Financial Feed

National Summary

Overall Economic Activity

Economic activity increased slightly, on balance, since early January, with eight Districts reporting slight to modest growth in activity, three others reporting no change, and one District noting a slight softening. Consumer spending, particularly on retail goods, inched down in recent weeks. Several reports cited heightened price sensitivity by consumers and noted that households continued to trade down and to shift spending away from discretionary goods. Activity in the leisure and hospitality sector varied by District and segment; while air travel was robust overall, demand for restaurants, hotels, and other establishments softened due to elevated prices, as well as to unusual weather conditions in certain regions. Manufacturing activity was largely unchanged, and supply bottlenecks normalized further. Nevertheless, delivery delays for electrical components continued. Ongoing shipping disruptions in the Red Sea and Panama Canal did not generally have a notable impact on businesses during the reporting period, although some contacts reported rising pressures on international shipping costs. Several reports highlighted a pickup in demand for residential real estate in recent weeks, largely owing to some moderation in mortgage rates, but noted that limited inventories hindered actual home sales. Commercial real estate activity was weak, particularly for office space, although there were reports of robust demand for new data centers, industrial and manufacturing spaces, and large infrastructure projects. Loan demand was stable to down, and credit quality was generally healthy despite a few reports of rising delinquencies. The outlook for future economic growth remained generally positive, with contacts noting expectations for stronger demand and less restrictive financial conditions over the next 6 to 12 months.

Labor Markets

Employment rose at a slight to modest pace in most Districts. Overall, labor market tightness eased further, with nearly all Districts highlighting some improvement in labor availability and employee retention. Businesses generally found it easier to fill open positions and to find qualified applicants, although difficulties persisted attracting workers for highly skilled positions, including health-care professionals, engineers, and skilled trades specialists such as welders and mechanics. Wages grew further across Districts, although several reports indicated a slower pace of increase. Employee expectations of pay adjustments were reportedly more in line with historical averages.

Prices

Price pressures persisted during the reporting period, but several Districts reported some degree of moderation in inflation. Contacts highlighted increases in freight costs and several insurance categories, including employer-sponsored health insurance. Nevertheless, businesses found it harder to pass through higher costs to their customers, who became increasingly sensitive to price changes. The cost of many manufacturing and construction inputs, such as steel, cement, paper, and fuel, reportedly fell in recent weeks.

Commonly known as the Beige Book, this report is published by the Federal Reserve Bank. Inside each publication is anecdotal information on current economic conditions through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts and other sources. The Beige Book summarizes this information by District and sector. Below is an overall summary of the district reports that is prepared by a designated Federal Reserve Bank.

Chicago

Economic activity increased modestly. Employment increased modestly; nonbusiness contacts saw a modest increase in activity; business spending increased slightly; manufacturing activity was flat; and construction and real estate and consumer spending declined slightly. Prices and wages rose moderately, while financial conditions tightened modestly.

St. Louis

Economic activity has increased slightly since our previous report. Contacts reported that consumer demand slowed beyond seasonal norms. While labor markets remain tight overall, an increasing number of firms reported being fully staffed or overstaffed relative to consumer demand. Price growth has slowed in recent months.

Minneapolis

District economic activity was up slightly. Employment grew some, but labor demand softened. Wage pressures continued to moderate, and prices rose modestly. Consumer spending declined slightly, thanks to slow winter tourism. Manufacturing, mining, and energy activity increased.

Kansas City

Economic activity was stable. Job gains were modest, and wage growth, while elevated, was tied closer to worker performance. Price sensitivity rose among consumers, even as prices rose moderately. Commercial real estate contacts indicated skepticism around recent appraisals of property valuation.

Dallas

Economic activity expanded modestly, with most sectors holding steady or experiencing slight to modest growth. Wage growth was moderate, and input cost and selling price growth was generally average. Texas firms were more bullish on demand expectations than late last year, with more than half of the firms’ expecting increases over the next six months.

San Francisco

Economic activity grew slightly, employment levels rose slightly, and price and wage growth eased. Retail sales were stable, and demand for services grew modestly. Demand for manufactured products changed little, and conditions in agriculture were stable. Real estate activity rose slightly overall. Financial sector conditions were little changed.

Note: This report was prepared at the Federal Reserve Bank of San Francisco based on information collected on or before February 26, 2024. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

Federal Reserve Bank of San Francisco

Summary of Economic Activity

Economic activity in the Twelfth District was up slightly during the January to mid-February reporting period. Employment levels rose slightly, and labor was more available. Prices and wages both increased overall but at slower rates. Retail sales were stable, while activity in the services sectors grew modestly. Demand for manufactured products and conditions in the agriculture and resource-related sectors remained unchanged on net. Residential real estate activity rose somewhat, while that for commercial real estate was largely unchanged. Financial sector conditions were little changed. For communities across the District, demand for care and shelter support services remained high. Looking ahead, contacts expect weaker economic conditions overall relative to late 2023, though they expressed a little more optimism than in the previous reporting period.

Labor Markets

Employment levels grew slightly over the reporting period. Contacts in sectors such as real estate and leisure and hospitality reported expanding headcounts in recent weeks. Finance, technology, and business services held employee counts flat or let levels decline with attrition or layoffs. Several employers in health and agriculture reported utilizing automation tools and emerging technology solutions to boost productivity and improve efficiency. Employers generally filled positions with greater ease, though hiring skilled workers across sectors remained difficult. Reports indicated that applicant pools expanded and contained more qualified candidates. Still, some contacts in California noted stiff competition for labor from bigger companies and employers for government projects.

Wages increased slightly over the reporting period. Employers offered wage increases in line with inflation and provided additional benefits to attract and retain workers. Contacts reported that some employers fully absorbed recent increases in health insurance premiums and continued to offer hybrid or fully remote work. One contact in Nevada noted that employees preferred remote work because it allowed them to more easily take a second job.

Prices

Prices increased slightly in recent weeks. Non-labor cost pressures moderated across sectors. For energy, steel, and replacement machinery parts, prices rose at a similar or slower pace relative to the previous reporting period. For other inputs such as wallboard, cement, and food services supplies, price levels were unchanged or slightly lower. Prices for consumer goods and services increased modestly or remained flat overall. However, prices for some grocery items, including staples and produce, fell recently. Limited abilities to pass through elevated costs to customers constrained price increases by those firms in business services and retail sectors.

