and many contacts noted an easing of cost pressures. Travel and tourism contacts enjoyed robust summer activity. Retail revenue growth slowed modestly or missed expectations but did not turn negative. Demand slowed on balance among manufacturers, although revenues still grew in most cases owing to earlier price increases; demand for semiconductor chips fell precipitously, however. Commercial real estate activity slowed moderately, and warning signs flashed on the financing side. Home sales remained down sharply on a year-over-year basis as home prices levelled off. The outlook turned more pessimistic, as recession fears spread, but many contacts remained at least cautiously optimistic for their own businesses.\nLabor Markets\nEmployment was up modestly, and wage growth was mixed. Labor markets remained tight but hiring and retention difficulties abated for some contacts and were stable, if still elevated, for most. Travel industry contacts engaged in a limited amount of hiring and their headcounts were roughly stable at desired levels. One retailer increased headcounts moderately in anticipation of a strong holiday season, and mostly reached their hiring targets. Manufacturers engaged in modest hiring on balance, but one instituted a hiring freeze in anticipation of a 2023 recession. Among software and IT services contacts headcounts increased moderately, and all but one contact experienced decreased turnover (another saw higher attrition). Hospitality industry contacts reported average wage increases of 15 percent from a year earlier, with most of the growth occurring in recent months. Software and IT firms held wages steady or offered selected wage increases and bonuses, rather than permanent raises for all. A clothing retailer paused wage increases, having implemented substantial raises earlier in the year, but expects to offer signing bonuses to attract more seasonal hires. Manufacturing wage growth ranged from flat to above average. The hiring outlook was mixed, and some contacts expressed concerns about adding too many workers in the lead-up to a possible downturn.\nPrices\nPrices were mostly stable, with isolated exceptions. A clothing retailer posted high single-digit markups in response to earlier cost pressures. Average nightly hotel room rates in the Boston area fell roughly 13 percent from May to August but remained up 20 percent from August 2021. Manufacturing contacts said that cost pressures had stabilized or eased slightly in recent months and that their output prices were mostly unchanged from last quarter. For retailers as well as manufacturers, supply chain issues appeared to be relenting and inventories approached desired levels. Half of software and IT firms increased their prices this year, by modest to above-average margins, while other IT firms had stable prices. Most contacts expected to hold prices firm moving forward based on having made significant price hikes earlier in 2022, but a select few said that their prices still lagged relative to their costs and planned to make at least modest increases in the coming months.\nRetail and Tourism\nFirst District retail contacts reported somewhat softer sales while tourism contacts saw strong increases in activity. A clothing retailer experienced modestly slower over-the-year revenue growth compared with second quarter results. Cape Cod retailers drew weaker than expected summer revenues and attributed that outcome to too few rainy days (which push customers into the stores), but nonetheless the season's sales results were described as \"good.\" Airline passenger traffic through Boston, both domestic and international, increased steadily in the summer months. As of August, international passenger volume had reached 85 percent of its 2019 level. Advance airline bookings for the fall showed further gains in all types of travel. Cruise ship activity increased substantially, surpassing operators' expectations. The Greater Boston hotel occupancy rate roughly doubled in the past six months, and as of August 2022 stood at nearly 80 percent of its comparable pre-pandemic level. Convention activity also accelerated, with attendance nearing 90 percent of pre-pandemic levels. Contacts in Cape Cod reported another record-setting season for its hospitality industry. Retail contacts expected a strong holiday season and tourism contacts were very optimistic for further recovery.\nManufacturing and Related Services\nRevenue growth for manufacturers was mixed in the latest cycle and forecasts for 2023 turned much more pessimistic. Five of the seven firms we talked to reported higher sales in dollars, but in three of those cases sales by units were down. Two contacts said that revenue growth had slowed as their customers worked through inventories that had been accumulated earlier in the year in what was described as panic buying. Demand for semiconductor chips dropped sharply as a result of this dynamic, and upstream demand for semiconductor manufacturing equipment has \"fallen off a cliff,\" according to one contact. Capital expenditures were steady from one year earlier, even for firms who recently made significant downward revisions to their 2023 growth forecasts. A common theme was that the tight labor market was pushing manufacturers to look for ways to automate more tasks. Most contacts remained optimistic about 2023 but two said they were explicitly planning for a recession. One contact was particularly worried about the semiconductor industry and foresaw that major new capital investments, motivated by the shortages in 2021 and 2022, would lead to a supply glut by the end of 2023.\nSoftware and IT Services\nDemand and revenue growth were stable or somewhat higher in the third quarter among First District software and IT contacts. Positive results were attributed to their offering products that emphasize cost-cutting and efficiency, as well as to the ongoing recovery of their business clients' end markets. Profits and margins were roughly stable on balance. In terms of strategy, two contacts mentioned that their services help clients to mitigate the impact of rising employment costs. For most firms, capital and technology spending was unchanged and was expected to remain flat in coming months. Contacts expected steady demand during the next quarter and expressed positive outlooks for their respective companies. However, they raised concerns about external downside risk factors such as inflation, financial market instability, labor cost pressures, and rising COVID-19 cases.\nCommercial Real Estate\nCommercial real estate activity slowed moderately in the First District. Contacts reported scant office leasing activity, with low rents and high vacancy rates that were nonetheless roughly stable. Work-from-home policies continued to depress daytime office occupancy well below seasonal expectations. Vacancy rates for industrial space remained historically low, in the low single digits, and rents stayed high. However, multiple contacts reported a larger number of acquisition and leasing contracts falling through. Retail leasing and acquisition markets were little changed, and retail remains a \"tenant's market,\" according to one contact. Across property types, lessors boosted their renovation budgets to retain existing tenants, and rising borrowing costs deterred new construction. Contacts were uniformly pessimistic about the outlook for commercial real estate. Rising interest rates and recession fears were expected to continue to restrain both leasing and investment activity. Contacts expected property valuations to fall in the coming months, possibly steeply. The outlook for the office market was particularly bleak, with contacts anticipating weaker demand, negative absorption rates, and increased foreclosure rates.\nResidential Real Estate\nPrices began to level off in the First District's residential real estate markets in August as higher mortgage rates cooled demand. While prices were up over-the-year (to August) in all reporting markets, those increases were substantially smaller than the over-the-year increases to July, except in the case of condo markets in Maine and New Hampshire, which had stable price growth. Inventory fell year-over-year in all reporting markets except for Boston's single-family homes. Relative to the previous report, that fact translates to moderately lower inventories in all markets except Maine. Closed sales decreased over-the-year to August, albeit by somewhat smaller percentages than were reported in July. Contacts across the region remarked that buyer demand had cooled, shifting the negotiating power to buyers.\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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"October 19, 2022\nSummary of Economic Activity\nEconomic activity in the Sixth District grew slightly from mid-August through September. Labor market pressures continued to ease, but labor availability largely remained tight. While wage pressures persisted, some easing was reported, and firms continued to offer a variety of incentives to employees. Certain commodity costs moderated while other nonlabor costs, such as freight and fuel, rose. Many firms reported continued pricing power. Retailers reported flat year-over-year unit sales. Demand for automobiles increased, and inventory levels grew. Leisure travel activity softened, but business and convention bookings continued to improve. Demand for housing slowed amid persistently high prices and rising mortgage interest rates. Commercial real estate activity remained mixed. Manufacturing activity was robust, though demand for certain discretionary products slowed. Transportation activity was mixed. At District banks, overall loan growth improved, but deposit growth slowed further since the previous report. Hurricane Ian made landfall in southwest Florida at on September 28, too late to collect input from business contacts for this report. The storm devastated many communities across the state, and its impact will inform reporting in the coming months.\nLabor Markets\nLabor market pressures modestly eased since the previous report; turnover rates held steady or had improved by most accounts. However, conditions remained tight as many firms remained understaffed and continued to backfill open positions, particularly among healthcare, manufacturing, and commercial construction firms. Some contacts noted that there was greater availability of hourly workers; however, most firms indicated that workers were resistant to overtime scheduling. Employers continued to focus on efforts to attract and retain workers through increased wages and bonuses, and enhancements to benefits. To address labor shortages and save costs, several contacts reported offshoring positions in addition to continued investments in automation.\nMost employers reported upward wage pressures, although several indicated that pressure had eased in recent months. Bonuses for retention, performance, sign-on and referral continued to be reported. Several contacts said that wage increases would be more targeted going forward and many indicated a greater focus on enhancements to benefits including attractive scheduling, flexible work arrangements, expanded healthcare coverage, and more vacation.\nPrices\nDistrict contacts noted moderation in some commodity costs like aluminum and resin over the reporting period, but supply chain imbalances remained an issue for planning and contract negotiations. Even as some input costs eased, a few contacts mentioned increasing costs for freight (a reversal of sentiment from the previous two reports), labor, and fuel. Some contacts noted strong pricing power as buyers hedged against future price hikes and/or uncertainty around supply availability. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth decreased to 4.1 percent, on average, from 4.3 percent in August. Firms' year-ahead inflation expectations decreased to 3.3 percent, on average, from 3.5 percent in August.\nConsumer Spending and Tourism\nRetailers reported flat unit sales compared to the same time period last year. Auto inventories improved and automobile dealerships reported healthy demand for new vehicles. Retail and auto contacts remain cautiously optimistic for the remainder of the year.\nDemand for leisure travel was described as normalizing down to pre-pandemic levels. Business and convention travel was noted as healthy with strong bookings for the Fall season.\nConstruction and Real Estate\nResidential real estate contacts reported continued slowing in housing demand throughout the District as record high home prices and rapidly rising interest rates pushed more potential buyers out of the market. Home sales in most areas throughout the District declined sharply on a year-over-year basis. Though rising, inventory levels remained low in many markets, leading to still record high, year-over-year price appreciation in places like Tampa, Nashville, and Orlando. The share of homes on the market with a reduced asking price continued to rise over the reporting period. New home builders reported further moderation in activity since the previous report. Buyer traffic at new subdivisions declined, contract cancellations rose, and more builders offered incentives to attract buyers.\nCommercial real estate (CRE) activity was mixed. Multifamily and industrial market conditions were stable, though some contacts voiced concerns that negative sentiment associated with a potential economic slowdown curbed some activity over the reporting period. Demand for lower-tier office and some segments of retail slowed somewhat. More firms returning to the office appeared to be mitigating some of the downward trend in the office sector; however, heightened levels of sublease space remained an impediment to market recovery. Contacts reported increasing concerns about possible declining CRE values amid a widening bid-ask spread and expectations for potential negative net operating income. There were more instances of buyers seeking greater concessions, shrinking pools of buyers, and declining prices in some of the less robust property types.\nManufacturing\nDistrict manufacturers reported solid activity, on balance, over the reporting period. According to the Atlanta Fed's Business Inflation Expectations Survey, manufacturers' sales levels increased slightly, and profit margins widened somewhat. However, a softening of demand was noted by producers of certain discretionary consumer products. Shortages of certain inputs and employee turnover continued to hold back production for some manufacturers.\nTransportation\nTransportation activity remained mixed. District ports continued to experience substantial year-over-year increases in container volumes; however, shipments of auto imports remained below 2019 levels. Trucking contacts saw increases in freight tonnage compared with year-earlier levels, citing rising industrial demand and a rebound in retail sales since the previous report. Year-to-date total rail traffic fell slightly from 2021 levels and intermodal freight was flat. Air cargo carriers reported a slowdown in activity, but revenues remained well above pre-pandemic levels.\nBanking and Finance\nConditions at District financial institutions were similar to the previous report. Including residential mortgages, loan growth for a majority of portfolios was positive. However, growth in consumer loans, particularly vehicle loans, slowed. Deposit growth declined and institutions increased borrowing as a source of funding. Additions to securities portfolios slowed and unrealized losses increased. Asset quality remained healthy, but near-term delinquencies trended higher.\nEnergy\nEnergy contacts indicated that oil and gas production was strong; however, getting products to market continued to be constrained by limited pipeline capacity. Refiners described high utilization and solid overall demand, although it has fallen from its summer peak. Broadly, contacts continued to report upward pressure on input costs, including operating expenses, parts and equipment, and services, and described very little easing of supply chain bottlenecks. Utility providers reported rising demand for power among commercial, residential, and industrial customers. Many energy contacts continued to report increasing their investment portfolio in renewables, particularly solar, wind, and biodiesel.\nAgriculture\nAgricultural conditions in the District were mixed. Cotton growers noted some softening, which was attributed to slowing demand for textiles. Cattle ranchers reported strong sales and increased prices for livestock. Demand for chicken was strong amid reports of domestic consumers trading down from other protein sources; however, poultry exports weakened due to concerns by foreign importers over avian flu outbreaks. Row crop production remained solid, but farmers were hesitant to invest in equipment amidst concerns over future crop demand.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy\u2010matters/regional-economics.aspx\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 19, 2022\nSummary of Economic Activity\nEconomic activity in the Seventh District was little changed overall in late August and September. Contacts expected slow growth in the coming months, with many expressing concerns about the potential for a recession. Employment increased moderately, business spending was up slightly, consumer spending was little changed, manufacturing declined slightly, and construction and real estate activity moved down modestly. Wages rose rapidly, as did most prices, while financial conditions tightened moderately. Agriculture profit expectations for 2022 remained positive. Nonbusiness contacts reported that inflation continued to put pressure on household budgets.\nLabor Markets\nEmployment increased moderately in late August and September, and contacts expected a similar pace of growth over the next 12 months. Contacts reported difficulty finding workers across sectors and skill levels, though there were also reports that difficulties had eased some. A manufacturer noted poaching of salaried employees, but also somewhat easier hiring conditions for lower-skilled workers. A staffing firm indicated that demand from clients had slowed, though it remained at a high level. And a contact in healthcare saw an increase in the supply of nurses in their area as some who had taken temporary travel positions returned home. Overall, wage and benefit costs moved up strongly and were aimed both at attracting new workers and retaining existing talent. In addition to labor market tightness, contacts cited high inflation as an impetus for workers requesting wage increases.\nPrices\nMost prices rose rapidly in July and early August, though some commodity prices fell, notably for fuel. Contacts expected the pace of price increases to slow over the next 12 months. Aside from declines in certain commodities, producer prices continued to rise, spurred by passthrough of higher overall costs for raw materials, labor, and shipping. That said, growth in producer prices slowed across many categories. Consumer prices generally moved up robustly due to solid demand and passthrough of higher costs. However, fuel costs were down, and contacts noted a greater number of promotions on a range of retail products.\nConsumer Spending\nOn balance, consumer spending was little changed over the reporting period. Nonauto consumer spending increased slightly, and retailers indicated that back-to-school shopping had met their expectations. Consumers continued to shift purchases toward essential, less premium items and away from discretionary spending. Spending on pet supplies, food, and seasonal items increased, while spending on apparel declined. Leisure and hospitality activity was down some. Light vehicle sales edged down but spending on auto parts and services increased noticeably.\nBusiness Spending\nBusiness spending increased slightly in late August and September. Capital expenditures were up modestly, with contacts highlighting the role of replacement demand for equipment and software. Commercial and residential energy consumption increased modestly, while demand for industrial energy consumption was down slightly. Retail inventories were elevated overall, and contacts said retailers were reducing orders and ramping up promotions to help pare them down. Auto inventories were stable and above their pandemic lows, but still well below pre-pandemic levels. In manufacturing, inventories were moderately elevated, partly because contacts were holding on to nearly completed products as they waited for missing parts and materials to arrive.\nConstruction and Real Estate\nConstruction and real estate activity decreased modestly on balance over the reporting period, and contacts pointed to higher interest rates as a key factor. Residential construction decreased slightly, and homebuilders expected a further slowdown over the coming year. Residential real estate activity decreased moderately, though home prices were up modestly due to limited supply. Residential rents increased moderately. Nonresidential construction was little changed over the reporting period, as was pricing. Long lead times for some materials persisted. Commercial real estate activity decreased modestly on weaker demand for office and retail space. In contrast, demand for industrial space remained robust. Prices were down slightly overall, and rents decreased modestly, while vacancy rates and sublease space availability moved up modestly.\nManufacturing\nManufacturing demand was down slightly in late August and September. Contacts again reported that with slowing new orders, they were making headway on filling their large order backlogs. Output moved up modestly as manufacturers continued to struggle with labor availability and supply chain disruptions. Steel production decreased slightly overall, as demand slowed across a range of sectors. Fabricated metals demand was flat, with higher orders from the defense, medical, and aerospace industries offsetting declines in several other segments. Auto production was unchanged amid continued tight labor and supply chain issues, while heavy truck production picked up a bit as supply constraints in that segment of the industry eased. There was a small decrease in demand for heavy machinery.\nBanking and Finance\nFinancial conditions tightened moderately over the reporting period. Participants in the equity and bond markets reported lower asset values and higher volatility. Business loan demand fell modestly, with contacts pointing to higher borrowing rates and elevated uncertainty as contributing to the slowdown. One contact highlighted a decline in lending to food and retail companies. Business loan quality was down slightly, and loan standards tightened slightly. In consumer markets, loan volumes decreased modestly, with contacts reporting drops in mortgage and auto lending in the face of higher interest rates. Consumer loan quality decreased some and standards were slightly tighter.\nAgriculture\nIncome expectations for agricultural producers in 2022 were unchanged over the reporting period, with a profitable year expected for most despite elevated input costs. Contacts were optimistic that corn and soybean yields would be better than had been expected this summer, even with drought in parts of the District. Corn and soybean prices moved higher during the reporting period. Shipping costs, however, were elevated due to reduced barge capacity from low river levels. Dairy prices, most notably for butter, and egg prices, were up as well. Hog and cattle prices declined.\nCommunity Conditions\nCommunity development organizations and public administrators reported some step-down in economic activity, especially in the housing market, though overall, the level of activity remained solid. Inflationary pressures continue to present challenges for low- and moderate-income individuals and families, as well as small businesses. State government officials again saw healthy growth in tax revenues over the reporting period. Unemployment insurance filings remained low. Small business development organizations said clients were borrowing not for growth, but to offset higher input prices. Nonprofits assisting low- and moderate-income households indicated that while fuel prices have eased, high grocery prices and elevated rents continue to strain household budgets, leading to strong demand for social services and other support. Childcare and early education providers reported ongoing elevated staffing vacancies due to the tight low wage labor market.\nFor more information about District economic conditions visit: chicagofed.org/cfsec\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 7, 2022\nThis report was prepared at the Federal Reserve Bank of San Francisco based on information collected on or before August 29, 2022. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nFederal Reserve Banks collect information for the Beige Book from a variety of business and nonbusiness sources. Beginning September 7, 2022, six Banks started including individual community sections with information from nonbusiness sources, while the remaining Banks will continue to include such information within the existing structure of their District reports.\nOverall Economic Activity\nEconomic activity was unchanged, on balance, since early July, with five Districts reporting slight to modest growth in activity and five others reporting slight to modest softening. Most Districts reported steady consumer spending as households continued to trade down and to shift spending away from discretionary goods and toward food and other essential items. Auto sales remained muted across most Districts, reflecting limited inventories and elevated prices. Hospitality and tourism contacts highlighted overall solid leisure travel activity with some reporting an uptick in business and group travel. Manufacturing activity grew in several Districts, although there were some reports of declining output as supply chain disruptions and labor shortages continued to hamper production. Despite some reports of strong leasing activity, residential real estate conditions weakened noticeably as home sales fell in all twelve Districts and residential construction remained constrained by input shortages. Commercial real estate activity softened, particularly demand for office space. Loan demand was mixed; while financial institutions reported generally strong demand for credit cards and commercial and industrial loans, residential loan demand was weak amid elevated mortgage interest rates. Nonfinancial services firms experienced stable to slightly higher demand. Demand for transportation services was mixed and reports on agriculture conditions across reporting Districts varied. While demand for energy products was robust, production remained constrained by supply chain bottlenecks for critical components. The outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to twelve months.\nLabor Markets\nEmployment rose at a modest to moderate pace in most Districts. Overall labor market conditions remained tight, although nearly all Districts highlighted some improvement in labor availability, particularly among manufacturing, construction, and financial services contacts. Moreover, employers noted improved worker retention, on balance. Wages grew across all Districts, although reports of a slower pace of increase and moderating salary expectations were widespread. Employers in several Districts reported giving midyear and off-cycle raises to offset higher living costs, and many noted that offering bonuses, flexible work arrangements, and comprehensive benefits were deemed necessary to attract and retain workers. Looking ahead, employers planned to provide end-of-year pay raises to their workers, but expectations for the pace of wage growth varied across industries and Districts.\nPrices\nPrice levels remained highly elevated, but nine Districts reported some degree of moderation in their rate of increase. Substantial price increases were reported across all Districts, particularly for food, rent, utilities, and hospitality services. While manufacturing and construction input costs remained elevated, lower fuel prices and cooling overall demand alleviated cost pressures, especially freight shipping rates. Several Districts reported some tapering in prices for steel, lumber, and copper. Most contacts expected price pressures to persist at least through the end of the year.\nHighlights by Federal Reserve District\nBoston\nBusiness activity expanded at a modest pace. Labor markets remained very tight, and employment increased modestly despite above average wage growth. Output prices increased moderately, but contacts noticed a stabilization or easing of input prices. Although many contacts were optimistic, the real estate outlook worsened, and some contacts perceived an elevated risk of recession.\nNew York\nEconomic activity contracted modestly, with supply disruptions easing somewhat. Employment increased modestly despite ongoing worker shortages. Tourism remained strong, whereas consumer spending was flat and manufacturing activity fell significantly. Businesses continued to report widespread increases in selling prices, input prices, and wages, though to a slightly lesser extent than earlier in the year.\nPhiladelphia\nBusiness activity held steady compared with the prior Beige Book period. Manufacturing, among other sectors, continued to decline. Employment grew slightly despite increased talk of a recession. Firms reported wage and price pressures subsided, but growth remained at a moderate and strong pace, respectively. Hiring, supply chains, and price growth remained key challenges for most firms. Firms' expectations for future prices fell.\nCleveland\nBusiness activity steadied in the District, after slowing slightly in the prior reporting period. Moreover, contacts appeared cautiously optimistic that demand would not soften much further in the next few months. Firms continued to add to their payrolls even though their hiring plans were not as aggressive as earlier in the year. Upward cost and price pressures let up somewhat with generally softer demand and some easing of supply disruptions.\nRichmond\nEconomic activity slowed slightly in recent weeks. Manufacturers, ports and transportation companies, retailers, and hospitality firms reported slight to modest declines in sales and volumes. Real estate activity was flat to down moderately. Lending activity declined for most loan types. Meanwhile, nonfinancial services saw moderate growth, employment increased strongly, and price growth remained robust.\nAtlanta\nEconomic activity grew slightly. Labor markets eased some, but wage pressures continued. Many nonlabor costs moderated. Retail sales softened. Leisure travel activity slowed while business travel grew. Housing demand weakened. Commercial real estate conditions were mixed. Manufacturing activity was strong. Demand for transportation services was mixed. Banking activity was steady.\nChicago\nEconomic activity decreased modestly. Employment increased moderately, business spending was little changed, consumer spending and construction and real estate declined modestly, and manufacturing orders were down moderately. Wages rose rapidly, as did most prices, while financial conditions improved modestly. Agriculture income expectations for 2022 were unchanged. Nonbusiness contacts reported little change in economic activity.\nSt. Louis\nEconomic conditions have declined slightly since our previous report. Slowing consumer demand and continued price increases have contributed to a weaker outlook. Residential housing activity slowed and rental demand rose. Manufacturing and agriculture firms saw significant input price increases.\nMinneapolis\nThe Ninth District economy fell slightly since early July. Employment grew moderately and wage pressures remained strong. High prices persisted but showed signs of easing. Energy and manufacturing saw only slight growth. Consumer spending was flat; construction and real estate sectors were subdued. Farm conditions were healthy, save for drought in some areas. Reports from minority- and women-owned businesses were mixed.\nKansas City\nThe Tenth District economy expanded slightly, with much of the growth in business revenue driven by higher prices rather than greater volumes of activity. Worker turnover declined moderately, and labor demand remained strong. Prices grew rapidly, including housing rental rates. Consumer spending was mostly unchanged, but more households began to express difficulty in meeting regular expenses, such as utility payments.\nDallas\nEconomic growth in the district continued, though the modest pace experienced over the summer has been a downshift from stronger expansion experienced earlier in the year. Job growth was quite robust and wage growth remained highly elevated due to a tight labor market. Supply chain bottlenecks have begun easing and prices were not rising as fast. Outlooks were mixed as uncertainty remained elevated.\nSan Francisco\nEconomic activity expanded modestly over the reporting period. Hiring activity grew at a modest pace amid tight labor market conditions. Wages and price levels increased further, albeit at a slower pace. Retail sales were stable while demand for services strengthened. Conditions in the agriculture sector were mixed. Residential real estate activity eased, and lending activity was steady.\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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"September 7, 2022\nSummary of Economic Activity\nEconomic activity in the Seventh District decreased modestly overall in July and early August. Contacts expected slow growth in the coming months, with many expressing concerns about the potential for a recession. Employment increased moderately, business spending was little changed, consumer spending and construction and real estate declined modestly, and manufacturing orders were down moderately. Wages rose rapidly, as did most prices, while financial conditions improved modestly. Agriculture income expectations for 2022 were unchanged. Nonbusiness contacts reported little change in economic activity.\nLabor Markets\nEmployment increased moderately over the reporting period, and contacts expected a similar pace of growth over the next 12 months. Many contacts continued to report difficulty in finding workers across sectors and skill levels. One contact in construction said they had rushed completion of a restaurant in time for a local festival, but the restaurant couldn't open because of lack of staff. Still, a number of contacts said finding workers had become easier. In addition, a workforce development agency saw an increase in the number of people coming in for job placement assistance or to apply for unemployment insurance benefits. Overall, wage and benefit costs increased rapidly and were aimed both at attracting new workers and retaining existing talent. In addition to labor market tightness, contacts cited high inflation as an impetus for workers requesting wage increases.\nPrices\nMost prices rose rapidly in July and early August, though energy prices decreased. Contacts expected the pace of price increases to slow over the next 12 months. Aside from a decline in energy costs, producer prices continued to rise, spurred by passthrough of higher costs for raw materials, labor, and shipping. However, growth in raw materials prices continued to slow, with contacts highlighting lower steel prices. Consumer prices generally moved up robustly (apart from declines in fuel prices) due to solid demand levels and passthrough of higher costs.\nConsumer Spending\nConsumer spending decreased modestly over the reporting period. Contacts noted that unit-sales of goods had fallen and that leisure and hospitality spending declined, albeit from a strong level earlier in the summer. Consumers continued to shift their spending toward essential items. Grocery contacts noted that trading down picked up across income levels\u2014lower income shoppers moved to store brands over name brands while higher income shoppers shifted toward prepared foods from eating out. Contacts expected a slight increase in back-to-school sales over last year. Light vehicle sales were unchanged at a low level, although dealers indicated that pre-orders of new vehicles stayed robust.\nBusiness Spending\nBusiness spending was little changed on balance in July and early August. Retail inventories were elevated overall, and contacts expected to see increased price promotions for the rest of the year to help pare them down. Auto inventories increased slightly from their pandemic lows. In manufacturing, inventories were moderately elevated, as contacts reported building up \"just-in-case\" stocks of available inputs while also holding on to nearly completed products as they waited for missing parts to arrive. Retail and manufacturing contacts expected various inventory challenges to persist into 2023. Transportation services activity decreased slightly as greater congestion in the rail system slowed container movement. Capital expenditures increased modestly, with contacts highlighting purchases of new equipment, including machinery and vehicles. Commercial, residential, and industrial energy consumption was up slightly.\nConstruction and Real Estate\nConstruction and real estate activity decreased modestly overall. Residential construction pulled back slightly, and homebuilders expected a further decline in coming months. Residential real estate activity decreased moderately. Contacts noted that the number of offers homes typically received had fallen and that it was taking longer for them to sell. Home price growth slowed but remained positive. Rents were up modestly. Nonresidential construction decreased slightly, as contacts continued to report project delays and elevated costs. Commercial real estate activity also fell slightly, with contacts highlighting some cooling in the strong demand for industrial space. There were concerns about the ability of owners of multifamily properties to repay floating interest rate loans that were underwritten with large forecasted rent increases. Prices and rents fell slightly, as did vacancy rates.\nManufacturing\nManufacturing demand was down moderately in July and early August. Contacts again reported that with slowing new orders they were making headway in filling their large backlog of unfilled orders. Still, one contact indicated that at many manufacturers, current backlogs were large enough to sustain production levels through the end of the year. Output continued to be held back by difficulties with labor availability and supply chains. Steel demand decreased modestly, with one contact noting a decline in construction demand. There was a moderate fall in orders of fabricated metals, led by declines in demand from the transportation sector. Auto production was little changed, as shortages of microchips and other materials persisted. One contact said there is growing recognition in the auto industry that the microchip shortage would continue well into 2023. Heavy truck demand increased slightly, while inventories continue to be very low. Demand for heavy machinery was flat.\nBanking and Finance\nFinancial conditions improved modestly over the reporting period. Participants in the equity and bond markets reported net increases in asset values and somewhat lower volatility. Business loan demand slowed slightly overall, with contacts pointing to higher borrowing rates and elevated uncertainty as contributing to the slowdown. Business loan quality remained very strong, though one contact said they were planning for some weakening in the coming months. Business loan standards tightened some. In consumer markets, loan volumes decreased modestly, with contacts continuing to note large declines in mortgage lending in the face of higher interest rates. Consumer loan quality was strong and stable, while standards tightened a bit.\nAgriculture\nAgricultural income prospects for 2022 were little changed, with contacts continuing to expect that most producers would turn a profit this year. Although portions of the District were in drought, farms were generally expected to have at least average yields for corn and soybeans. Crop progress was behind the typical pace due to late plantings but was catching up. Corn, soybean, and wheat prices were down from the previous reporting period, as were prices for milk and eggs. Hog prices declined slightly from a high level, while cattle prices edged up. Strong demand for agricultural equipment continued, with long lead times for delivery.\nCommunity Conditions\nCommunity development organizations and public administrators reported little change in overall economic activity, although inflation was creating financial challenges for some organizations and their clients. State government officials saw healthy growth in tax revenues over the reporting period. Small business development organizations noted their manufacturing clients' large order backlogs would take time to clear because of labor and supply chain constraints. Small business investment demand waned some due to higher interest rates and elevated economic uncertainty. Nonprofits assisting low- and moderate-income households indicated that higher prices for fuel, food, and housing were straining household budgets and leading to strong demand for their services. Nonprofits also noted financial challenges, as their funding was unable to keep up with rising staff wages.\nFor more information about District economic conditions visit: chicagofed.org/cfsec\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/2022/2022-09-ny