Retail Trade and Services

Consumer spending on retail goods was stable at solid levels. Demand for groceries and other basic necessities was strong, but consumers continued to cut down on discretionary spending in response to elevated prices. E-commerce retailers noted muted demand for full price products while promotional offerings boosted online sales. Home centers reported lower sales of wood products. Contacts across the District reported above-average inventories following the holiday season. However, one contact noted that retailers that had previously decided to limit inventory levels to cut costs experienced product shortages and offered fewer new products recently.

Activity in the consumer and business services sectors grew modestly in recent weeks. Demand for logistics, legal, and consulting services was unchanged. Contacts reported that several consulting firms increased staffing capacity to take on new projects in recent weeks. Demand for health-care services grew further, and the industry remained near capacity. Demand for leisure and hospitality services in most of the District moderated somewhat due to expected seasonal fluctuations. In contrast, Nevada contacts reported that the economic impact of February's NFL Super Bowl LVIII held in Las Vegas exceeded expectations, and that the boost to the local economy was in line with that of the Formula 1 race held in the city last November.

Manufacturing

Demand for manufactured products was unchanged on net. Demand for capital equipment strengthened as firms in the food and beverages, personal care, and medical industries boosted investments in productivity-enhancing products. Soft construction activity and poor weather dampened demand for wood products. Reports indicated that ongoing shipping disruptions in the Red Sea have not had a notable impact on production and businesses across the Twelfth District. In contrast, a contact in the ocean freight industry reported that severe drought conditions in the Panama Canal boosted traffic at ports across the West Coast. Many container ships heading from Asia opted to dock on the West Coast and use rail to transport cargoes to their destinations across the country instead of using the canal to reach East Coast ports.

Agriculture and Resource-Related Industries

Conditions in agriculture and resource-related industries were largely comparable to the previous reporting period. Domestic demand for fresh produce was solid, while that for logs remained soft. Demand for forested land with timber resources continued to grow. Despite a strong dollar, international demand for fruits, vegetables, and seafood increased over the reporting period. However, weaker economic activity in China and Japan led to lower exports of logs. Major seafood stocks remained stable. Record crop yields of apples and tree nuts in California and the Pacific Northwest had a dampening effect on wholesale prices.

Real Estate and Construction

Activity in the residential real estate market rose somewhat. Residential construction strengthened. Demand for single-family homes picked up slightly, as mortgage rates, though still elevated, moderated a bit in recent weeks. To attract reluctant homebuyers, some home builders began offering variable-rate mortgages at below-market interest rates, which revert to market pricing after a year, at which point buyers are reportedly expecting rates to be lower. The supply of multifamily rental units increased further as more construction projects were recently completed, thereby raising vacancy rates and putting downward pressure on rents. A contact from Hawaii noted that recent construction activity in the state has focused on affordable housing units.

Commercial real estate activity was largely unchanged from the previous reporting period. Demand for industrial and retail space was strong, but weak office leasing activity continued. Public infrastructure spending continued to boost overall construction activity across the District. Some private-sector commercial projects slowed on account of elevated costs and limited availability of skilled trades subcontractors, such as plumbers and electricians. Challenges persisted in obtaining some materials, particularly electrical equipment.

Federal Reserve Bank of Kansas City

Summary of Economic Activity

Economic activity in the Tenth District was stable over the past month. Job growth was modest. Though wage gains for new hires remained elevated, contacts indicated wage increases were targeted at workers who expanded their scope of responsibilities. Consumer spending stabilized, but contacts noted rising price sensitivity among consumers. Still, consumer prices rose moderately. Reports from commercial real estate (CRE) contacts indicated skepticism around any recent appraisals of property valuation, as they did not want to be in a position of trying to "catch a falling knife" early in a CRE downturn. Loan performance was generally stable for CRE deals, but banks' internal stress testing pointed to potential deterioration as CRE loans mature in a higher-rate environment. Despite climbing oil prices, the number of active oil rigs fell to levels observed several months ago, reverting from a recent spike before year-end. Agricultural credit conditions remained sound despite some softening in farm conditions.

Labor Markets

Hiring activity picked up slightly across the District. Most contacts continued to report tight labor markets, but they also indicated the quality of applicants and recent hires improved recently. As staffing levels improved, businesses in both manufacturing and services sectors continued to modestly reduce average weekly hours and their use of part-time work. Many employers indicated they increased efforts to retrain and promote existing workers. Though wage growth for new hires remained elevated, many contacts continued to indicate wage increases were focused primarily on workers who expanded their capabilities, responsibilities, and productivity.

Prices

Prices for industrial goods and business services declined slightly over the last month, but several consumer-oriented contacts reported moderate increases in prices. In particular, prices for core goods, food away from home, and hotels all rose moderately. Business contacts reported higher input costs broadly. Services businesses continued to note rising labor costs, with professional business services indicating more difficulty passing higher costs onto customers.

Consumer Spending

After declining recently from elevated levels, consumer spending stabilized over the past month. Several contacts noted a recent shift in sales across spending categories due to heightened price sensitivity among consumers. Hotels noted bookings by leisure and small-group "SMERF" customers fell, even though business and large event bookings grew robustly.¹ Retail contacts reported pockets of strength in auto part sales and grocery consumption, with spending shifting away from clothing and home electronics. Auto dealers noted sharp declines in EV sales, while demand for other vehicles was steady. Amid the rising price sensitivity of consumers, several contacts indicated their emphasis on protecting price margins over coming months.

Community Conditions

More contacts reported difficulties among low-to-moderate income (LMI) households in obtaining and maintaining affordable credit. Contacts noted increased utilization of, and defaults on, credit cards, payday loans, and pay-as-you-go purchasing among LMI households. Defaults on debts for medical services also reportedly rose. The increase in default rates among LMI households has led to a moderate increase in challenges among renters in qualifying for housing leases. Contacts also reported more denials of financing for car purchases among LMI households and a slight increase in vehicle repossession due to delinquency on existing loans.

Manufacturing and Other Business Activity

Business activity across the District grew slightly over the last month, while profitability declined slightly. Service firm activity rebounded moderately from declines earlier in the year. Manufacturing firms reported further declines in production over the last month. However, several manufacturing contacts noted the current weakness is partially driven by customers working through excess inventories, and that longer-term demand for machinery and manufactured products remained stable. Contacts in the logistics, transportation, and packaging sector reported softening demand for shipping, suggesting potential slowing in consumer goods sectors over coming months. Businesses broadly reported resolutions to supply chain issues domestically, with microchips still being an exception. However, many contacts raised concerns over international shipping due to both rising geopolitical tensions and physical disruptions to trade routes through Central America. Manufacturing and services contacts reported declining margins and lower profitability in recent months. Professional service firms reported more pronounced margin compression than manufacturing contacts, consistent with higher labor costs and an inability to pass costs onto customers. Contacts implemented a series of cost-saving strategies to maintain profit margins, including changing suppliers and reducing overtime work. Overall, contacts are more optimistic about margins and profitability, anticipating flat or slight margin expansion over the coming year.

Real Estate and Construction

Contacts in commercial real estate noted appraisers were facing difficulty assessing property values amid very few property transactions over the past several months. Buyers expressed skepticism around any recent appraisals, not wanting to be in a position of trying to "catch a falling knife" early in a CRE downturn. Developers indicated new private development activity has all but ceased, especially for multifamily housing. In some District states, substantial municipal project construction activity offset headwinds to private development, which, combined with projects already under development, supported demand for construction labor.

Energy

Total oil and gas production declined slightly across the District. Despite climbing oil prices, the number of active oil rigs fell to levels observed three to six months ago, reverting from a recent spike before year-end. Gas rig counts stayed steady as drilling for gas remained unprofitable. The number of drilled and completed wells decreased in Colorado and Wyoming's Niobrara Basin, while they stayed mostly steady in Oklahoma's Anadarko Basin. Accordingly, the number of drilled but uncompleted wells was constant in the Anadarko but fell in the Niobrara, portending a potential for decreased production in coming months. Coal production in Wyoming rebounded somewhat from lower production levels earlier in the year, and coal prices remain slightly higher than pre-pandemic levels.

Agriculture

Conditions in the Tenth District farm economy softened in February, but agricultural credit conditions remained sound. Crop prices declined moderately over the past month alongside reports of stronger yields and production in the 2023 growing season than was previously estimated. Grain stocks were higher coming into 2024 than a year ago in most Districts states. Although strong yields could support revenues, producers with large shares of the harvested grain currently in storage appeared likely to sell at unfavorable prices. In the livestock sector, cattle prices remained strong alongside reports of additional declines in cattle herds. Farm financial conditions have moderated over the past year, but credit stress and farm loan delinquencies remained low. Looking ahead, contacts continued to cite ongoing risks associated with high expenses, commodity market developments, and high interest costs.

For more information about District economic conditions visit: KansasCityFed.org/research/regional-research.

¹ "SMERF" is a hotel industry acronym referring to Social, Military, Educational, Religious and Fraternal group bookings. 

Federal Reserve Bank of St. Louis

Summary of Economic Activity

Economic activity across the Eighth District has increased slightly since our previous report. Contacts reported that consumer demand slowed beyond seasonal norms and cited consumer price sensitivity and lower levels of disposable income as primary reasons why. While labor markets remain tight overall, an increasing number of firms reported being fully staffed or even overstaffed relative to consumer demand. Price growth has slowed in recent months. Residential real estate activity remained slow relative to seasonal averages. Contacts across a range of industries reported a mixed outlook moving forward, although the outlook has considerably improved since mid-December.

Labor Markets

Employment has remained unchanged since our previous report. The labor market continues to be tight, but reports of adequate supply relative to demand have increased. A retail contact in St. Louis reported some difficulty in finding applicants for open positions, while a banking contact in Memphis had to reduce staff due to overhiring. In Louisville, local business contacts have reported an easing of demand for labor in the manufacturing, retail, and health-care sectors, while noting there are still more openings than workers available.

Contacts reported that growth in hourly compensation in 2023 was about 4.5 percent, which was faster than they anticipated one year ago (3.5 percent); however, they expect growth to moderate to an average of about 3 percent in 2024. An insurance contact in Bowling Green reported wages have risen, which has made it tougher to match qualified candidates to new salaries. A restaurant contact in Little Rock reported that rising costs in wages and labor benefits have slowed growth expectations.

Prices

Prices have increased slightly since our previous report. Survey respondents across the District reported that prices increased by an average 2.5 percent during 2023 and expect continued moderation in price increases in 2024. On net, a majority of contacts reported that their ability to increase prices charged to consumers had deteriorated. A manufacturer reported facing increased costs and pushback on price increases. A theater contact similarly reported increasing costs and difficulty in determining if and how to pass those increases on to patrons. A contact in spirits and beverages reported that the firm is still able to pass price changes on to consumers. A car dealer reported that prices were being cut to offset higher interest rates for consumers.

Consumer Spending

District general retail, restaurant, and hospitality contacts reported mixed activity, while automotive contacts reported slower activity. January real sales tax collections increased in Arkansas, Western Tennessee, Missouri, and Kentucky relative to December. Missouri saw particularly strong increases in real sales tax collections. Downtown Louisville retail contacts have seen decreases in sales due to continued sluggish foot traffic. An auto dealer in Louisville stated that they've had to scale down their attempt to push electric vehicles onto the market due to low consumer demand. Restaurant contacts in St. Louis and Louisville reported consumer demand weakening beyond expectations, which they attributed to continued price increases. A Northern Mississippi hospitality contact reported that their year-over-year revenue growth fell from 13 percent in the first half of 2023 to 3 percent in the second half, and January saw continued slower growth.

Manufacturing

Manufacturing activity has decreased slightly since our previous report. Firms in Missouri reported a slight increase in inventories and delivery lead times and a moderate decrease in employment. Firms in Arkansas reported moderate decreases in inventories, sales, and employment. A third-party logistics provider across several District states reported full staffing at all seven of its distribution and manufacturing centers for the first time in months. However, other contacts continued to report that finding quality and committed workers remained an ongoing issue. On average, firms reported they expect slight decreases in employment and inventory in the coming quarter.