"Beige Book Report: New York\nSeptember 7, 2022\nSummary of Economic Activity\nEconomic activity in the Second District contracted modestly in the latest reporting period, with worker shortages continuing but supply backlogs easing somewhat. Businesses did not expect much improvement in the months ahead. Selling prices, input prices, and wages all continued to increase but to a slightly lesser extent than earlier in the year. Businesses continued to hire, albeit at a somewhat slower pace than in recent months, and there have been scattered reports of layoffs. Still, a wide range of employers plan to add staff, on net, in the months ahead. Manufacturers reported that activity fell significantly in recent weeks. Consumer spending has been flat, though tourism has remained strong. The home sales market softened further, while the rental market continued to strengthen, amplifying concerns about housing affordability. Commercial real estate markets were mixed but, on balance, a bit weaker. Construction starts declined, and industry contacts have grown increasingly pessimistic. Conditions in the broad finance sector improved but remained weak, and regional banks reported ongoing declines in loan demand, tighter credit standards, and steady delinquencies.\nLabor Markets\nEmployment increased modestly despite ongoing worker shortages, though businesses reported some improvement in labor availability and there have been scattered reports of layoffs. One upstate New York employment agency noted that demand for workers has abated a bit but remains solid, especially in technology-related fields. A New York City agency reported that hiring has remained strong and workers remain hard to find. Businesses in the manufacturing, distribution, and information sectors indicated that they continue to add staff, on net. Firms in all major industry sectors except construction, retail, and finance plan to add staff in the months ahead.\nBusinesses across all major sectors except finance continued to report widespread wage increases. However, one employment agency noted a leveling off in wages, and another indicated that the pace of wage growth was slowing. Businesses across all sectors plan to raise wages further in the months ahead. Remote work arrangements among office-based businesses remain fairly widespread and are not expected to change much in the year ahead.\nPrices\nMost business contacts noted ongoing broad-based escalation in input prices, though to a somewhat lesser extent than in the prior report. Cost increases were particularly widespread in construction. Contacts across all major sectors expect cost pressures to persist.\nBusinesses continued to report widespread escalation in their selling prices, though to a slightly lesser extent than in recent months. Increases were most pervasive in the construction, manufacturing, distribution, and leisure & hospitality industries. A large but declining share of businesses said they plan further price hikes in the months ahead.\nConsumer Spending\nConsumer spending has been little changed in recent weeks. Nonauto retailers reported that business has been essentially flat, picking up a bit in July but tapering off in the first half of August. One retail chain noted some uncertainty about the upcoming holiday season, anticipating a modest decline from 2021 levels. Auto dealers in upstate New York reported that sales of both new and used vehicles have remained sluggish in the latest reporting period\u2014due mainly to lack of inventory but also to affordability issues which have crimped demand.\nManufacturing and Distribution\nManufacturing activity has been choppy, declining significantly in recent weeks. However, businesses engaged in wholesale trade and transportation & warehousing continued to report modest growth. Manufacturers reported a slight decline in unfilled orders and expect both unfilled orders and delivery times to decline noticeably in the months ahead. Businesses in manufacturing and distribution report some improvement in supply availability, and, looking ahead, disruptions and delays are expected to diminish.\nServices\nActivity in the service sector has been flat to slightly weaker in the latest reporting period. Education & health providers and information firms noted a slight increase in activity, while businesses engaged in leisure & hospitality and professional & business services saw a modest decline. Businesses in these sectors remain mildly optimistic about the near-term outlook.\nTourism, however, has continued to show strength. In New York City, hotel occupancy has remained at or above 75 percent in recent weeks. Domestic tourism has been fairly robust, and international visits have picked up further, led by Europe, whereas visits from Asia (especially China) have lagged substantially. Moreover, visitors from Europe have been spending briskly, despite the weak Euro and Sterling. Underscoring this trend, attendance at tourist attractions, such as the Statue of Liberty, has been solid, and the U.S. Tennis Open is reportedly sold out. Upcoming events, such as the UN General Assembly and Climate Week, are expected to draw more visitors. Business travel, though still well below pre-pandemic levels, has picked up\u2014mainly reflecting smaller in-person-only conferences and meetings.\nReal Estate and Construction\nThe home sales market has softened over the summer, while the rental market has continued to strengthen. In New York City, as well as across most of the District, homes sales tapered off, and the inventory of available homes, though still very low, edged higher. Home prices appear to have leveled off across most of the region and the prevalence of bidding wars has receded noticeably.\nIn contrast, residential rental markets strengthened further. Throughout New York City, rents continued to rise briskly in July and were up roughly 20 percent from a year earlier in Manhattan and up about 15 percent in Brooklyn and Queens. Rental vacancy rates turned up modestly but are still near 20-year lows. Rents have also continued to trend up fairly strongly in upstate New York and northern New Jersey.\nCommercial real estate markets have softened a bit, on balance. Office markets were steady to slightly weaker, with vacancy rates edging up in Manhattan, northern New Jersey, and upstate New York but steady elsewhere. Office rents were little changed across the District. The industrial market has also shown scattered signs of weakening, with vacancy rates steady to modestly higher but rents continuing to rise briskly. Retail rents were flat, while vacancy rates rose modestly.\nConstruction activity weakened somewhat, as construction starts slipped. Still, a fair amount of space remains under construction, though this too has declined a bit, as a good deal of commercial space under development has come or is about to come to market. Industry contacts characterized the general business climate as quite negative and worsening, and contacts are somewhat pessimistic about the near-term outlook.\nBanking and Finance\nContacts in the broad finance sector characterized the general business climate as negative but improving modestly. Small to medium-sized banks reported lower loan demand across all segments. Refinancing activity also decreased. Credit standards tightened for business loans and commercial mortgages but were little changed for consumer loans and home mortgages. Loan spreads widened and deposit rates rose. Finally, delinquency rates were unchanged across all categories.\nCommunity Perspectives\nCommunity leaders reported that rising prices have had various adverse effects on people in the District. Food pantry managers were seeing an ongoing rise in food prices and increased demand from clients, leading to heightened food insecurity. However, they noted some easing of logistical and delivery challenges. With rents escalating rapidly, especially in New York City, concerns about housing affordability have grown. Some nonprofits' expansion plans, driven by new mandates and funding, have been hampered by labor shortages caused by turnover, retirements, and wage competition from the private sector.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\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/2022/2022-09-sl

"Beige Book Report: St Louis\nSeptember 7, 2022\nSummary of Economic Activity\nEconomic conditions have declined slightly since our previous report. Consumer demand for goods and services has slowed slightly and price increases have continued across a broad range of sectors. Labor shortages have limited activity in service sectors, and employers continue to raise wages to attract and retain workers. Input prices rose, and most firms reported plans to pass additional increases on to consumers. Real estate contacts saw homebuying activity slow significantly, while demand for rental properties strengthened. The agriculture and manufacturing sectors experienced continued supply chain bottlenecks and input shortages that contributed to price increases. The overall outlook for business conditions over the next 12 months has improved slightly but remains pessimistic.\nLabor Markets\nEmployment activity has been mixed since our previous report. Contacts across the District continue to report that workers remained scarce. Several St. Louis public schools temporarily suspended school bus services because of a shortage of drivers. Some firms utilized flexible hours, bonuses, and increased entry-level pay to fill jobs and retain workers. In contrast, some Arkansas contacts reported recent signs of the labor market easing, including wage pressures beginning to level out.\nWages across the District have grown moderately since our previous report. One Louisville-area professional services firm gave workers bonuses to keep up with inflation, and a Little Rock leisure and recreation contact had to raise their skilled labor wages by 15 percent. Some short-staffed firms reported they were continuing to offer incentives to work more hours or on weekends but were still receiving few to no takers.\nPrices\nPrices have increased moderately since our previous report. Approximately half of all contacts reported modest to moderate increases in prices charged to consumers. A jewelry retailer reported higher prices charged to consumers and expects to further raise prices in coming months. Auto dealers reported increased prices charged to consumers. A contact in the health care industry reported \"double digit\" increases in payroll costs. Multiple contacts in the hospitality industry reported higher input costs, but reports on the pass-through rate to consumers were mixed. A furniture store contact expects sales prices to decrease due to excess supplier inventory.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported mixed business activity and a mixed outlook. One retailer in St. Louis noted that they had a dramatic improvement in sales in early August; although they are not completely sure of the reason, they suspect that declining fuel prices played a big role. An auto dealer in Little Rock reported that some of their customers are asking to be let out of their vehicle order commitments. Most restaurants in Louisville noted that overall customer volume is down considerably. Hospitality contacts reported mixed business activity compared with this time last year and a mixed outlook for the upcoming months.\nManufacturing\nOverall manufacturing activity increased slightly since our previous report. Survey-based indices suggest that production, capacity utilization, and new orders have all increased slightly, while inventory levels and employment remain low. Production times are still longer than they were pre-pandemic, and supply chain issues still limit the availability of key inputs. Though the backlog of orders remains long, the rate of new orders has slowed due to softening demand. Labor shortages from COVID-related absenteeism are still a major concern for manufacturers. On average, firms reported they expect slight increases in production, capacity utilization, and new orders in the coming quarter.\nNonfinancial Services\nActivity in the nonfinancial services sector has decreased slightly since our previous report. While freight air traffic has slightly increased, passenger traffic decreased. A ground transportation company in Kentucky reported struggling to meet demand and to find new trucks and mechanics. Healthcare firms in the Louisville region saw tight labor markets and high employee turnover rates. Labor costs increased as outpatient medical clinics competed with hospitals for the same credentialed employees by increasing pay by 25 percent and paying licensing fees, but an increase in appointment cancellations and higher out-of-pocket expenses for patients led to fewer sales this quarter. In Eastern Missouri and Northern Kentucky, post-secondary education institutions saw lower enrollment as fewer people opted to attend college, and childcare contacts reported that a lack of qualified applicants inhibited expansion.\nReal Estate and Construction\nCommercial real estate activity has slowed slightly since our previous report, with large office buildings competing for few clients. Industrial real estate inventory remains extremely low, though industrial construction activity has increased.\nResidential real estate demand has slowed significantly since our previous report. Contacts reported that it remains a seller's market, but the \"multiple-offer\" market has ended. Prices remain elevated compared with one year ago, and inventories are just beginning to return to pre-pandemic levels. An Arkansas real estate contact noted that, while demand has contracted, it remains above pre-pandemic levels.\nDemand for rental units has continued to increase since our previous report\u2014especially for single-family housing. Rental rates in all four major District MSAs increased since our previous report. The general outlook of contacts remains negative, with over 80 percent of contacts in real estate and construction describing their outlook as somewhat or significantly worse than the previous quarter.\nBanking and Finance\nBanking conditions in the District have seen little change since our previous report. On average, surveyed bankers indicated that overall loan demand has decreased slightly compared with the same quarter of last year. While mortgage loan demand has declined, due to a combination of rising interest rates and low housing inventory, demand for commercial and industrial loans has increased moderately. Delinquency rates for all loans are largely unchanged relative to the same quarter of last year, and watch-list loans remain manageable. Banking contacts in Louisville expect more competitive deposit rates in the coming months, as liquidity wanes from its previously high levels.\nAgriculture and Natural Resources\nDistrict agriculture conditions have moderately worsened since our previous report. Compared with the previous reporting period, crop conditions in the District have either slightly declined or remained relatively unchanged. Relative to the previous year, the percentage of corn, cotton, and soybeans rated fair or better sharply declined, while the same measure for rice slightly increased. Worsened conditions may be partially attributable to the droughts and severe flooding that have affected the District, especially Missouri and Kentucky. Additionally, District contacts indicated that farming conditions remained strained due to input prices and labor shortages, with the ability to hire quality labor being their biggest concern.\nNatural resource production fell moderately from July to August, with seasonally adjusted coal production decreasing just above 7 percent. Additionally, production is down approximately 3 percent from a year ago.\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 7, 2022\nSummary of Economic Activity\nThe Sixth District economy expanded slightly from July through mid-August. Pressures in the labor markets lessened somewhat, but overall, the labor market remained tight amid persistent wage pressures. Certain nonlabor costs fell, but remained elevated as compared with pre-pandemic levels. Retailers reported declining unit sales and evidence of consumers trading down from brand names to private label products. Demand for automobiles was strong, but inventory shortages continued to hinder sales. Leisure travel activity slowed while business travel continued to recover. Demand for housing continued to fall as affordability further declined. Commercial real estate activity remained mixed. Manufacturing activity was robust, though some slowing was reported. Transportation activity varied. Deposit growth continued to slow at financial institutions, but loan growth improved.\nLabor Markets\nSixth District labor market pressures eased modestly since the previous report, as several employers reported an uptick in applicants and some lessening in turnover. However, conditions remained tight and several noted ongoing automation efforts designed to reduce labor reliance. Housing affordability and higher costs of living were said to be limiting the pool of workers in some areas. Some indicated that retention had improved in response to growing economic uncertainty. No business contacts reported layoffs, but several said that they had begun to shrink headcount through attrition, reduce open positions, and fill positions more slowly. Several firms anticipate layoffs amid slowing demand later this year and into next year.\nMost employers reported persistent upward wage pressure. Many firms tried to offset higher wages with bonuses and per diems to attract workers and incentivize attendance and productivity. Enhanced benefits options were also offered. The outlook for wage growth was mixed; some expect wage growth to remain strong, while others anticipate it will subside over the next year.\nPrices\nFreight costs continued to slowly decline over the reporting period, and costs for some inputs like copper, lumber, and steel softened from pandemic highs but remained elevated. Numerous contacts reported diminished pricing power, either through pushback in negotiations or reduced demand, and there was widespread uncertainty over near-term inflationary impacts on demand. Gasoline prices also moderated, but rent, utilities, and food prices continued to climb. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth remained unchanged at 4.3 percent, on average. Firms' year-ahead inflation expectations decreased to 3.5 percent, on average, from 3.7 percent in July.\nConsumer Spending and Tourism\nDistrict retailers reported declining unit sales and an increase in consumers trading down from brand name to private label products, attributed to diminishing real discretionary income. Automobile dealerships continued to report healthy demand for new vehicles, but sales were muted by inventory shortages. Most retailers are cautiously optimistic for the upcoming holiday season.\nTravel and tourism contacts experienced slowing demand for leisure travel, described as a return to more \"normal,\" pre-pandemic levels. Business travel and convention activity continued to recover with healthy bookings for the fall, although still below 2019 levels. Contacts are optimistic that travel will continue to normalize throughout the remainder of the year.\nConstruction and Real Estate\nHousing markets remained challenged across the District due to rising home prices and interest rates, declining affordability, and inventory shortages. Although some markets experienced a sharp increase in home prices over the past year as housing demand in these regions exceeded supply, overall homebuyer sentiment throughout the District dropped sharply, mortgage originations and pending home sales declined compared with a year ago, and the share of homes on the market with a reduced asking price rose. Though construction supply chain issues eased and cost inflation slowed, homebuilders experienced increased contract cancellations as rising interest rates priced more buyers out of the market.\nDistrict commercial real estate (CRE) activity was mixed. Contacts reported healthy conditions in the multifamily and industrial markets, but voiced concerns that negative sentiment associated with a potential economic slowdown could impact activity. Slowing occurred in certain segments of retail CRE as some contacts reported a growing number of restaurant closings. Contacts also noted increasing concerns about possible declining CRE values as the bid-ask spread widened, pools of buyers diminished, the number of buyers seeking concessions grew, and prices declining in some of the less robust property types.\nManufacturing\nDistrict manufacturers continued to report strong demand, though a few noted a slowing of activity since the previous report. Some improvement in delivery times was mentioned. However, according to the Atlanta Fed's Business Inflation Expectations Survey, more than half of manufacturing respondents experienced moderate or severe supply chain disruptions causing shortages of supplies or inputs. Roughly two-thirds of manufacturers surveyed noted concerns about a potential recession due to inflation, rising interest rates, stock market volatility, and the Russia-Ukraine conflict. Most manufacturers expect sales over the next twelve months to be similar or slightly higher than pre-pandemic levels.\nTransportation\nActivity was mixed for District transportation firms. Container ports continued to see record container volumes. Inland barge companies reported solid coal exports and refined petroleum product shipments. Trucking activity slowed for some carriers, and freight brokerages saw spot market rates drop and slowing demand for flatbed services. Rail activity declined as domestic intermodal freight, lumber shipments, and international chemical volumes fell.\nBanking and Finance\nDistrict banking conditions were steady. Loan growth improved despite higher interest rates, while growth in securities portfolios declined, reflective of slowing deposit growth. Financial institutions reported strong asset quality metrics, although the level of nonperforming assets increased slightly. Provisions for credit losses also increased. Improved earnings were driven by higher net interest margins offsetting lower noninterest fee income.\nEnergy\nEnergy contacts indicated that the supply of crude oil and gasoline did not keep pace with demand over the reporting period. Oil refining utilization eased slightly, which contacts attributed to some refiners completing previously delayed maintenance projects. However, refiners experienced strong margins and are expected to rebuild product inventories over the balance of the year. Natural gas production trended up and exports soared. Utility contacts reported rising demand for power, driven by hot weather and strong growth in retail and commercial customers; utilities also experienced higher fuel and power costs, resulting in higher utility bills for customers. Providers continued to diversify power generation systems, including investing in renewables, particularly solar and wind.\nAgriculture\nDemand for agricultural products remained strong. Hot weather and dry spells damaged crop yields, particularly corn, in many areas of the District. Prices paid to farmers were elevated overall but fell somewhat for corn and milk. Restrictions on imports from China led to higher demand for domestic cotton. Demand for poultry exceeded supply, while the beef market held steady. Long lead times for machinery and parts forced many farmers to use decommissioned machinery and some small farms suffered crop losses due to inoperable equipment.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy\u2010matters/regional-economics.aspx\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2022/2022-09-bo