Real Estate and Construction

Residential real estate sales have slowed since our previous report. Contacts in Arkansas and Tennessee reported that the low end of the market continues to be strong, while contacts in Missouri and Southern Indiana reported higher-end homes selling better. Rental rates for residential real estate have remained unchanged since our previous report. Multiple contacts reported that demand for office space in downtown areas continues to be sluggish. In Louisville, two large tenants announced plans to vacate their downtown offices. A Memphis contact reported that demand for retail space remains strong.

Contacts across real estate and construction reported that recent increases in insurance costs have led to higher prices and affordability challenges. Two construction contacts reported that lending has slowed and new projects are being shelved. Other construction firms reported a lack of skilled labor reducing their ability to obtain new projects. However, a Northwest Arkansas commercial real estate construction firm reported being booked out through 2025.

Agriculture and Natural Resources

District agriculture conditions have remained stable since our previous report. Total winter wheat acreage planted was down about five percent relative to the total planted the year before. Reports indicate the decline was expected and consistent with national planting patterns. A decline in fertilizer costs was offset by increasing fuel and interest costs.

District contacts were mixed on the impact global commodity markets are having on their operations. While some reported benefitting from tightened export markets due to international shipping disruptions and high demand—particularly for cotton—others reported that declining commodity prices and competition from major exporters such as Brazil had depressed their outlook.

Contacts indicated the ban in early February on specific pesticides commonly used for major District crops and subsequent regulatory changes were sources of uncertainty for future planting and growing decisions. Most District contacts described their outlook as unchanged or worsening.

Federal Reserve Bank of Kansas City

Summary of Economic Activity

Economic activity in the Tenth District was stable over the past month. Job growth was modest. Though wage gains for new hires remained elevated, contacts indicated wage increases were targeted at workers who expanded their scope of responsibilities. Consumer spending stabilized, but contacts noted rising price sensitivity among consumers. Still, consumer prices rose moderately. Reports from commercial real estate (CRE) contacts indicated skepticism around any recent appraisals of property valuation, as they did not want to be in a position of trying to "catch a falling knife" early in a CRE downturn. Loan performance was generally stable for CRE deals, but banks' internal stress testing pointed to potential deterioration as CRE loans mature in a higher-rate environment. Despite climbing oil prices, the number of active oil rigs fell to levels observed several months ago, reverting from a recent spike before year-end. Agricultural credit conditions remained sound despite some softening in farm conditions.

Labor Markets

Hiring activity picked up slightly across the District. Most contacts continued to report tight labor markets, but they also indicated the quality of applicants and recent hires improved recently. As staffing levels improved, businesses in both manufacturing and services sectors continued to modestly reduce average weekly hours and their use of part-time work. Many employers indicated they increased efforts to retrain and promote existing workers. Though wage growth for new hires remained elevated, many contacts continued to indicate wage increases were focused primarily on workers who expanded their capabilities, responsibilities, and productivity.

Prices

Prices for industrial goods and business services declined slightly over the last month, but several consumer-oriented contacts reported moderate increases in prices. In particular, prices for core goods, food away from home, and hotels all rose moderately. Business contacts reported higher input costs broadly. Services businesses continued to note rising labor costs, with professional business services indicating more difficulty passing higher costs onto customers.

Consumer Spending

After declining recently from elevated levels, consumer spending stabilized over the past month. Several contacts noted a recent shift in sales across spending categories due to heightened price sensitivity among consumers. Hotels noted bookings by leisure and small-group "SMERF" customers fell, even though business and large event bookings grew robustly.¹ Retail contacts reported pockets of strength in auto part sales and grocery consumption, with spending shifting away from clothing and home electronics. Auto dealers noted sharp declines in EV sales, while demand for other vehicles was steady. Amid the rising price sensitivity of consumers, several contacts indicated their emphasis on protecting price margins over coming months.

Community Conditions

More contacts reported difficulties among low-to-moderate income (LMI) households in obtaining and maintaining affordable credit. Contacts noted increased utilization of, and defaults on, credit cards, payday loans, and pay-as-you-go purchasing among LMI households. Defaults on debts for medical services also reportedly rose. The increase in default rates among LMI households has led to a moderate increase in challenges among renters in qualifying for housing leases. Contacts also reported more denials of financing for car purchases among LMI households and a slight increase in vehicle repossession due to delinquency on existing loans.

Manufacturing and Other Business Activity

Business activity across the District grew slightly over the last month, while profitability declined slightly. Service firm activity rebounded moderately from declines earlier in the year. Manufacturing firms reported further declines in production over the last month. However, several manufacturing contacts noted the current weakness is partially driven by customers working through excess inventories, and that longer-term demand for machinery and manufactured products remained stable. Contacts in the logistics, transportation, and packaging sector reported softening demand for shipping, suggesting potential slowing in consumer goods sectors over coming months. Businesses broadly reported resolutions to supply chain issues domestically, with microchips still being an exception. However, many contacts raised concerns over international shipping due to both rising geopolitical tensions and physical disruptions to trade routes through Central America. Manufacturing and services contacts reported declining margins and lower profitability in recent months. Professional service firms reported more pronounced margin compression than manufacturing contacts, consistent with higher labor costs and an inability to pass costs onto customers. Contacts implemented a series of cost-saving strategies to maintain profit margins, including changing suppliers and reducing overtime work. Overall, contacts are more optimistic about margins and profitability, anticipating flat or slight margin expansion over the coming year.

Real Estate and Construction

Contacts in commercial real estate noted appraisers were facing difficulty assessing property values amid very few property transactions over the past several months. Buyers expressed skepticism around any recent appraisals, not wanting to be in a position of trying to "catch a falling knife" early in a CRE downturn. Developers indicated new private development activity has all but ceased, especially for multifamily housing. In some District states, substantial municipal project construction activity offset headwinds to private development, which, combined with projects already under development, supported demand for construction labor.

Energy

Total oil and gas production declined slightly across the District. Despite climbing oil prices, the number of active oil rigs fell to levels observed three to six months ago, reverting from a recent spike before year-end. Gas rig counts stayed steady as drilling for gas remained unprofitable. The number of drilled and completed wells decreased in Colorado and Wyoming's Niobrara Basin, while they stayed mostly steady in Oklahoma's Anadarko Basin. Accordingly, the number of drilled but uncompleted wells was constant in the Anadarko but fell in the Niobrara, portending a potential for decreased production in coming months. Coal production in Wyoming rebounded somewhat from lower production levels earlier in the year, and coal prices remain slightly higher than pre-pandemic levels.