"September 7, 2022\nSummary of Economic Activity\nBusiness activity expanded at a modest pace on balance, led by solid revenue growth among retailers and manufacturers and robust tourism activity. In contrast, commercial real estate activity was flat and home sales fell, developments attributed in part to higher interest rates. Labor markets remained very tight, and employment increased only modestly despite above average (but stable) wage growth. Labor scarcity held back revenue growth at staffing firms and led to reduced hours at some Massachusetts restaurants. Firms' output prices increased moderately on average, but several contacts noticed a stabilization of input prices such as for wholesale food items. Also, freight costs eased owing to a reversal of earlier fuel surcharges. Retail, hospitality, and manufacturing contacts were mostly optimistic, but the real estate outlook worsened and several contacts in diverse businesses perceived that the risk of recession remained elevated.\nLabor Markets\nEmployment increased modestly and wage growth held steady at an above-average pace. Although headcounts were flat in most cases, two manufacturers managed to boost their staffing levels by moderate and large margins, respectively. Across sectors, most contacts said that attracting and retaining workers remained very challenging, even after having raised their wage offers for new and/or existing employees. However, selected contacts in the retail sector experienced a modest decline in attrition. The dearth of labor supply held back revenue growth at staffing firms and caused some restaurants to reduce their hours. Contacts said that nonwage incentives, such as remote work options, flexible schedules, and career training, remained important for attracting and retaining employees. One manufacturer experienced high absenteeism rates among workers dealing with substance abuse problems. Contacts who commented on the labor outlook expected labor shortages to persist, but not worsen, moving forward.\nPrices\nOutput prices increased moderately on average, but input pricing pressures were mostly stable. All but one manufacturer raised its output prices recently, with increases ranging from 2 percent to 12 percent. One retailer posted a moderate price increase in the second quarter in response to higher costs for labor and a steep increase in propane costs following a contract renegotiation. Restaurant menu prices mostly stabilized but remained up 7 percent on average from one year ago, as wholesale food prices levelled off. Freight and shipping costs subsided following a reduction in fuel surcharges that had been added in the spring, and contacts said that supply chain issues had either eased or at least not intensified in recent months. Hotel room rates climbed at a robust pace that was nonetheless more moderate than that of earlier in the year. Despite the stabilization of cost pressures, some contacts said that further price increases were possible moving forward, as their output prices tended to adjust to cost increases with a lag.\nRetail and Tourism\nRetail and restaurant contacts reported moderately higher sales, while hotels enjoyed a summer surge that exceeded even their optimistic expectations. An online retailer had a modest uptick in sales and recaptured market share lost earlier this year from supply chain woes. A salvage store enjoyed a substantial increase in sales, but high costs kept profits flat. A Massachusetts restaurant industry contact said that sales increased solidly throughout the state amid renewed tourism activity, as summer customers appeared undeterred by earlier menu price hikes. Downtown Boston restaurants saw relatively muted growth, a fact attributed to the still tepid rebound in business travel. Cape Cod restaurants faced very high demand, but labor shortages forced many to reduce their operating hours. Hotel occupancy rates in the Boston area climbed rapidly in recent months, approaching pre-pandemic levels despite reduced business travel. The outlook was mostly optimistic, but concerns about ongoing inflationary pressures and labor shortages persisted.\nManufacturing and Related Services\nMost First District manufacturing contacts reported moderately stronger sales on balance. The semiconductor industry continued to enjoy very strong revenue growth. A furniture maker said that his earlier pessimism turned out to be groundless: demand for his firm's goods has been exceptionally strong, with in-store traffic back at pre-pandemic levels and online sales well above pre-pandemic levels. The only firm to report weaker sales, a veterinary care supplier, explained that veterinary clinics were cutting their hours to relieve overworked staff. While all contacts experienced ongoing stresses in the supply chain, some said that such issues had eased, and one reported that logistics firms had stopped levying surcharges. None of our contacts reported any revisions to their capital expenditure plans. The outlook was mostly positive, with two exceptions. The veterinary supplier expected demand to continue to soften back to pre-pandemic levels, and a capital equipment manufacturer foresaw weaker demand in the third quarter owing to overall pessimism about the economy.\nStaffing Services\nFirst District staffing contacts reported no significant revenue changes in 2022Q2 from the previous quarter, as revenue growth was reportedly held back by weakness in labor supply. Demand for labor continued to outpace supply across a variety of industries and experience levels, and wages remained elevated throughout the region. Contacts characterized the labor market as extremely competitive and fast-paced, with candidates being placed in a matter of days. One contact noted an increase in pre-college-graduation recruitment activity for some entry-level jobs. According to another contact, any number of snags could become an immediate dealbreaker for a job seeker, such as the need to relocate or to work in-person rather than remotely. In response to the tough hiring environment, staffing firms made renewed efforts to reach new job candidates and/or to accelerate the hiring process, such as by boosting their advertising activity and offering referral bonuses. Some contacts expressed concerns about an impending economic contraction, signaled both by macroeconomic conditions and by recent layoffs at a large Boston-area employer, but one was hopeful for a mild slowdown that would normalize the labor market.\nCommercial Real Estate\nFirst District commercial real estate markets were mostly stable. Contacts reported a largely static retail leasing market, with little change in rents or demand for space. Rents for industrial space remained quite high, with vacancy rates at historic lows, as scarce land and labor constrained the addition of new supply. Demand for high-square-footage industrial space continued to outstrip supply, particularly in urban areas. Vacancy rates in office buildings remained elevated throughout the region, and lease rates fell or held steady, as working from home remained prevalent. Contacts said that office rents were flat but that concessions such as high renovation budgets had become standard. Higher interest rates deterred borrowing for new construction and acquisitions. Equity contributions on new loans increased, as investors sought to avoid lower-yielding options. The outlook was generally pessimistic. In the retail and industrial markets, contacts expected high borrowing and building costs to continue to deter construction activity. Several contacts expected office leasing activity to pick up by the end of the year but cautioned that such activity would result in significant tenant downsizing.\nResidential Real Estate\nHigher interest rates cooled home-buying demand, leading to fewer closed sales in the First District's residential real estate markets. (Vermont reported year-over-year changes for June 2022 and all other areas reported changes for July 2022. Connecticut data were unavailable.) Closed sales fell sharply over-the-year in all reporting markets, in a notable weakening from the previous report. Contacts attributed the decline in sales to rising mortgage rates, coupled with high price inflation that crimped buyers' budgets. Home prices increased over-the-year in all reporting markets. For single-family homes, the over-the-year price increase was smaller than in the previous report, and contacts anticipated that prices would continue to level off into the fall. In condo markets, the price increases were slightly larger than or on par with those from the previous report. Since the spring, inventories were substantially lower in Rhode Island, Maine, and Vermont, but moderately higher in Massachusetts (including Boston proper) and New Hampshire. Several contacts described a return to pre-pandemic normalcy in the market after the home-buying \"frenzy\" of the past two years.\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"

Philadelphia

/beige-book-reports/2022/2022-09-ph

"September 7, 2022\nSummary of Economic Activity\nOn balance, business activity in the Third District held steady \u2013 a pause from the slight growth of the prior Beige Book period. Broad nonfinancial services activity grew slightly, but most other sectors were flat or down. Activity in a few sectors remained below pre-pandemic levels. Employment grew slightly as fears of a recession increased. Wages and prices continued to grow at a moderate and strong pace, respectively. However, firms noted that wage and price pressures were, in fact, easing. Moreover, firms' expectations for future prices fell. Most firms continued to note hiring difficulty, supply chain disruptions, and high prices as their biggest challenges; COVID-19 cases held steady in the District at relatively low rates. On balance, expectations for continued economic growth over the next six months declined for nonmanufacturing firms but remained positive. Among manufacturers, expectations remained negative and deteriorated further. Expectations for all firms were well below their nonrecessionary historical averages.\nLabor Markets\nEmployment grew slightly \u2013 slower than the prior period's modest pace. Scattered reports of layoffs, attrition, and hiring freezes have increased since the prior period. One staffing company reported slower job orders, noting order activity is approaching levels consistent with prior recessions. The share of firms reporting employment increases edged down from the prior period. However, the share remained near one-quarter among both manufacturing and nonmanufacturing firms despite rising signs of a cooling labor market.\nOverall, most firms still describe hiring and retention as a top concern. However, many contacts, including staffing firms, noted a slight easing of labor supply challenges in recent months, with more workers applying for open positions. One contact stated that some workers have explained that they had quit jobs because of poor management, unkept promises, or racist attitudes.\nFirms continued to note that wage growth subsided in recent months. However, wage inflation remains widespread and appears to have maintained a moderate pace. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee edged down but remained above 50 percent, as has been true for the past year. Few firms reported lower compensation.\nOn a quarterly basis, firms reported a somewhat higher expectation of the one-year-ahead change in compensation cost per worker, with a trimmed mean of 5.8 percent in the third quarter of 2022 \u2013 up from 5.2 percent in the second quarter.\nPrices\nPrices appear to have continued growing at a strong pace. Contacts reported that price increases received for their own goods and services over the past year rebounded in the third quarter of 2022 after slowing in the prior quarter. The trimmed mean for reported price changes in our quarterly survey questions rose to 7.2 percent from 6.3 percent in the second quarter of 2022 for all firms. Price increases ticked up to 4.5 percent from 4.4 percent for nonmanufacturers and rose to a high of 10.4 percent from 9.6 percent among manufacturers.\nDespite the rise in year-over-year price growth, price increases for firms' inputs were less widespread in recent months. Additionally, a smaller share of firms reported price increases throughout much of the downstream supply chain, including prices faced by consumers.\nLooking ahead one year, the price increases that firms anticipated receiving fell for the third consecutive quarter \u2013 the trimmed mean for all firms was 4.3 percent in the third quarter of 2022, down from 5.0 percent in the second quarter of 2022 and a peak of 5.9 percent in the fourth quarter of 2021. The expected rate of growth was 3.5 percent for nonmanufacturers and 5.4 percent for manufacturers.\nManufacturing\nOn average, current manufacturing activity continued to decline slightly. The index of new orders fell from an already negative reading. Despite the decline in new orders, the shipments index rose modestly as firms worked through backlogs.\nManufacturing firms' expectations remained muted. The indexes of future activity and new orders fell further into negative territory; however, expectations of future capital expenditures and employment were positive and even rebounded slightly.\nConsumer Spending\nOn balance, retailers (nonauto) and restaurateurs reported overall sales held steady from the prior period. Most contacts noted no change in customer traffic, but one contact reported smaller purchases per visit.\nAuto dealers reported little change to the weak level of sales observed during the prior period, as inventories remained extremely low; sales remained significantly below the levels in 2019. While constrained supply makes it difficult to observe demand, one contact noted that high prices and rising interest rates appeared to slightly reduce demand for vehicles' most expensive trim options.\nOverall, tourism continued to grow slightly. The ongoing recovery of business travel outweighed a slight pullback in leisure travel. Despite the slight slowdown, domestic leisure travel remained strong, particularly at shore destinations. One contact reported that the number of large events, such as conventions and concerts, had returned to near 2019 levels, but attendance at such events remained well below what was seen prior to the pandemic.\nNonfinancial Services\nOn balance, nonmanufacturing activity grew slightly \u2013 at a slower pace than in the prior period. Overall, the share of firms reporting increases in sales and in new orders declined, while the share of firms that reported decreases rose in both categories.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew modestly during the period (not seasonally adjusted) \u2013 at a slower pace than in the prior period, but comparable with the same period in 2019. Growth was balanced as all but one individual loan segment grew modestly to moderately during the period. Inflation is contributing more to the growth during the current year relative to past years.\nLoan volumes declined at a moderate pace for commercial and industrial loans. Multiple contacts noted a slowdown in commercial loan demand, as potential borrowers remained concerned about rising interest rates and economic uncertainty. Some contacts also highlighted the amount of untouched stimulus money still on firms' balance sheets. Credit card volumes appeared to continue growing moderately \u2013 at a quicker pace than typically experienced this season of the year.\nReal Estate and Construction\nHomebuilders reported that contract signings for new homes continued to fall modestly. However, contacts noted that sales traffic rebounded slightly in recent weeks following the introduction of new incentives and lower-priced options.\nExisting home sales continued to fall slightly. While prices continued to rise on a year-over-year basis, contacts noted that the percentage of houses selling for more than the asking price declined. Housing affordability remained a challenge, and rents remained high. The share of 211 calls that sought assistance for housing have edged higher since the prior period, to 35 percent of total calls \u2013 42 percent of those were for rental assistance. Calls for help with utility bills edged down to 20 percent.\nOn balance, construction activity and leasing activity for commercial real estate continued to hold steady. The markets for industrial/warehouse space, multifamily housing, and institutional projects remained strong. Rents for industrial/warehouse space and multifamily housing continued to rise. Contacts noted that high input prices remain a challenge for construction, but price growth has slowed. Multiple contacts reported that new land purchases and long-term projects have been delayed until firms have more clarity on interest rates and inflation.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/surveys\u2010and\u2010data/regional\u2010economic\u2010analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2022/2022-09-mi