Agriculture

Conditions in the Tenth District farm economy softened in February, but agricultural credit conditions remained sound. Crop prices declined moderately over the past month alongside reports of stronger yields and production in the 2023 growing season than was previously estimated. Grain stocks were higher coming into 2024 than a year ago in most Districts states. Although strong yields could support revenues, producers with large shares of the harvested grain currently in storage appeared likely to sell at unfavorable prices. In the livestock sector, cattle prices remained strong alongside reports of additional declines in cattle herds. Farm financial conditions have moderated over the past year, but credit stress and farm loan delinquencies remained low. Looking ahead, contacts continued to cite ongoing risks associated with high expenses, commodity market developments, and high interest costs.

For more information about District economic conditions visit: KansasCityFed.org/research/regional-research.

¹ "SMERF" is a hotel industry acronym referring to Social, Military, Educational, Religious and Fraternal group bookings.

Federal Reserve Bank of Chicago

Summary of Economic Activity

Economic activity in the Seventh District increased modestly overall in January and early February, and contacts generally expected a small increase in demand over the next year. Employment increased modestly; nonbusiness contacts saw a modest increase in activity; business spending increased slightly; manufacturing activity was flat; and construction and real estate and consumer spending declined slightly. Prices and wages rose moderately, while financial conditions tightened modestly. Prospects for 2024 farm income deteriorated some.

Labor Markets

Employment rose modestly over the reporting period, and contacts expected a similar rate of increase over the next 12 months. Many contacts noted cooling labor market conditions. There were reports of increased job applications per posting, improved applicant quality, job posting removals, and layoffs. A contact that hires spring and summer seasonal workers said hiring for the coming season was easier than last year. Wages rose moderately, with many contacts citing this as the outcome of their annual wage reviews. Benefits costs increased as new insurance rates took effect in the new year. Overall, contacts reported that insurance rates increased at about the same pace as a year ago.

Prices

Prices rose moderately overall in January and early February, and contacts expect growth to continue at that pace over the next 12 months. Producer prices moved up moderately. Nonlabor input costs continued to rise, with contacts highlighting increases in raw materials and shipping costs. Several contacts noted that shipping disruptions in the Red Sea had contributed to higher transportation costs. Consumer prices continued to rise moderately, though retail contacts noted that price growth was noticeably slower than six months ago.

Consumer Spending

Consumer spending decreased slightly on balance over the reporting period. Contacts noted that sales fell due to unseasonably cold weather in January and that a rebound in early February was not enough to offset the earlier decline. Non-auto sales decreased slightly. Contacts remained cautiously optimistic, though, with several commenting that the underlying positive trend in spending hadn't changed. Some also expected a slight pickup in the number of retail store openings this year compared with 2023. Light vehicle sales were little changed overall, with the mix of sales shifting toward more affordable models. Leisure and hospitality spending was softer. While spending on restaurants and cruises was higher, it was not enough to make up for weaker spending on air travel and hotels.

Business Spending

Business spending increased slightly in January and early February. Capital expenditures were up a bit, with contacts noting renovations or expansions of existing structures. Several contacts said they were holding off on investments because of high interest rates, slower sales growth, or both. Demand for truck transportation services decreased slightly. Inventories were comfortable for most retailers, including auto dealers, where inventories had been below desired levels for an extended period of time. Manufacturing inventories were slightly elevated, and several contacts reported that input shortages were limited or had disappeared entirely.

Construction and Real Estate

Construction and real estate activity decreased slightly over the reporting period. Residential real estate activity was down moderately, though prices were steady overall. High interest rates and a low supply of existing homes for sale continued to hold back activity. Residential construction was unchanged. A majority of respondents to a homebuilder's survey indicated that January demand met expectations. Cancellation rates for new home construction trended lower. Home renovation contractors reported some decline in backlogs, though overall they remained at a high level. Commercial real estate activity decreased slightly, as demand for large office and multifamily properties declined further. Contacts continued to point to high interest rates as the most important reason holding back potential deals. Nonresidential construction increased slightly. An Indiana contact indicated that the pipeline was still strong for data centers, industrial, and pharmaceutical projects. However, several contacts said it remained difficult to start new projects because of high building costs and tight credit conditions.

Manufacturing

Manufacturing demand was flat on balance in January and early February. Auto production increased slightly, while heavy truck demand decreased modestly. Machinery sales were up modestly overall, partly due to heightened demand from the aerospace sector. That said, a contact in heavy machinery noted a drop in orders, albeit from historically high levels. Demand for steel increased slightly, in part because of a rebound in auto production following the UAW strike. Steel orders for industrial buildings remained strong. Activity in fabricated metals declined slightly, with contacts reporting mixed results across sectors. Chemicals production declined slightly, with lower demand from the construction, mining, and agriculture sectors more than offsetting higher demand from pharmaceuticals.

Agriculture

Income prospects for 2024 continued to deteriorate for Seventh District crop producers, while the outlook for livestock producers improved. Corn prices edged down once again, as low demand and a large 2023 harvest boosted stocks. Soybean and wheat prices were also down some. Fertilizer costs for crop production were down from the fall and well below those of a year ago. Hog, cattle, egg, and dairy prices increased from the previous reporting period. Margins for dairy farmers remained tight as labor costs rose, though lower feed costs helped some.

For more information about District economic conditions visit: chicagofed.org/cfsec.

Federal Reserve Bank of Dallas

Summary of Economic Activity

The Eleventh District economy expanded modestly, with activity in most sectors holding steady or experiencing slight to modest growth. Employment rose modestly, and wages grew at an average pace. Input costs grew moderately. Selling prices rose at an average rate in the service sector but were flat in manufacturing. Demand for nonprofit services remained solid. Overall, Texas firms were more bullish on demand expectations than last quarter, with more than half expecting demand to increase over the next six months, up from 38 percent in November 2023. Overall outlooks were less pessimistic, although geopolitical instability and heightened domestic policy uncertainty were cited as key headwinds.

Labor Markets

Employment expanded modestly over the past six weeks. Labor availability improved, though contacts continued to cite difficulty in filling certain positions, particularly truck drivers, mechanics, engineers, health care professionals, and machinists. One contact said they were holding on to some workers with suboptimal performance due to a tight labor market.

Wage growth was moderate across most sectors. Staffing firms cited some reprieve in wage pressures. One food manufacturer noted paying above-average wages and offering more flex time to retain staff, while a professional and business services firm said they have been able to retain employees without giving raises by offering them the ability to work remotely.

Prices

Input costs rose moderately. Selling prices rose at an average pace in the service sector but prices were flat for manufactured goods. Airfares rose in response to higher costs, and unplanned refinery outages in the Midwest and on the Gulf Coast placed modest upward pressure on fuel prices. Home prices were flat to up. Auto dealers reported lower prices for vehicles, and many energy contacts expect the level of oilfield services prices to ease slightly this year.

Manufacturing

Texas manufacturing activity stabilized in February after contracting sharply in January. New orders rose after 20 months of decline. Weakness was concentrated in durables, particularly metals manufacturing in part due to competition from imports. Demand for and output of nondurables rose, led by growth in food manufacturing. New orders for basic chemicals and plastics ticked up slightly in January, while petrochemical manufacturers noted sluggish industrial demand, stemming from weakness in demand for construction-related products and aluminum. Utilization rates dipped as refineries along the Gulf Coast experienced unexpected outages during the reporting period. Overall, manufacturing outlooks remained negative, though pessimism waned.

Retail Sales

Retail sales somewhat stabilized in February after having weakened notably in January. Durable goods wholesalers and construction-related retailers saw a pickup in demand, while nonstore retailers and auto dealers noted declining sales and higher inventories. Retail outlooks remained pessimistic, though uncertainty in outlooks subsided somewhat.

Construction and Real Estate

Home sales rose during the reporting period, and contacts noted that the spring selling season was generally off to a good start. Cancellation rates were down, buyer incentives were less prevalent, and builders said they were raising prices slightly in some markets. Outlooks were positive, although contacts cited economic and political uncertainty, diminished affordability, and tight lending for loans as headwinds.

Activity in commercial real estate held steady during the reporting period. Apartment leasing was solid, but rents were flat to down as new supply continued to outpace demand. Office leasing remained weak; vacancy rates were elevated, and concessions remained widespread. A few contacts noted that tenants were screening the landlord's credit before leasing up space. Industrial demand was solid and in line with pre-pandemic averages. Outlooks were mixed, with economic uncertainty, high capital costs, and tight credit standards cited as deterrents to launching new projects or attracting investors.

Energy

Oilfield activity held steady during the reporting period. Oil and gas production ticked up, but only modest increases in production were expected over the next few quarters as firms seek opportunities to consolidate. Overall, contacts expect U.S. oil production growth to slow notably this year.

Agriculture

Drought conditions receded further in Texas but remained prevalent in southern New Mexico. Recent rainfall improved pasture conditions, refilled ponds, and boosted crop prospects. Tighter supplies of cattle continued to push up prices, while crop prices moved down over the past six weeks amid increased production expectations. Farmers cited high input costs and weak crop prices as a concern and noted that above-average yields will be needed this year to break even. An increase in cotton acreage could be seen as farmers may favor cotton over grain crops due to a relatively more favorable price.

Community Perspectives

Nonprofits reported continued elevated demand for services, as lower-income households faced increased difficulty in making ends meet. There were also reports of an uptick in white-collar professionals seeking financial assistance. Housing affordability remained a widespread concern, and contacts said in some instances multiple generations were living together in order to pay for housing costs. Contacts said that along the Texas-Mexico border, there was a need for migrant housing beyond the temporary assistance provided by FEMA. Mental health was cited as a growing need among youth.

For more information about District economic conditions visit: dallasfed.org/research/texas.

Federal Reserve Bank of Chicago

Summary of Economic Activity

Economic activity in the Seventh District increased modestly overall in January and early February, and contacts generally expected a small increase in demand over the next year. Employment increased modestly; nonbusiness contacts saw a modest increase in activity; business spending increased slightly; manufacturing activity was flat; and construction and real estate and consumer spending declined slightly. Prices and wages rose moderately, while financial conditions tightened modestly. Prospects for 2024 farm income deteriorated some.

Labor Markets

Employment rose modestly over the reporting period, and contacts expected a similar rate of increase over the next 12 months. Many contacts noted cooling labor market conditions. There were reports of increased job applications per posting, improved applicant quality, job posting removals, and layoffs. A contact that hires spring and summer seasonal workers said hiring for the coming season was easier than last year. Wages rose moderately, with many contacts citing this as the outcome of their annual wage reviews. Benefits costs increased as new insurance rates took effect in the new year. Overall, contacts reported that insurance rates increased at about the same pace as a year ago.

Prices

Prices rose moderately overall in January and early February, and contacts expect growth to continue at that pace over the next 12 months. Producer prices moved up moderately. Nonlabor input costs continued to rise, with contacts highlighting increases in raw materials and shipping costs. Several contacts noted that shipping disruptions in the Red Sea had contributed to higher transportation costs. Consumer prices continued to rise moderately, though retail contacts noted that price growth was noticeably slower than six months ago.

Consumer Spending

Consumer spending decreased slightly on balance over the reporting period. Contacts noted that sales fell due to unseasonably cold weather in January and that a rebound in early February was not enough to offset the earlier decline. Nonauto sales decreased slightly. Contacts remained cautiously optimistic, though, with several commenting that the underlying positive trend in spending hadn't changed. Some also expected a slight pickup in the number of retail store openings this year compared with 2023. Light vehicle sales were little changed overall, with the mix of sales shifting toward more affordable models. Leisure and hospitality spending was softer. While spending on restaurants and cruises was higher, it was not enough to make up for weaker spending on air travel and hotels.

Business Spending

Business spending increased slightly in January and early February. Capital expenditures were up a bit, with contacts noting renovations or expansions of existing structures. Several contacts said they were holding off on investments because of high interest rates, slower sales growth, or both. Demand for truck transportation services decreased slightly. Inventories were comfortable for most retailers, including auto dealers, where inventories had been below desired levels for an extended period of time. Manufacturing inventories were slightly elevated, and several contacts reported that input shortages were limited or had disappeared entirely.