"September 7, 2022\nSummary of Economic Activity\nEconomic activity in the Ninth District was slightly lower since early July. Employment grew moderately since the last report. Wage pressures were strong as labor demand remained healthy and labor availability was still tight. Price pressures were strong but eased slightly. Manufacturing and energy activity increased slightly since the last report. Consumer spending was flat overall with contacts reporting a wide variety of conditions. Commercial construction and real estate were flat, while residential construction and real estate declined. Agricultural conditions strengthened modestly, though drought threatened crop production in some parts of the District. Reports from minority- and women-owned business enterprises were mixed.\nLabor Markets\nEmployment grew moderately since the last report. Multiple surveys from late July through the last half of August confirmed that labor demand from District employers remained very healthy. A large majority of employers were actively looking for labor in some capacity, including many hoping to add full-time, permanent workers to their total workforce. However, employers continued to report difficulty finding and hiring workers for open positions. Larger firms reported more success in hiring workers compared with smaller firms, but they were also experiencing rising turnover rates. Total job openings have dipped recently, but initial unemployment claims also fell over the most recent four-week period (through mid-August) compared with the previous four-week period.\nWage pressures remained strong. A large majority of employers reported higher wages, and those raising wages by more than 5 percent increased modestly from earlier in the year. A health care firm in Michigan's Upper Peninsula said that lower revenue might lead to potential staffing cuts. \"But to keep good employees, we have to pay them more than the 5 percent raise we normally give.\" Among many strategies to attract labor, firms reported that raising wages was by far the most common strategy, followed by increased work flexibility, lowered job experience requirements, better benefits, and outsourcing more work.\nPrices\nPrice pressures remained elevated but eased slightly since the last report. More than half of respondents to a monthly survey of Ninth District businesses said their nonlabor input prices increased in July compared with the previous month, while three-fifths said that prices they charged to customers were unchanged or decreased. While manufacturers continued to see strong price pressures for raw materials and transportation, several reported that steel prices have declined recently. \"Metal markets are cooling off significantly,\" noted one contact. Prices for certain inputs such as lumber and copper also eased, according to contacts. Agricultural producers continued to report significant input cost pressures, particularly for fertilizer. Retail fuel prices in District states declined briskly since the previous report.\nWorker Experience\nUnemployed respondents to a recent survey in Montana were prioritizing higher wages, more flexibility, and better benefits as they looked for jobs. Employed job seekers were mainly looking for better pay and career advancement. Respondents listed child care costs and availability and the need for skills to meet job requirements as the top barriers to employment. \"Lack of reliable childcare has caused many issues in finding and keeping a job,\" shared a recently unemployed survey participant. A social services job seeker expressed frustration at having applied for 28 jobs but only hearing back from one. A partially retired nonprofit worker was considering returning to full-time work due to inflation pressures and the declining value of retirement savings. Pressures from higher food and fuel costs were broadly spread among workers.\nConsumer Spending\nConsumer spending was flat overall since the last report, with contacts reporting a wide variety of conditions. Several shopping centers reported that sales at home furnishing stores, services firms, and restaurants were solid, while apparel and luxury retail sales dropped. Tourism businesses reported strong activity across much of Montana, but the southern region was still suffering from closed entrances to Yellowstone National Park. An August survey of Minnesota hospitality and tourism firms found modest revenue growth compared with the start of summer and with the same period last year. In southern Minnesota, \"distilleries, wineries, [and] restaurants are banging right now.\" But some firms reported slowing sales, including an entertainment center whose customers were \"not being as frivolous with spending\" as earlier in the year. Sales of cars, trucks, and various recreational vehicles have slowed, in some cases significantly, with lower demand and continued inventory shortages both playing a role. Contacts said business travel remained subdued.\nConstruction and Real Estate\nCommercial construction was flat since the last report. Among several dozen contacts, revenue trends were modestly higher, which some contacts attributed to higher input costs getting passed on to customers. More than half said profits declined. Firms reported decent project backlogs but many challenges, including long product lead times and uncertain pricing that \"make it hard to bid projects and not lose money,\" said one contact. Residential housing slowed. Recent single-family permitting was lower across the District's larger markets compared with a year earlier, with higher interest rates reportedly pushing some builders and buyers to pause projects.\nCommercial real estate was flat overall since the last report. Real estate sources said that the office market continued to soften, with rising vacancy rates and subleasing activity. Office space sales also remained subdued with the increase in interest rates and related financing costs. However, demand for industrial space remained high, and low vacancy rates were spurring a host of new construction projects, including an increase in speculative developments, according to a source. Residential real estate activity fell. Closed sales of single-family homes were lower in markets across the District, with many seeing recent year-over-year sales decline by 10 percent to 30 percent.\nManufacturing\nManufacturing activity increased slightly since the previous report, with some signs of slowing. An index of regional manufacturing conditions indicated increased activity in Minnesota and South Dakota in July compared with a month earlier, while activity in North Dakota decreased. Manufacturing respondents to business surveys reported decreased new orders on balance. Expectations for the near future were generally positive, but about a third of manufacturers said their outlook for the second half of 2022 was somewhat or very pessimistic. A packaging producer announced the closure of a plant in Minnesota.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions strengthened modestly since the previous report, with notable exceptions. A survey of agricultural credit conditions pointed to continued growth in farm incomes; 80 percent of farm lenders said incomes in their area increased in the second quarter from a year earlier. While lenders reported continued concerns about rising production costs, commodity prices were strong enough to offset them. However, wheat and small grains production in Montana will be severely impacted by drought for the second year in a row. District oil and gas exploration activity increased slightly since the last report. A regional electrical transmission operator announced a multibillion-dollar, long-term expansion to its grid infrastructure. Production at District iron ore mines was expected to decrease significantly in 2022 from the previous year, due largely to an idling at one facility along with reductions in output at others.\nMinority- and Women-Owned Business Enterprises\nReports from minority- and women-owned business enterprises in the District were mixed. Services firms reported experiencing positive sales and profits while some retail and hospitality contacts had much lower sales compared to the same time last year. Hiring, prices, and the availability of input materials remained a challenge for many. Outlooks for the next four-week period were slightly more positive; contacts expected sales and profits to improve and other production pressures to ease. A contact in Minnesota noted that \"supplier notifications of price increases slowed down significantly.\"\nFor more information about District economic conditions visit: 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/2022/2022-09-kc

"Beige Book Report: Kansas City\nSeptember 7, 2022\nSummary of Economic Activity\nThe Tenth District economy expanded slightly, with much of the growth in business sales and revenue being driven by higher prices rather than a greater volume of activity. Consumer spending was mostly unchanged. Yet, more households began to report difficulty in meeting regular expenses, and delinquencies on utility payments picked up slightly. Amid high levels of overall production, new orders and backlogs at manufacturers declined modestly, indicating some softening of overall demand. Job growth was constrained by difficulties in attracting applicants. Many contacts indicated that worker turnover declined moderately, and that they were better able to retain high quality workers in recent months. Many businesses reported that they raised worker compensation mid-year in response to high inflation. Prices in the District rose broadly at a robust pace. Lags in the ability to fully pass-through costs led most contacts to report declining margins. Housing rental rates also increased in recent months. Several contacts pointed to an increased prevalence of property investors in both rural and metro rental markets contributing to rental cost pressures.\nLabor Markets\nEmployment grew at a moderate pace in the Tenth District, as the overwhelming majority of contacts expressed difficulty in filling newly opened positions. Most businesses pointed to low numbers of applicants, or qualified applicants, as the primary challenge to recruiting. Many contacts also highlighted difficulty in meeting workers' expectations regarding compensation. Worker turnover declined moderately across industries and across District states. Many businesses noted that they have been better able to retain higher quality workers in recent months, although retention continues to be a challenge. Expectations for hiring over the next six months declined modestly as some businesses indicated they do not plan to add to their workforce for the remainder of the year.\nContacts reported broadly they made mid-year adjustments to worker compensation that were tied directly to inflation pressures. Nearly all contacts reported wage increases. In addition, many businesses also made one-time bonus payments, added flexibility in work schedules, or adjusted the benefits they offer. Looking ahead, contacts were mixed on whether further changes to wages or other compensation will be needed before the end of the year. Most contacts expressed they would be more likely to continue inflation-related bonus payments.\nPrices\nPrices continued to grow at a robust pace. Most contacts reported a slight slowing of input price growth from recent highs, particularly for commodity-related materials. In contrast to the past year, where supply chain disruptions led to outsized increases in input costs for particular products, several contacts noted that input cost pressures are now more broad-based and incremental. Businesses' ability to pass price increases to customers improved moderately. On balance, though, most businesses indicated that price margins declined further as higher selling prices continued to be insufficient to fully offset higher materials costs and rising labor costs.\nConsumer Spending\nTotal consumer spending changed little over recent months. However, several contacts noted sales revenues were supported by higher prices, as quantities sold fell slightly. For example, even restaurants with lower price points commented the number of transactions was lower over the last month. Although consumer delinquencies on credit cards and mortgages remained subdued, more households began to express difficulty in meeting regular expenses as prices rose. Delinquencies on household utility bills picked up slightly.\nCommunity Conditions\nHousing affordability challenges for both renters and owners grew moderately in both rural and metro areas, particularly for low and moderate income (LMI) households. Contacts in several District states pointed to pressures on rental housing prices resulting from increases in investor purchases of local homes. Some investors have been reportedly less willing to accept vouchers or less willing to negotiate rents. Although purchase prices of single-family homes moderated somewhat, contacts reported that rising interest rates have pushed many prospective LMI buyers out of the market. Eviction cases increased in recent months. For example, a record number of eviction cases were filed in the Oklahoma County District Court in July and August. Funds from assistance programs for preventing evictions and foreclosures diminished recently.\nManufacturing and Other Business Activity\nRevenues at manufacturing firms expanded slightly, primarily due to robust growth in prices with slight decreases in production. Inventories grew mildly. Manufacturing contacts reported modest declines in a number of forward-looking indicators, such as new orders and order backlogs, which point to a tempering of otherwise high levels of demand. Services business contacts, both professional-oriented and consumer-facing, reported moderate growth in revenues but only modest increases on overall activity. Contacts also noted persistent supply chain disruptions continue to hamper growth. In line with softening demand, expectations for future activity over the next six months and planned capital expenditures eased slightly.\nReal Estate and Construction\nGrowth in non-residential real estate activity expanded at a moderate pace. While office vacancies remained elevated, demand for industrial space grew rapidly, and occupancy of retail spaces continued to expand at a moderate pace. Planned development for industrial sites expanded at a robust pace in several states. However, contacts expressed mixed views regarding future development and building activity for commercial properties. As financial conditions continued to tighten, several contacts noted that they were able to adjust terms and covenants, and to continue with planned construction. Other contacts indicated that persistently high materials costs and labor shortages are inhibiting further new development of large commercial projects.\nCommunity and Regional Banking\nLoan demand weakened modestly in the past month as rising interest rates and heightened economic uncertainty adversely affected borrower demand. Contacts noted that credit standards remained unchanged and credit quality was stable, with low past due and problem asset levels. Deposits were stable across community and regional banks in the District, but several contacts noted that competition for deposits intensified as rates rose further. Bankers largely expected credit quality to remain stable over the next six months, but concerns were noted regarding rising inflation and the prospect of a recession.\nEnergy\nTenth District energy activity was roughly unchanged over the last month, with notable differences across segments of the energy sector. The overall number of newly drilled wells and well completions were steady on net over the last month. Declines in oil prices led to a slight reduction in total active oil drilling rigs in the District. Offsetting those declines, robust increases in natural gas prices contributed to moderate increases in the number of rigs targeted towards natural gas production. Contacts noted that surging natural gas prices were driven by confluence of low inventories, high summer demand amidst historic heat waves, and rising exports. Coal producers also saw a slight uptick in production, due to persistently high demand from electricity generation and elevated coal prices.\nAgriculture\nConditions for the Tenth District's farm economy remained favorable, supported by the overall strength in commodity prices, despite elevated volatility in certain markets in recent months. Crop prices remained generally higher than a year ago, but were lower in August compared to earlier in the summer. Specifically, corn and wheat prices declined moderately, and soybean prices also dropped slightly during the past month. Heightened production costs and adverse growing conditions were worse than the national average in some District states over the past month. Several farmers noted that, even with elevated levels of revenue expected this year, net income levels would likely be more subdued. In the livestock sector, profit opportunities remained sound as cattle prices were slightly higher than the previous reporting period and hog prices increased notably.\nFor more information about District economic conditions visit: 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/2022/2022-09-ri

"September 7, 2022\nSummary of Economic Activity\nOn balance, economic activity in the Fifth District slowed slightly in recent weeks. Manufacturers reported a modest pull back in new orders while supply chains improved slightly, leading to reduced backlogs and higher inventory levels. District ports and trucking companies reported slight declines in shipping volumes and shipping rates; however, volumes were still high relative to their pre-pandemic levels. Retailers reported little change in total sales, overall, with some reports of shifts and reductions in consumer demand. Similarly, travel and tourism contacts saw flat to slightly declining consumer demand. Residential real estate sales slowed moderately, leading to increases in inventory and average days on the market; however, the housing market remains historically tight. Commercial real estate held steady, overall, but there were some reports of slowing demand in the office segment and a slight reduction in construction projects. Financial institutions reported modest declines in commercial lending and residential mortgages but solid demand for auto loans, particularly for used vehicles. Nonfinancial firms saw moderate growth but remained very concerned about inflation. Employment rose strongly in recent weeks and a majority firms reported increasing wages to recruit and retain workers. Price growth picked up slightly and continued to increase robustly, year-over-year.\nLabor Markets\nSince the last report, the Fifth District labor market remained tight while employment grew strongly. Firms continued to report off-cycle wage increases to attract and retain workers and planned to raise wages again on their typical annual cycle. Several contacts reported reducing hours of service or turning down work because they did not have enough employees. An increasing number of contacts mentioned concerns about a possible economic downturn, but this has not slowed down their hiring and many firms expected to increase their employment in the next six months.\nPrices\nSince our previous report, price growth edged higher from an already robust year-over-year rate. Firms in both manufacturing and non-manufacturing sectors reported a slight uptick in the rate of price growth for their goods and services. Input price growth, on the other hand, picked up slightly for service sector firms but was flat for manufacturers. Several producers noted that supply chain issues continue to lead to volatility in the availability and prices for inputs. One manufacturer added that not only were raw material prices rising, but so were the prices they pay for business-to-business services.\nManufacturing\nOn balance, Fifth District manufacturers reported modest declines in new orders. Some survey contacts reported improving, but still strained, supply chains as order backlogs and vendor lead times both decreased. Some manufacturers reported higher inventories, which many attributed to a varying combination of a pullback in demand and improving supply chains. Firms also reported that the cost of raw materials and energy prices remained elevated, although some noted that prices have eased somewhat from their recent peaks. Contacts continued to report difficulty finding workers with job-specific skills but had less trouble hiring office workers.\nPorts and Transportation\nFifth District ports indicated that shipping volumes weakened slightly this period. Imports again outpaced exports but there was some improvement in loaded exports. There was a steady volume of empties leaving the ports, allowing for reduced container congestion. However, there continued to be higher than normal dwell times of imports at the ports mainly due to chassis and warehouse constraints. Import volumes at Fifth District ports continued to be led by furniture and construction equipment. Spot shipping rates maintained their decline but were still above their 2019 levels. Air freight volume decreased this period partially due to carriers taking planes out of service for routine maintenance. Air freight rates remained elevated despite slightly lower fuel costs.\nTrucking companies stated that demand had slowed and the number of booked orders had decreased, but that they were not struggling to find loads as customers were still having issues with supply-chain inventory backlogs. Respondents indicated that there was expanding truckload capacity with spot rates down 30 percent since spring; though, less-than-truckload shipping rates remained unchanged. Most firms reported an improvement in hiring drivers. Trucking companies noted continued challenges obtaining parts to maintain their equipment, causing equipment to be out-of-service for longer periods.\nRetail, Travel, and Tourism\nOn balance, retailers reported little to no change in revenues and a slight softening of consumer demand in recent weeks. A few contacts in the fast casual food service industry reported steady sales and demand but saw more consumers shifting away from in-person ordering to third party delivery services. A furniture company said that they were still rebuilding their inventory but were seeing less demand due to price increases. Auto dealers continued to report low inventory levels, low sales volumes, and some hesitancies by consumers due to high vehicle costs and higher interest rates for auto loans.\nTravel and tourism contacts reported steady to slightly lower revenues and demand. Hotels in the Fifth District gave mixed reports. A hotel in South Carolina said that occupancy in July was down from June but that was typical, and compared to last June occupancy was up. In contrast, a hotel in North Carolina saw occupancy rates lower this July than last year, which was the first time this year that occupancy was down compared to the same month last year. However, their average revenue per room was reportedly up and future booking remained strong. Business air travel reportedly picked up and a port contact reported strong demand for leisure cruises.\nReal Estate and Construction\nResidential real estate market activity declined moderately this period. Respondents indicated that sales volumes were slightly lower and there was a reduction in buyer traffic. Inventories of homes for sale and days on market increased while home prices have softened. Demand remained strong but it was noted that affordability was an issue as some buyers no longer qualified to purchase a house due to elevated home prices coupled with increasing mortgage rates. Existing new home construction continued but new housing starts were down; some input costs declined this period, like lumber, but on the whole residential construction costs remained elevated.\nCommercial real estate activity remained stable. Some respondents noted that office and retail market activity was starting to slow while the industrial or multifamily segments continued to experience strong leasing demand, low vacancy rates, and increasing rental rates. There remained a shortage of Class A office space, especially in suburban markets, and the amount of sublease space had been shrinking. Retail vacancy rates continued to edge down; but less desirable retail centers were still struggling with vacancies. New commercial construction projects decreased slightly due to higher construction costs, lack of availability of some materials, and increased interest rates. Commercial real estate capital market activity softened this period.\nBanking and Finance\nLoan demand continued to slow modestly across all commercial loan types, with this being attributed to both rising rates and economic uncertainty. Residential mortgage demand continued to slow as well, also attributed to rising interest rates. Auto loan demand, especially used autos, remained stable as rising interest rates did not restrict demand. Deposit growth was flat despite institutions noting they had started to increase rates. Overall loan quality remained good, but some respondents noted delinquency rates were starting to move slightly upward, mainly in their consumer portfolio. Borrower credit quality remained good with no signs of deterioration.\nNonfinancial Services\nNonfinancial service providers continued to report moderate growth and stable demand. Contacts were still concerned that their increased costs could slow growth and negatively impact employment. Several firms noted the lack of labor and supply chain issues were still impacting their ability to expand. They continue to find creative ways to attract and maintain their employee base, but this was seen as a temporary fix. One firm noted they are observing a reduction in consumer spending and visits to entertainment districts in their area. Inflation in all areas of their businesses was a top concern of many firms.\nFor more information about District economic conditions visit: 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"