Construction and Real Estate

Construction and real estate activity decreased slightly over the reporting period. Residential real estate activity was down moderately, though prices were steady overall. High interest rates and a low supply of existing homes for sale continued to hold back activity. Residential construction was unchanged. A majority of respondents to a homebuilder's survey indicated that January demand met expectations. Cancellation rates for new home construction trended lower. Home renovation contractors reported some decline in backlogs, though overall they remained at a high level. Commercial real estate activity decreased slightly, as demand for large office and multifamily properties declined further. Contacts continued to point to high interest rates as the most important reason holding back potential deals. Nonresidential construction increased slightly. An Indiana contact indicated that the pipeline was still strong for data centers, industrial, and pharmaceutical projects. However, several contacts said it remained difficult to start new projects because of high building costs and tight credit conditions.

Manufacturing

Manufacturing demand was flat on balance in January and early February. Auto production increased slightly, while heavy truck demand decreased modestly. Machinery sales were up modestly overall, partly due to heightened demand from the aerospace sector. That said, a contact in heavy machinery noted a drop in orders, albeit from historically high levels. Demand for steel increased slightly, in part because of a rebound in auto production following the UAW strike. Steel orders for industrial buildings remained strong. Activity in fabricated metals declined slightly, with contacts reporting mixed results across sectors. Chemicals production declined slightly, with lower demand from the construction, mining, and agriculture sectors more than offsetting higher demand from pharmaceuticals.

Agriculture

Income prospects for 2024 continued to deteriorate for Seventh District crop producers, while the outlook for livestock producers improved. Corn prices edged down once again, as low demand and a large 2023 harvest boosted stocks. Soybean and wheat prices were also down some. Fertilizer costs for crop production were down from the fall and well below those of a year ago. Hog, cattle, egg, and dairy prices increased from the previous reporting period. Margins for dairy farmers remained tight as labor costs rose, though lower feed costs helped some.

For more information about District economic conditions visit: chicagofed.org/cfsec.

Federal Reserve Bank of San Francisco

Summary of Economic Activity

Economic activity in the Twelfth District was up slightly during the January to mid-February reporting period. Employment levels rose slightly, and labor was more available. Prices and wages both increased overall but at slower rates. Retail sales were stable, while activity in the services sectors grew modestly. Demand for manufactured products and conditions in the agriculture and resource-related sectors remained unchanged on net. Residential real estate activity rose somewhat, while that for commercial real estate was largely unchanged. Financial sector conditions were little changed. For communities across the District, demand for care and shelter support services remained high. Looking ahead, contacts expect weaker economic conditions overall relative to late 2023, though they expressed a little more optimism than in the previous reporting period.

Labor Markets

Employment levels grew slightly over the reporting period. Contacts in sectors such as real estate and leisure and hospitality reported expanding headcounts in recent weeks. Finance, technology, and business services held employee counts flat or let levels decline with attrition or layoffs. Several employers in health and agriculture reported utilizing automation tools and emerging technology solutions to boost productivity and improve efficiency. Employers generally filled positions with greater ease, though hiring skilled workers across sectors remained difficult. Reports indicated that applicant pools expanded and contained more qualified candidates. Still, some contacts in California noted stiff competition for labor from bigger companies and employers for government projects.

Wages increased slightly over the reporting period. Employers offered wage increases in line with inflation and provided additional benefits to attract and retain workers. Contacts reported that some employers fully absorbed recent increases in health insurance premiums and continued to offer hybrid or fully remote work. One contact in Nevada noted that employees preferred remote work because it allowed them to more easily take a second job.

Prices

Prices increased slightly in recent weeks. Nonlabor cost pressures moderated across sectors. For energy, steel, and replacement machinery parts, prices rose at a similar or slower pace relative to the previous reporting period. For other inputs such as wallboard, cement, and food services supplies, price levels were unchanged or slightly lower. Prices for consumer goods and services increased modestly or remained flat overall. However, prices for some grocery items, including staples and produce, fell recently. Limited abilities to pass through elevated costs to customers constrained price increases by those firms in business services and retail sectors.

Retail Trade and Services

Consumer spending on retail goods was stable at solid levels. Demand for groceries and other basic necessities was strong, but consumers continued to cut down on discretionary spending in response to elevated prices. E-commerce retailers noted muted demand for full price products while promotional offerings boosted online sales. Home centers reported lower sales of wood products. Contacts across the District reported above-average inventories following the holiday season. However, one contact noted that retailers that had previously decided to limit inventory levels to cut costs experienced product shortages and offered fewer new products recently.

Activity in the consumer and business services sectors grew modestly in recent weeks. Demand for logistics, legal, and consulting services was unchanged. Contacts reported that several consulting firms increased staffing capacity to take on new projects in recent weeks. Demand for health-care services grew further, and the industry remained near capacity. Demand for leisure and hospitality services in most of the District moderated somewhat due to expected seasonal fluctuations. In contrast, Nevada contacts reported that the economic impact of February's NFL Super Bowl LVIII held in Las Vegas exceeded expectations, and that the boost to the local economy was in line with that of the Formula 1 race held in the city last November.

Manufacturing

Demand for manufactured products was unchanged on net. Demand for capital equipment strengthened as firms in the food and beverages, personal care, and medical industries boosted investments in productivity-enhancing products. Soft construction activity and poor weather dampened demand for wood products. Reports indicated that ongoing shipping disruptions in the Red Sea have not had a notable impact on production and businesses across the Twelfth District. In contrast, a contact in the ocean freight industry reported that severe drought conditions in the Panama Canal boosted traffic at ports across the West Coast. Many container ships heading from Asia opted to dock on the West Coast and use rail to transport cargoes to their destinations across the country instead of using the canal to reach East Coast ports.

Agriculture and Resource-Related Industries

Conditions in agriculture and resource-related industries were largely comparable to the previous reporting period. Domestic demand for fresh produce was solid, while that for logs remained soft. Demand for forested land with timber resources continued to grow. Despite a strong dollar, international demand for fruits, vegetables, and seafood increased over the reporting period. However, weaker economic activity in China and Japan led to lower exports of logs. Major seafood stocks remained stable. Record crop yields of apples and tree nuts in California and the Pacific Northwest had a dampening effect on wholesale prices.