Dallas

/beige-book-reports/2022/2022-09-da

"September 7, 2022\nSummary of Economic Activity\nGrowth in the Eleventh District economy continued at a modest pace, though job growth was quite robust. Manufacturing and service sector activity continued to slow, growing at a diminished clip from earlier this year. Retail sales were flat to down, and homes sales remained relatively subdued. Loan demand continued to increase but at a markedly slower pace. Local nonprofits reported increased demand for rent and food assistance amid rising costs. The energy sector expanded further while ongoing drought resulted in significantly lower crop production and culling of livestock herds. Wage growth remained highly elevated due to a tight labor market. Supply chain bottlenecks have begun easing and prices were not rising as fast, though inflation is still high. Outlooks were mixed as uncertainty remained elevated, and contacts voiced concern about slowing demand and the risk of a recession stemming from high prices, weakening consumer sentiment, and rising interest rates.\nLabor Markets\nRobust employment growth continued, though the supply of workers remained tight. Among 367 Texas business executives responding to a Dallas Fed July survey, 62 percent were trying to hire and a vast majority cited lack of applicants as an impediment. Workforce shortages were particularly acute in manufacturing, where one contact said they have the highest unfilled job rates in recent history and another noted the labor pool was more like \"a labor puddle.\" Transportation services firms are experiencing shortages of drivers and pilots. Oil and gas firms noted widespread hiring but also significant challenges getting qualified applicants.\nWage growth remained high as firms tried to attract and retain employees amid the dearth of labor. Among Texas business trying to hire, more than half said workers looking for more pay than offered was an impediment. Staffing agencies in particular described a large gap between what employers were willing to pay and the wages job hunters were expecting. Contacts noted high turnover at low-skill positions and openings filling at higher pay rates. Others said they were having to pay sizable bonuses to attract talent.\nPrices\nWhile input costs and selling prices continued to climb, the pace has slowed slightly, especially for manufacturing raw materials. Price decreases have been seen for some metals like aluminum and copper. Overall, supply chain shortages remained a primary driver of input cost increases, though there was some easing over the past six weeks. High fuel prices have also pushed up costs for a majority of firms. Most contacts report passing at least some of their higher costs on to customers through higher prices, though only about 10 percent were able to pass along all. Airline ticket prices have risen, and contacts expect them to remain elevated amid persistent labor shortages and high input costs. Looking ahead, price increases are expected to moderate over the next six months but remain historically elevated.\nManufacturing\nTexas manufacturing activity increased modestly during the reporting period. Output growth was led by durable goods manufacturing such as computers and autos. Overall manufacturing demand has waned, however, with slightly more firms noting a decrease in new order volumes in August than an increase. While a majority of manufacturers continued to experience supply chain disruptions, some say the severity has lessened. The pullback in orders coupled with unwinding supply issues has allowed firms to work through backlogs and reduce delivery times. Petrochemical companies reported strong business despite some logistics challenges, and refineries were running at near full utilization with very healthy margins. Overall manufacturing outlooks were mixed, with some contacts losing confidence amid weakening demand.\nRetail Sales\nRetail sales were flat to down over the past six weeks, with some contacts citing pushback from customers on higher pricing. Broad improvement in supply chain disruptions was noted, and inventories have started to rebuild. An auto dealer expects a slow increase in new vehicle availability over the next year, which will put downward pressure on prices. Overall outlooks were for increased sales six months from now, though expectations for general business activity were less optimistic.\nNonfinancial Services\nThe service sector continued to expand moderately during the reporting period. Revenue growth was mostly broad-based, with continued solid increases seen in the transportation sector. Airlines reported elevated demand despite high ticket prices and said leisure travel has mostly recovered to prepandemic levels while business travel has lagged behind. Cargo volumes through Texas seaports experienced record-breaking growth. Staffing firms continued to report very strong demand, including for permanent placements for professionals. Service-sector outlooks were fairly neutral amid increased uncertainty about future business conditions.\nConstruction and Real Estate\nHousing market activity remained weak, particularly at the entry level. Sales were off notably in July but improved in August partly due to a dip in mortgage rates. Home prices were flat to down, and incentives were becoming more widespread. Outlooks were uncertain, with contacts expecting further weakness ahead. Apartment leasing was solid and in line with pre-COVID levels, though momentum has slowed from its 2021 highs. Occupancy was flat to down and rent growth remained elevated but was declining from its earlier feverish pace. Demand for office space was mixed and construction subdued, while industrial leasing and construction remained high.\nFinancial Services\nLoan demand continued to increase but at a markedly slower pace than what has been seen over the last 18 months. Total loan volume growth also declined, with mixed movements by lending type. Residential real estate loan volumes decreased over the past six weeks after flattening out earlier this year amid higher mortgage rates. Consumer, commercial, and industrial loan volumes largely held steady, while commercial real estate loan volumes continued to increase. Loan nonperformance increased for consumer loans but continued to decrease for other loan types, leading to little change in nonperforming loans overall. Looking six months ahead, contacts continue to expect that loan demand and general business activity will decrease, and loan delinquency will increase, though outlooks were somewhat less pessimistic than six weeks ago.\nEnergy\nOil and gas activity increased, with the Eleventh District rig count ticking up and contacts noting strong demand for oilfield services. Labor and supply chain challenges continued to restrain the pace of increases in drilling and well completions. Lead times for new oilfield equipment have extended further. Outlooks were quite strong, as firms seem confident that prices will remain high enough to support continued growth in oil and gas activity.\nAgriculture\nOverall drought conditions improved slightly over the past six weeks, as some areas received significant rainfall in late August. Many row crops were experiencing high abandonment and low yields resulting in significantly lowered production this year, particularly for cotton. High input costs and low production will financially strain many producers. Severe drought and higher feed costs have prompted significant culling of cattle herds.\nCommunity Perspectives\nNonprofits reported increased demand for services among the communities they serve over the past six weeks. Inquiries regarding rent and food assistance picked up, and contacts noted high inflation was straining household budgets. Housing costs have become a primary concern for low-income residents, driven by an insufficient stock of affordable housing, rapid rent hikes, and the winding down of state and federal assistance programs. Evictions have increased, and a rise in first-time homelessness has been seen. Community colleges reported enrollment increases, though matriculation among female students has not rebounded as fast as among males.\nFor more information about District economic conditions visit: 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/2022/2022-09-sf

"Beige Book Report: San Francisco\nSeptember 7, 2022\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded modestly during the July through mid-August reporting period. Hiring activity continued to grow at a modest pace, and wages grew further amid tight labor market conditions. Inflation remained elevated, albeit with some indication of slight moderation. Retail sales were stable, and activity in the consumer and business services sectors was reportedly strong. Manufacturing output grew, while conditions in the agriculture and resource-related sectors were mixed. Residential real estate activity eased despite strong demand for multifamily housing, and activity in commercial real estate was mixed. Lending activity was unchanged on net. Communities across the Twelfth District were challenged by housing affordability and elevated living costs. Looking ahead, contacts expected prices to moderate further and overall economic conditions to weaken.\nLabor Markets\nHiring activity continued to grow at a modest pace, although a notable portion of recruiting efforts was dedicated to replacing existing employees rather than expanding payroll. Firms reported increased employment levels despite difficulty attracting workers in health care, retail, education, professional services, travel, and skilled trades. Employment in leisure and hospitality remained far below target levels, with some employers in Southern California relying more heavily on temporary immigrant workers. Conversely, providers of financial services, construction, and utilities reported an easing of labor supply constraints, partly due to slower activity in the real estate market. In entertainment, one contact noted that recent mergers and acquisitions could lead to significant layoffs. Reports indicated some improvement in employee retention, but many employers continued to highlight persistently high turnover rates. Several business and community representatives noted that worker fatigue has become a more significant driver of voluntary quits. Employers of skilled trades workers highlighted early retirements and skill mismatch as additional constraining factors. Many contacts revised their future hiring plans due to the uncertain economic outlook.\nWages grew further over the reporting period but at a more moderate pace. Reports indicated that the increasing cost of living across the District, including the rising costs for essential expenses such as food and rent, continued to drive wage pressures upward. Several manufacturers and financiers reported some easing in salary expectation from new hires. Nonetheless, employees across sectors continued to demand more comprehensive benefits, flexible work arrangements, and upfront hiring incentives.\nPrices\nPrices continued to rise during the reporting period, albeit with some slight moderation in the rate of increase. Reports noted persistent inflation across industries and products, including prices for food, entertainment, insurance, packaging, natural gas, and some manufacturing products due to continued pressures from material or labor costs. However, falling oil prices and cooling overall demand helped alleviate some price pressures in recent weeks. Reduced port backlogs and a stronger dollar also helped moderate inflation of imported goods and services. Contacts additionally noted more stable prices for used vehicles, construction materials, and airfares.\nCommunity Conditions\nCommunities across the District reported being challenged by housing affordability, homelessness, higher cost of living, and food insecurity. Contacts highlighted that the lack of affordable childcare has continued to impede parents' access to employment. Small business owners noted limited ability to compete for workers in the tight labor market. Mental health and wellness service providers mentioned the inability to meet higher demand for support due to the tight availability of licensed practitioners. Some contacts also noted that increased safety concerns in downtown areas have led some businesses to relocate.\nRetail Trade and Services\nRetail sales were stable during the reporting period. Demand for retail goods remained strong but elevated prices and economic uncertainty shifted consumer spending away from discretionary goods and toward food and energy. Contacts noted that sales growth for apparel and durable goods such as motor vehicles, electronics, and appliances softened noticeably. Although labor challenges and supply disruptions impacting the retail sector eased slightly, these pressures remained as major headwinds to productivity.\nActivity in the consumer and business services sectors strengthened. Demand for consumer services, such as those related to leisure and hospitality, was strong, and demand for live performances and attractions was robust. While business and group travel activity remained weak, demand for leisure travel continued to grow. A Las Vegas contact reported record-breaking tourist spending in the city in recent months. Demand for health-care, wellness, and legal services remained at or near capacity.\nManufacturing\nManufacturing production grew moderately during the reporting period. Sales and new orders were strong across many industries, and capacity utilization improved on balance. Demand for capital equipment was notably strong, as firms in the food, beverage, chemical, personal care, and pharmaceutical industries sought to boost productivity. Despite some reported improvement, supply bottlenecks persisted, and input costs remained elevated. Several manufacturers reported accumulating vast inventories to meet demand amid materials shortages. Contacts expected supply disruptions and cost pressures to ease in the coming months, although uncertainty related to the war in Ukraine and pandemic developments in China remained high.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors were mixed. Drought conditions in many areas continued to impact the growing season, with some producers letting portions of their farms go fallow to prioritize water usage. Farmers throughout the District reported strong international demand for both fresh and processed foods. Shipping bottlenecks eased slightly in recent weeks, but overall supply chain disruptions persisted. Utilities reported continued challenges meeting demand as labor and materials shortages delayed maintenance and expansion projects. Input costs, despite some relief in fuel prices, remained elevated.\nReal Estate and Construction\nResidential real estate activity eased further over the reporting period. High mortgage rates and overall economic uncertainty cooled demand for existing and new single-family homes. Conversely, demand for multifamily housing units remained strong and rental rates grew in many regions. A Northern California banker reported a recent increase in financing requests for multifamily construction projects. Despite cooling demand, housing prices remained elevated and inventories strained, by historical standards. Homebuilders' confidence declined further as materials shortages continued to delay existing projects.\nActivity in the commercial real estate market was mixed. Demand for industrial and warehouse space remained robust, while demand for office and retail space weakened in most of the District. One contact in Los Angeles expected office vacancies to rise when leases are renegotiated as businesses continued to struggle to return workers to the office. Contacts noted that commercial real estate permits and construction slowed down in some areas due to cooling activity.\nFinancial Institutions\nLending activity was steady over the reporting period. Business lending grew, especially for commercial and industrial loans, and many contacts reported solid loan pipelines. While demand for credit cards and home equity loans remained elevated, mortgage originations and refinancing activity dipped further as higher interest rates and limited inventories dampened housing activity. Many contacts mentioned a notable increase in competition for loans and continued ample liquidity. Credit quality remained high, but contacts expected some deterioration going forward on account of increasing interest rates and moderating deposits. Financiers in the private equity and venture capital space reported lower valuations as financial conditions tightened.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2022/2022-09-cl

"September 7, 2022\nSummary of Economic Activity\nAfter declining slightly during the prior reporting period, Fourth District business activity steadied in recent weeks. Retailers reported that higher inflation had constrained households' ability to spend on some items, particularly among lower-income households. In addition, higher prices and interest rates dampened demand for automobiles and homes. Manufacturing and nonresidential construction activity held up better, but growth was softer than earlier in the year. While, on balance, contacts did not expect a meaningful increase in activity in the fall, they continued to add to their payrolls. Supply chain disruptions remained prominent, but there were more frequent reports of relief from these disruptions. Generally softer economic conditions and slight relief from supply disruptions appeared to alleviate some inflationary pressures. Though still high, both the share of contacts reporting higher input costs and the share reporting higher selling prices dipped to their lowest levels in more than a year.\nLabor Markets\nEmployment increased modestly. While most contacts said that staffing held steady, nearly a third indicated that they had added to their payrolls in the prior two months. Several business contacts acknowledged that they had curbed hiring plans from earlier in the year, but many indicated that because of persistent worker shortages they continued to run shorthanded and were playing catch up with staffing. A manufacturer said his firm \"will continue to hire until we can gain a full staff, even if the economy slows.\" Based on contact reports, labor availability recently increased somewhat.\nIncreased availability of workers along with a modest pullback in hiring may have contributed to a slight easing in wage pressures. The share of contacts reporting pay increases has been edging down since the beginning of the year but remained elevated. In many cases, contacts suggested that they had paused pay increases after generous pay hikes in prior periods. While the percentage of contacts offering higher pay decreased, those who hiked wages often did so \"to blunt the effects of inflation\" on their workers. In addition, many said that pay increases were still high by historical standards.\nPrices\nWeaker demand appeared to relieve some upward pressure on prices. The share of contacts reporting increased nonlabor input costs fell to its lowest in more than a year, though it remained high by historical standards. Several freight contacts noted that falling fuel prices helped alleviate overall cost pressures, while those in construction and manufacturing reported lower prices for lumber and steel. One nonresidential builder said that \"an endless chain of 10 percent increases every 30 days has subsided.\" Moreover, a manufacturer who did experience higher costs said that they were \"moderate increases, not as outrageous as in previous periods.\" Looking ahead, contacts expected cost pressures to ease somewhat further in coming months.\nWhile still elevated, the share of contacts reporting an increase in selling prices also dipped to its lowest in more than a year. In some cases, firms passed lower input costs along to customers. One manufacturer said that \"most of our contracts have pass through provisions. As our raw material costs have decreased, so have prices.\" In other cases, slower demand growth and higher inventories led to more intense price competition. One general merchandiser, citing public reports of higher inventories at the retail level, said \"markdowns are coming.\"\nConsumer Spending\nRetailers reported weaker sales, particularly for discretionary items, as higher prices for food and other essentials depleted households' discretionary income. One general merchandiser said that lower-income consumers were spreading out their back-to-school purchases rather than purchasing everything at once. First, they bought school essentials, and will likely purchase school apparel later. Restaurateurs and tourism contacts reported that sales remained steady over the summer and are optimistic that customer demand will remain steady into the next quarter. Auto dealers reported a decline in demand for both new and used vehicles, which they attribute to higher prices, rising interest rates, and general inflation taking up more of households' incomes.\nManufacturing\nDemand for manufactured goods was mixed but generally stable. Several contacts said that their customers were working down inventories, a situation which resulted in fewer orders, and some noted a reduction in demand from abroad. Still, others indicated that demand was relatively steady, and several were cheered by plateauing or declining costs for some inputs. On balance, manufacturers expected little change in demand in coming months.\nReal Estate and Construction\nDemand for residential construction and real estate remained well below levels experienced earlier in the year. Contacts attributed softer demand to high construction costs and rising interest rates. One homebuilder noted that his firm's construction starts have outpaced sales over the past couple of months, raising the concern that his backlogs may soon diminish. Contacts anticipated activity would remain slow and did not expect to see any significant improvement in demand in the coming months.\nMost nonresidential construction and real estate contacts reported that demand has remained stable despite increasing interest rates. Demand for warehousing space in particular has remained strong as firms continue to shift toward more ecommerce activity. While contacts expected demand to remain stable in the near future, a few worried that higher construction costs and rising interest rates could lead to declines in overall demand.\nFinancial Services\nOverall loan demand was generally unchanged as a decline in new mortgage and auto originations was offset by an increase in commercial lending. Bankers reported a notable increase in demand for commercial loans and credit that they attributed to firms' initiating projects earlier than planned to get ahead of anticipated interest rate increases. On the household side, contacts noted a continued decline in auto, mortgage, and refinancing applications related to higher borrowing costs and low inventories. According to bankers, commercial and consumer loan delinquency rates remained low and core deposits flat. However, one banker noted that customers have started drawing down their savings to meet financial obligations. Looking ahead, bankers expected inflationary pressures and higher interest rates to cause consumers and businesses to delay major purchases, a situation leading to weaker loan demand in the near term.\nNonfinancial Services\nDemand for nonfinancial services was mixed in recent weeks. Freight activity softened further as demand from customers in certain markets (such as residential construction) slowed. Meanwhile, demand for technology services remained strong, including for human resources- and payroll-related software. Digital authentication services also continued to see strong activity because online purchasing remained robust. Going forward, contacts anticipated freight demand would remain soft, though professional and business services firms expected demand for their services to remain strong.\nCommunity Conditions\nCommunity organizations experienced heightened demand for services in recent months. Several contacts mentioned that the number of families seeking food assistance increased because of higher prices. One contact said inflation \"impacts what families are able to purchase with their SNAP benefits and their own resources, which means they are coming to our foodbanks in larger numbers.\" Adding to the challenge, declines in donations and general constraints in the food supply chain led food banks to ration food. Several contacts also noted an uptick in the number of unsheltered families and longer stays in shelters.\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"

Philadelphia

/beige-book-reports/2022/2022-07-ph

"July 13, 2022\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to grow slightly. Modest growth of broad nonfinancial services outweighed declines in manufacturing and some service sectors; in a few sectors, supply constraints obscured whether demand had declined. Employment continued to grow modestly, despite increased talk of a recession. Wage and price inflation subsided further for most firms but still remained at a moderate and strong pace, respectively. Most firms continued to note hiring difficulties and supply chain disruptions as their key challenges, while the rate of COVID-19 cases in the District has fallen by half and is currently lower than the national average. On balance, expectations for continued economic growth over the next six months remained positive but edged lower for all firms and were well below their nonrecessionary historical averages. Among manufacturers, although expectations turned negative, firms are hesitant to consider layoffs after struggling to rehire workers following the pandemic shutdowns.\nLabor Markets\nEmployment continued to grow modestly. Scattered reports of layoffs, attrition, or hiring freezes have appeared as chatter about a future recession has increased. However, the share of firms reporting employment increases edged up to near one-third among nonmanufacturing firms and among manufacturers. Moreover, staffing companies reported no signs that job orders had slowed.\nIn fact, several contacts noted that manufacturing firms were hesitant to lay off workers, given the difficulty they have experienced rehiring after the pandemic closures. Looking ahead six months, the share of manufacturers that expect to hire more workers fell further to one-fifth from one-third in the prior period.\nOverall, most firms still describe hiring and retention as challenges. A majority of firms reported that labor market problems had been a moderate or significant constraint to their second-quarter production. However, most firms have noted some easing of hiring challenges since the first quarter. In particular, retention is improving, and more workers are applying; however, labor quality and reliability remain poor. With the expectation that labor challenges will persist, contacts continued to note heavy investment in automation.\nMost firms, including staffing firms, continued to note that wage growth is slowly subsiding. However, wage inflation remains widespread and appears to have maintained a moderate pace. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee has held steady at about three-fifths since April. Very few firms reported lower compensation, as has been true for the past year.\nPrices\nPrices appear to have continued growing at a strong pace. Price increases for manufacturers' factor inputs were less widely reported; however, more firms reported price increases throughout much of the downstream supply chain, including prices faced by consumers. Though the price increases were more widespread, comments tended to note that their rate had eased.\nThe share of manufacturers reporting higher prices for factor inputs fell to 70 percent, and the share receiving higher prices for their own products held steady at 52 percent. The share of nonmanufacturers reporting higher prices for their inputs rose to 80 percent, while the share receiving higher prices from consumers for their own goods and services rose to 38 percent.\nA majority of firms reported that supply chain disruptions had been a moderate or significant constraint to their second-quarter production. While firms have noted an easing of supply chain problems since the first quarter, most firms remain uneasy about the disruptions.\nJust over three-fifths of the manufacturers expect to pay higher prices for their factor inputs over the next six months. While still a historically high share, the percentage reached an all-time peak in January at nearly four-fifths and has fallen in four of the following five months. Also, just over half expect the prices they receive to increase \u2013 the lowest percentage since March 2021.\nManufacturing\nOn average, current manufacturing activity appeared to decline slightly. The indexes for shipments and new orders fell significantly, with new orders turning negative. Moreover, sentiment weakened further, as the index of current general activity also turned negative.\nLikewise, the indexes for future general activity and future new orders both turned negative, while the index for future shipments fell to nearly zero. Nevertheless, manufacturing firms' expectations for future capital expenditures edged higher from the index's six-year low.\nConsumer Spending\nRetailers (nonauto) and restaurateurs reported a slight decline in overall sales \u2013 the first negative reports since early 2021. Contacts noted either less customer traffic or smaller purchases per visit, if not both. One contact noted that the firm would normally strive to increase traffic but currently can't staff up for it.\nOn balance, auto dealers reported little change to the weak level of sales observed during the prior period; sales remained significantly below the levels in 2019. The constrained supply makes it difficult to observe demand; however, some contacts feel that high prices and rising interest rates have reduced demand below the industry's potential capacity.\nOverall, tourism grew slightly \u2013 at a slower pace than in the prior period. Continued improvements in business travel were offset by reported flattening of leisure travel and some cancellations of business meetings, especially in the tech sector. Many contacts noted that high gas prices and airfares had contributed to lower demand from leisure travelers, but contacts from some local properties noted rising competition from cruise lines and international tourism.\nNonfinancial Services\nOn balance, nonmanufacturing activity grew modestly \u2013 rebounding somewhat from the prior period's slight pace of growth. Overall, the share of firms reporting increases in sales and in new orders rose, while the share of firms that reported decreases edged lower in both categories.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew moderately during the period (not seasonally adjusted) \u2013 a similar pace as seen during the same period in 2019. However, growth was more balanced in 2019; now, individual loan segments are behaving much differently. Moreover, inflation is contributing more to the growth during the current year relative to past years.\nLoan volumes grew at a moderate to strong pace for home mortgages and commercial and industrial lending. According to a lender, gains in the latter reflect a return to banks by borrowers who have found the current bond market too expensive. Contacts noted that rising interest rates and expectations of a slowdown have virtually eliminated growth in commercial real estate loans and home equity lines, while auto lending and other consumer loans grew slightly, at best. Credit card volumes appeared to continue growing moderately \u2013 a typical pace for this season of the year.\nReal Estate and Construction\nOn balance, contacts reported that sales traffic and contract signings for new homes fell modestly, more so for high-end houses. One contact noted that customers were waiting for lower rates or lower prices.\nBrokers noted that existing home sales continued to fall slightly, and that signs had emerged of a cooler market. While overall prices continued to rise on a year-over-year basis, one broker noted a significant number of price reductions in a recent 24-hour period. However, housing affordability remains a challenge, and rents remain high.\nOn balance, construction activity and leasing activity for commercial real estate continued to hold steady. The markets for industrial/warehouse space, multifamily housing, and institutional projects remained strong. Contacts are still waiting for clarity into the office market with the presumption of a further downward adjustment in space needs. However, the office market has been gradually adjusting through conversions to other uses.\nFor more information about District economic conditions visit: https://www.philadelphiafed.org/surveys\u2010and\u2010data/regional\u2010economic\u2010analysis\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/2022/2022-07-su

"Beige Book: National Summary\nJuly 13, 2022\nThis report was prepared at the Federal Reserve Bank of Atlanta based on information collected on or before July 13, 2022. 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 expanded at a modest pace, on balance, since mid-May; however, several Districts reported growing signs of a slowdown in demand, and contacts in five Districts noted concerns over an increased risk of a recession. Most Districts reported that consumer spending moderated as higher food and gas prices diminished households' discretionary income. Due to continued low inventory levels, new auto sales remained sluggish across most Districts. Hospitality and tourism contacts cited healthy leisure travel activity with some noting an uptick in business and group travel. Manufacturing activity was mixed, and many Districts reported that supply chain disruptions and labor shortages continued to hamper production. Non-financial services firms experienced stable to slightly higher demand, and some firms reported that revenues exceeded expectations. Housing demand weakened noticeably as growing concerns about affordability contributed to non-seasonal declines in sales, resulting in a slight increase in inventory and more moderate price appreciation. Commercial real estate conditions slowed. Loan demand was mixed across most Districts; some financial institutions reported increased customer usage of revolving credit lines, while others reported weakening residential loan demand amid higher mortgage interest rates. Demand for transportation services was mixed and reports on agriculture conditions across reporting Districts varied. While demand for energy products was robust and oil and gas drilling activity picked up, production remained constrained by labor availability and supply chain bottlenecks for critical components. Similar to the previous report, the outlook for future economic growth was mostly negative among reporting Districts, with contacts noting expectations for further weakening of demand over the next six to twelve months.\nLabor Markets\nMost Districts continued to report that employment rose at a modest to moderate pace and conditions remained tight overall. However, nearly all Districts noted modest improvements in labor availability amid weaker demand for workers, particularly among manufacturing and construction contacts. Most Districts continued to report wage growth. One third of Districts indicated that employers were considering or had given employees bonuses to offset inflation related costs while in two Districts, workers requested raises to offset higher costs. A quarter of Districts indicated wage growth will remain elevated for the next six months, while a few noted that wage pressures are expected to subside later this year.\nPrices\nSubstantial price increases were reported across all Districts, at all stages of consumption, though three quarters noted moderation in prices for construction inputs such as lumber and steel. Increases in food, commodities, and energy (particularly fuel) costs remained significant, though there were several reports that price inflation for these categories had slowed compared with recent months but remained historically elevated. While several Districts noted concerns about cooling future demand, on balance, pricing power was steady, and in some sectors, such as travel and hospitality, firms were successful in passing through sizable price increases to customers with little to no pushback. Most contacts expect pricing pressures to persist at least through the end of the year.\nHighlights by Federal Reserve District\nBoston\nBusiness activity expanded at a modest pace. Employment was flat as turnover remained high and wages grew at an above-average rate. Prices increased at an above-average pace. The outlook turned more cautious or even pessimistic in cases. Most saw ongoing inflation (and efforts to control it) as posing significant threats to activity moving forward.\nNew York\nEconomic growth slowed to a crawl in the latest reporting period, as demand from households and businesses weakened amidst ongoing labor shortages, supply back-logs, and elevated Covid levels. Tourism continued to strengthen, while consumer spending and manufacturing activity were flat. Businesses continued to report wide-spread increases in selling prices, input prices, and wages. Optimism about the near-term outlook has eroded further.\nPhiladelphia\nBusiness activity continued to grow slightly. Manufacturing, among other sectors, appeared to decline, even as activity in a few sectors remains below pre-pandemic levels. Increased chatter about a future recession has caused growth in employment, wages, and prices to subside a bit. However, each of these measures is still best described by its pace in the prior period of modest, moderate, and strong, respectively.\nCleveland\nBusiness activity declined slightly as households and firms grappled with higher costs and rising interest rates. Contacts expected further weakening in the near term. Labor market conditions remained tight, although the share of firms that increased staff levels or raised wages has eased since the start of 2022. Reports of higher nonlabor costs were widespread, and most firms raised prices.\nRichmond\nThe regional economy grew modestly over the last several weeks, although there were some emerging signs of slowing demand. Consumer spending remained generally solid, while manufacturers and service providers reported slowing to modest growth. Commercial and residential mortgage lending was hindered by rising interest rates. Labor markets were tight and price growth remained elevated.\nAtlanta\nEconomic activity grew modestly. Labor markets were tight, and wage pressures continued. Nonlabor costs rose. Retail sales were solid. Leisure travel activity remained robust. Housing demand weakened. Commercial real estate conditions were mixed. Manufacturing activity was strong. Demand for transportation services was mixed. Banking activity slowed.\nChicago\nEconomic activity increased slightly. Employment in-creased moderately, business spending was up modestly, consumer spending rose slightly, and manufacturing and construction and real estate declined slightly. Wages and prices rose rapidly, while financial conditions tightened some. Agriculture income expectations for 2022 were little changed.\nSt. Louis\nEconomic conditions have improved at a modest pace since our previous report. Labor shortages eased slightly but continued to place upward pressure on wages. Prices for energy and intermediate goods rose, but in-creases were passed through at a lower rate than in previous months. Homebuying slowed and consumer demand for services rose.\nMinneapolis\nThe region's economy grew modestly since mid-May. Labor demand weakened but remained at a high level, while wage and price pressures remained strong. Manufacturing and services activity grew. Construction contacts reported little change and real estate contacts reported modest declines. Minority and woman entrepreneurs expected flat to increased sales in the next month but have lowered their profit expectations.\nKansas City\nGrowth in the Tenth District slowed to a modest pace, with mixed performance across segments of the regional economy. Job growth was strong, but consumer spending softened. Several businesses indicated they began to offer pre-paid gas cards or direct payments to offset rising gas prices for workers. Rising interest rates deterred new growth in residential real estate and put some initial pressure on community banks' liquidity positions.\nDallas\nEconomic growth in the District slowed to a modest pace partly due to elevated prices, rising interest rates, and higher uncertainty hampering demand in manufacturing, housing, and services. Input costs rose at a rapid clip, though pass through was becoming more difficult for firms. Outlooks were mostly negative and highly uncertain owing to concerns about a further slowdown in demand.\nSan Francisco\nEconomic activity strengthened modestly over the reporting period. Overall labor market conditions remained tight. Wages and price levels increased further. Retail sales moderated somewhat while demand for discretionary services fell. Conditions in the agriculture and manufacturing sectors were mixed. Residential real estate activity eased, and lending activity was unchanged on balance.\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/2022/2022-07-ny

"Beige Book Report: New York\nJuly 13, 2022\nSummary of Economic Activity\nEconomic growth in the Second District slowed to a crawl in the latest reporting period, as demand from households and businesses weakened amidst ongoing labor shortages, supply backlogs, and elevated Covid levels. Business optimism about the near-term outlook has also eroded further. Businesses continued to report widespread increases in selling prices, input prices, and wages, as well as ongoing difficulty obtaining necessary supplies. Despite severe labor shortages and high turnover, businesses have continued to add workers and plan to continue doing so in the second half of the year. Both manufacturing activity and consumer spending have been flat in recent weeks, while tourism activity has accelerated. There were pronounced signs of easing in the home sales market, whereas the rental market was increasingly robust. Commercial real estate markets were mixed but generally steady. Construction activity has picked up, with a good deal of multifamily residential development in progress. Finance-sector contacts reported some weakening in activity, while regional banks reported widespread declines in loan demand and refinancing activity, as well as tighter credit standards and steady delinquencies.\nLabor Markets\nBusinesses continued to report widespread labor shortages, restraining both new hiring and retention, though one employment agency noted that workers have become more reluctant to change jobs. Particularly acute labor shortages were reported in technology and healthcare occupations. Still, a sizable proportion of businesses indicated that they continue to add staff\u2014particularly in the wholesale trade and information sectors, as well as in transportation and professional & business services. One contact noted increasing job openings for call centers. Firms in all major industry sectors except finance plan to add staff in the second half of this year.\nBusinesses continued to note widespread wage increases and anticipated further increases in the months ahead. One employment agency noted that more employees are using counter-offers to raise their salaries in their current jobs. Wage gains have been most pronounced in the construction, transportation, and warehousing sectors.\nPrices\nMost business contacts noted ongoing broad-based escalation in input prices. In particular, escalating costs for both energy and freight continued to be cited widely. In the construction sector, while lumber prices have eased, costs of engineered wood products (e.g., doors and windows) have reportedly continued to rise. Contacts across the board expect input prices to rise further in the months ahead.\nBusinesses continued to note widespread escalation in their selling prices, particularly in the manufacturing and distribution industries. A majority of businesses said they plan further price hikes in the months ahead.\nConsumer Spending\nConsumer spending has been essentially flat in recent weeks. Non-auto retailers reported that business has been steady to weaker in the latest reporting period. Contacts have also become more pessimistic about the near-term outlook. Auto dealers in upstate New York reported that sales of both new and used vehicles have been sluggish in recent weeks, largely reflecting the ongoing lack of inventory, as well as affordability issues. Consumer confidence among New York State residents fell in May but rebounded modestly in June; it is roughly on par with pre-pandemic levels and still fairly high by historical standards.\nManufacturing and Distribution\nManufacturing activity has been essentially flat since the last report, but growth picked up somewhat in the wholesale trade industry and remained moderately strong in the transportation & warehousing industry. For the first time in well over a year, manufacturers reported a slight decline in unfilled orders, and expect that these, as well as delivery times, will decline noticeably in the months ahead. Contacts have yet to see improvement in supply availability, but manufacturers expect disruptions and delays to diminish over the second half of this year.\nServices\nActivity in the service sector has remained essentially flat in the latest reporting period. Professional & business service firms indicated a slight increase in activity, whereas education & health service providers saw a slight decline. Contacts in the information and leisure & hospitality sectors noted a pause in growth. Businesses in these sectors remain mildly optimistic about the near-term outlook.\nIn New York City, however, tourism has continued to flourish. A local industry expert noted that both business travel and international visitors have picked up to a surprising degree in recent weeks, though visits from Asia continue to lag (mainly attributed to home country restrictions). Removal of inbound restrictions in the U.S. seems to be boosting visits, and this trend is expected to continue. Manhattan's hotel occupancy rate has now rebounded to over 75 percent, with mid-week occupancy surpassing weekend levels at around 90 percent\u2014partly due to longer stays and more business travelers. Occupancy is now roughly on par with pre-pandemic levels. While a number of hotels are still housing the homeless, as well as emergency personnel and health workers, this now accounts for under 10 percent of occupancy. In addition, the average daily room rate has climbed above pre-pandemic levels to well above $300. With business on the rebound, some closed hotels have reopened or plan to do so soon. Attendance at trade shows and medium to large corporate meetings have trended up, and out-year bookings have also picked up.\nReal Estate and Construction\nHousing markets have been mixed since the last report, with the rental market continuing to strengthen but the sales market weakening noticeably. Both in New York City and across the metropolitan region, there has been a steady and pronounced decline in signed contracts in both May and June, going against normal seasonal trends. A leading local real estate authority attributed this drop-off in sales to a combination of low affordability, rising mortgage rates, and increased uncertainty. There has also been a rise in the inventory of available homes\u2014though it is still quite low\u2014but not a reduction in prices thus far. Real estate contacts in upstate New York continued to characterize the market as strong, though less so than in recent months\u2014for instance, bidding wars still occur but with fewer bidders competing and some sellers have lowered their asking prices.\nIn contrast, residential rental markets have strengthened noticeably, with substantial escalation in rents, low vacancy rates, and brisk leasing activity. In New York City, rents rose sharply during the 2nd quarter, setting new records, and rental vacancy rates are at a 20-year low. Rents have also risen sharply in upstate New York. With rents rebounding to well above pre-pandemic levels in New York City and elsewhere, affordability has been a widespread and growing concern.\nCommercial real estate markets have been mixed since the last report. Office markets across the District were steady to slightly weaker, with vacancy rates edging up in Manhattan and the Lower Hudson Valley but little changed elsewhere. Office rents were flat to up slightly and close to pre-pandemic levels, except in Manhattan. The industrial market has remained firm, with vacancy rates leveling off but rents continuing to rise briskly. The market for retail space has remained sluggish.\nConstruction activity has been mixed but picked up somewhat overall. Nonresidential construction starts have remained exceptionally low, whereas multifamily residential construction starts have increased across most of the District, with the notable exception of Manhattan\u2014though even there a sizable volume of construction is still in progress.\nBanking and Finance\nContacts in the broad finance sector reported marked worsening in the general business climate, a decline in activity, and growing pessimism about the near-term outlook. Bankers reported lower loan demand across all consumer and business loan segments. Refinancing activity also decreased. Credit standards tightened somewhat across all loan categories, while delinquency rates were little changed.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\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/2022/2022-07-sl

"Beige Book Report: St Louis\nJuly 13, 2022\nSummary of Economic Activity\nEconomic conditions have improved at a modest pace since our previous report. Ongoing price increases have contributed to a mixed outlook, though demand remained stable. Labor shortages continue to place upward pressure on wages, though there are indications that these pressures have eased slightly for some firms in recent weeks. Prices for energy and intermediate goods rose, but these increases were passed through to consumers at a lower rate than in previous months. Retailers and restaurants saw increased consumer sensitivity to price increases. Homebuying activity slowed across most of the District due to rising interest rates, and rents rose. Supply chain bottlenecks remained a key issue across industries, with shortages and delays affecting availability of key inputs.\nLabor Markets\nEmployment has increased modestly since our previous report. Contacts across the District reported that workers remained scarce. One staffing firm, which typically filled 30 or more jobs per day pre-pandemic, reported struggling to fill 2-3 per day now. Firms continued to expand outreach and bonuses to fill their positions, with mixed success. One transportation contact estimated they were now spending 3-4 times more than in recent years to attract new drivers, and many contacts reported having to settle for less-dependable workers. Despite this, contacts in several industries reported recent signs of the labor market easing.\nWages across the District have grown strongly since our previous report, especially for hard-to-fill positions. One contact reported rural nurse wages had increased 30-40%, and one public school district doubled its summer school teacher pay to $50 per hour. Some short-staffed service firms reported offering overtime to workers but receiving few to no takers.\nPrices\nWhile most prices have increased moderately since our previous report, prices for raw materials, such as steel, have declined. Most contacts cited rising energy costs, especially fuel prices, as their primary input cost increase. Contacts in the services and retail industries reported increased prices charged to consumers, but at lower rates than input cost increases. A contact in the retail industry reported large increases in shipping and storage prices. A catfish farming industry contact cited rising grain and fuel costs as the main factors for increasing prices. A contact in the childcare industry reported higher costs for sanitization materials and increased fees charged to clients.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported generally higher business activity and a mixed outlook. May real sales tax collections increased in Kentucky, Missouri, and West Tennessee relative to April and decreased in Arkansas. One retailer in Little Rock noted that there has been no slowdown in business activity, but while the supply chain has started to improve it is nowhere close to normal. A St. Louis auto dealer reported that while vehicle inventory is improving, they expect higher gas prices and waning consumer confidence to impact business activity. Restaurants in Louisville noted that when they increased prices to help with rising costs, they saw a decrease in customers and had to lower prices to keep business activity up. Hospitality contacts reported generally higher business activity compared with May, but a mixed outlook for the upcoming months due to high gas prices and inflation.\nManufacturing\nManufacturing activity has increased slightly since our previous report. Firms saw slight upticks in new orders and production but reported difficulty ramping up output to match demand due to continued supply chain issues. These bottlenecks stem from lockdowns in China and persisting scarcity in intermediate inputs. This trend of intermediate input shortages has been observed across various industries, including cement in concrete, cotton in textiles, and wet strength resin in packaging. One major manufacturer in Northwest Mississippi noted that supply chain issues are as bad now as they were at the outset of the pandemic, saying \"the wheels have fallen off.\"\nNonfinancial Services\nActivity in the nonfinancial services sector has increased since our previous report. However, rising input costs and labor shortages have hampered firms' ability to meet rising demand. Transport firms in particular have struggled in this regard. While Tennessee and Northwestern Arkansas saw increases in both freight and passenger traffic in May, passenger spending continues to lag relative to quarterly expectations. A regional airport in Kentucky has struggled to attract another air service after an airline discontinued service to the area due to cost increases.\nReal Estate and Construction\nThe residential real estate market has slowed slightly since our previous report due to rising mortgage rates. Total homes sold and pending sales have fallen since our previous report. Inventory has continued to remain scarce, and house prices are at elevated levels relative to income, especially for first-time homebuyers. Multiple contacts reported fewer bids per listing since our previous report, a signal that demand is beginning to cool. Most contacts are expecting real estate demand to slow further in the coming months.\nThe rental market continues to be extremely competitive. Rents in all District MSAs saw strong growth in recent months. Many discouraged would-be home buyers seem to be turning to rentals to avoid high mortgage rates and home prices. One contact reported some rental markets seeing prospective renters coming in above asking rents.\nBanking and Finance\nOverall activity in the banking sector has increased moderately since our previous report. Total loans have grown, with consumer loans seeing the largest increase. However, banking contacts in Memphis forecast loan growth to slow down due to recent interest rate increases. Commercial and industrial loans have increased slightly but remain below June 2021 levels. Memphis contacts reported that higher 30-year mortgage rates have not decreased demand for real estate loans, but rather have decreased the price of a home the customers can afford. Total deposits have decreased slightly, consistent with a Memphis contact's account of the lack of pressure to raise deposit rates. At least one bank in Memphis has started offering \"special\" rates ranging from 1.25% to 1.75%, and this contact expects this trend to ripple across banks following the recent interest rate increase.\nAgriculture and Natural Resources\nDistrict agriculture conditions declined moderately relative to the previous reporting period and the previous year. In June, the percentages of corn, cotton, rice, and soybeans rated fair or better decreased slightly to moderately across the District. Most crop conditions declined moderately over this period relative to last year, except for rice, which increased modestly.\nNatural resource extraction conditions declined modestly from April to May, with seasonally adjusted coal production decreasing over 4%. May production was essentially unchanged compared with a year ago, improving by less than a quarter of a percent.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

/beige-book-reports/2022/2022-07-da

"July 13, 2022\nSummary of Economic Activity\nGrowth in the Eleventh District economy slowed to a modest pace, with part of the deceleration in demand attributed to surging prices, rising interest rates, and higher uncertainty. Manufacturing and service sector activity slowed, and retail spending and homes sales weakened further. Solid apartment and industrial leasing continued, but loan growth eased. The energy sector saw further expansion, while drought dampened agricultural conditions. Employment expanded broadly, and wage growth remained highly elevated due to a tight labor market. Supply-chain bottlenecks and higher energy prices continued to drive up costs, and prices rose at a rapid clip, though pass through was becoming more difficult for firms, eroding margins. Outlooks were mostly negative, and uncertainty surged, with contacts voicing concern about slowing future demand and increased risk of a recession stemming from high prices, supply-side constraints, weakening consumer sentiment, and rising interest rates.\nLabor Markets\nEmployment continued to expand broadly, except in retail where it was little changed. Staffing challenges remained widespread, with many firms reporting that they were a drag on revenue growth. However, shortages appeared to be most acute for truck drivers, pilots, health care staff, and oil field workers. Staffing firms continued to report that filling lower-skilled positions was harder than higher-skilled jobs. A restaurateur noted operating at 85 percent capacity because of staffing issues, despite increasing pay and benefits. Some contacts said labor shortages had increased workload for existing staff, resulting in retention issues.\nWage growth remained robust amid a tight labor market. Multiple firms reported offering higher pay or bonuses to retain and/or hire employees. A contact in the oilfield services firms cited intense wage pressures, with wages up 10 percent in the industry so far in 2022, after double-digit increases last year, and added that rig workers with no experience and working half the year were being paid about $85,000. A transportation equipment manufacturer cited continued difficulty hiring despite a 40 percent increase in starting pay. According to a June Dallas Fed survey of more than 300 Texas business executives, wages on average are expected to rise at an above-average pace both this year and in 2023.\nPrices\nOverall, input and selling price growth remained significantly elevated during the reporting period. In the energy sector, cost pressures accelerated to new heights. Construction contacts reported that the cost of materials remained steady but high, except for lumber prices which dipped slightly. Most manufacturers and service firms noted acute price pressures due to ongoing supply-chain issues, labor shortages, and high fuel prices. While price growth remained high, cost pass through was more difficult, particularly for small firms and companies in the service sector.\nExceptionally strong price growth was expected by Texas businesses in the near term. According to the earlier-mentioned survey, respondents anticipate input prices to climb 10 percent in 2022, on average, and selling prices to increase 7 percent. These figures are markedly higher than pre-pandemic rates, and businesses expect these elevated price pressures to persist next year as well.\nManufacturing\nGrowth in the Texas manufacturing sector slowed sharply, following solid gains in the previous reporting period. Output growth was flat, and new orders fell, with the deceleration spanning both durable and nondurable goods. The slowing was most pronounced in construction materials, fabricated metals, computer, and printing-related manufacturing. Manufacturers attributed slowing sales to rising prices and uncertainty regarding future demand. Gulf Coast refinery utilization rates edged up, and chemical output increased, buoyed by continued strong domestic and export demand. Manufacturing outlooks were negative.\nRetail Sales\nRetailers reported sustained weakness in overall sales, with tight inventories and ongoing supply chain challenges continuing to hamper growth, though there were some reports of higher prices and rising interest rates damping demand as well. Auto dealers cited continued declines in sales stemming from low inventories. Overall outlooks were pessimistic and highly uncertain due to supply challenges and expectations of weaker demand ahead.\nNonfinancial Services\nActivity in the service sector softened during the reporting period. Revenue growth was mixed, with continued solid increases seen in transportation and warehousing but flat to weaker activity in information and accommodation and food services. Staffing firms continued to report robust and broad-based activity, though a few contacts cited some slowing in demand, particularly for construction workers. Passenger air travel demand remained solid, with leisure travel continuing to dominate bookings. Airline contacts were optimistic that second-quarter revenues will surpass comparable 2019 levels. Air cargo volumes softened largely due to a dip in international shipments as domestic volumes remained strong. Small parcel shipments edged up, and container traffic at a large Texas seaport was up strongly year to date relative to 2021. Service-sector outlooks were negative due to higher uncertainty in the face of rising prices and interest rates, weakening consumer sentiment, and growing expectations of a recession in the near term.\nConstruction and Real Estate\nConditions in the housing market eroded more quickly than anticipated during the reporting period. Sales were off notably from earlier in the year and both online and foot traffic slowed markedly. Cancellations rose in part due to loan qualification issues. Buyers were hesitant to move forward and were looking for better deals, and builders noted offering incentives again to drive sales. Home prices were largely flat. One contact said that lenders were raising capital requirements on new acquisition and development loans. Contacts said several new land deals were on pause due to rising uncertainty in the market. Outlooks were negative, and sales and starts expectations were being revised downward.\nThe multifamily market remained tight, with occupancy and rent growth staying elevated. Commercial real estate markets were mixed. Office leasing continued to improve, though net absorption was negative in some markets. Activity in the industrial sector remained robust. On the investment side, transaction volumes have softened given higher interest rates and increased uncertainty in the economic outlook.\nFinancial Services\nLoan volume growth moderated over the past six weeks amid broad increases in loan pricing. Growth was strongest in commercial real estate followed by commercial and industrial lending, though a deceleration occurred in both categories. Residential real estate loan volumes were flat for a second consecutive reporting period after two years of solid growth. Nonperforming loans continued to decrease overall, though an uptick was seen in consumer and auto loans. Credit standards and terms tightened notably. Looking six months ahead, contacts expect that general business activity and loan demand will decrease, and nonperforming loans will increase.\nEnergy\nOilfield activity expanded in the district. The rig count rose, and oil and natural gas production increased. Labor and supply chain constraints continued to limit the pace of drilling and well completion activity. Lead times for critical parts and components, such as engines and transmissions, were over a year, and a severe shortage of steel tubular goods was reported. Industry sentiment was largely optimistic, though uncertainty rose, and expectations were for slow growth ahead due to very limited spare capacity\u2014a result of supply-chain and labor challenges.\nAgriculture\nMuch of the district remained in severe drought, causing agricultural conditions to deteriorate further. The wheat harvest was wrapping up and with much lower harvestable acres and yields, production is expected to be substantially below average. Agricultural producers continued to be concerned with production cost increases and the availability of inputs. With prices and costs at high levels, producers may still be able to generate a profit, but current drought conditions create a higher-risk situation than normal. Ranchers continued to reduce herd sizes amid poor grazing conditions and limited hay supplies. Contacts noted that the strengthening dollar combined with higher transportation costs and logistics issues could negatively impact agricultural exports moving forward.\nFor more information about District economic conditions visit: 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"