Real Estate and Construction

Activity in the residential real estate market rose somewhat. Residential construction strengthened. Demand for single-family homes picked up slightly, as mortgage rates, though still elevated, moderated a bit in recent weeks. To attract reluctant homebuyers, some home builders began offering variable-rate mortgages at below-market interest rates, which revert to market pricing after a year, at which point buyers are reportedly expecting rates to be lower. The supply of multifamily rental units increased further as more construction projects were recently completed, thereby raising vacancy rates and putting downward pressure on rents. A contact from Hawaii noted that recent construction activity in the state has focused on affordable housing units.

Commercial real estate activity was largely unchanged from the previous reporting period. Demand for industrial and retail space was strong, but weak office leasing activity continued. Public infrastructure spending continued to boost overall construction activity across the District. Some private-sector commercial projects slowed on account of elevated costs and limited availability of skilled trades subcontractors, such as plumbers and electricians. Challenges persisted in obtaining some materials, particularly electrical equipment.

Federal Reserve Bank of Minneapolis

Summary of Economic Activity

The Ninth District economy grew slightly since the previous report. Respondents to a January survey reported a slight increase in sales and orders over the previous month. Employment grew slightly, but overall labor demand softened somewhat. Wage pressures were moderate but continued to ease, and prices rose modestly. Consumer spending and agricultural conditions declined, while commercial real estate activity was flat. Construction, manufacturing, and residential real estate activity increased slightly. Activity among minority- and women-owned businesses declined slightly.

Labor Markets

Employment grew slightly since the last report. Hiring demand remained positive overall but softened somewhat. Demand for full-time, year-round employees fell modestly, particularly among leisure and hospitality firms affected by unseasonal winter conditions. Softer labor conditions were also reported in construction, manufacturing, wholesale, and transportation sectors. More firms cut workers, though this number was still a small fraction compared with those looking for workers. Contacts reported modestly improved labor availability. A Minnesota finance company said, "It depends on the position. Higher-level positions are hard to find qualified candidates. Lower-level positions are starting to have more applications." A large manufacturer in South Dakota reported that slowing demand over the last year cooled its labor needs, but "finding workers to replace turnover is still moderately difficult." Firms were a bit less optimistic about future hiring needs than they were previously, but still positive overall.

Wage pressures were moderate overall but have been easing compared with previous levels. A survey of almost 700 firms found that roughly half reported wage increases of 3 percent or more, with 18 percent seeing increases of more than 5 percent; both measures were moderately lower than those of earlier surveys. Some firms reported wage pressure was easing due to better labor availability, reduced business, an inability to pass higher costs on to customers, and declining reimbursement rates from government health care programs.

Prices

Prices increased modestly since the last report. A quarter of respondents to a District business survey reported increasing customer prices in January from a month earlier, while 63 percent reported no change in pricing. Input price pressures remained greater than final prices; 41 percent reported increases in January. Retail fuel prices in District states increased slightly since the last report. Prices received by farmers increased in December from a year earlier for chickpeas, dry edible beans, lentils, chickens, and cattle; prices decreased for corn, wheat, soybeans, hay, sugar beets, potatoes, canola, milk, hogs, turkeys, and eggs.

Worker Experience

Workers highlighted opportunities for career development, income improvement, and schedule flexibility as their top three priorities when looking for a job. The majority were confident that they would find a job in the next three months. Contacts who switched jobs or recently became employed after a period of unemployment said the most challenging part of their job search was finding a job that pays what they need. Most of them got jobs in health care, followed by education and manufacturing. The majority had applied for up to five jobs before being hired. Contacts reported higher prices across most items in recent weeks, mainly in food. "I wish my twenty-dollar [sandwich] lunch went back to [costing] ten," said a Minnesota worker. "It instead keeps going up."

Consumer Spending

Consumer spending was down since the last report. Unseasonably warm weather hurt businesses catering to winter activity; firms in retail, accommodation, and entertainment saw lower revenues across the District. Ski hills in Montana and Michigan's Upper Peninsula (U.P.) closed due to lack of snow. January hotel occupancy fell in most District states, including by 12 percent in Montana. An accommodations firm in the U.P. said bookings were 20 percent higher to start the year, but "most guests cancel due to lack of snow. We are now showing a 25 percent decline. This is having a devastating effect on all local businesses." However, contacts reported healthy underlying demand; weather was a confounding factor, but expectations for spring tourism were positive. Consumer spending remained active in some other areas; new-vehicle sales rose 18 percent in January at one large dealership, and sales of powersport vehicles also rose across the District. Contacts noted that some consumers continued to adjust purchasing habits due to high prices. A grocer in southern Minnesota said that customer counts remained strong, but "customers are starting to pull back on their purchases."

Construction and Real Estate

Construction declined overall since the last report. Firms reported that both active and future projects out for bid were lower. Commercial permitting for new projects in January was widely lower. Single-family development remained soft, with modest but spotty increases in some District markets compared with a year earlier. Multifamily permitting has slowed significantly. Home remodeling activity has also slowed for some firms. A Minnesota contact said that "consumers quite abruptly stopped spending discretionary income on larger home improvements."

Commercial real estate was flat. Office space continued to see negative absorption due in part to soft employment in office-using sectors. Industrial vacancy rates rose slightly, but slowing speculative development allowed rental rates to rise. Retail vacancy rates were comparatively low, thanks to very slow development of new space and new leasing activity. Residential real estate grew modestly from low levels, with a modest majority of larger markets seeing year-over-year sales growth in January.

Manufacturing

Manufacturing activity increased slightly since the previous report. A regional index of manufacturing conditions indicated expansion in activity in Minnesota, North Dakota, and South Dakota in January relative to a month earlier. However, demand continued to slide. Two-thirds of manufacturing sector respondents to a District business survey reported that January sales fell from a month earlier. A large custom fabricator reported that demand from large customers had slowed, but they were "not sure if they are reducing inventories to free up cash, or if demand is softer." In contrast, several producers of construction materials and electronics reported an uptick in demand.

Agriculture, Energy, and Natural Resources

District agricultural conditions declined. Ninth District farm income declined in the last quarter of 2023 relative to a year earlier, according to most lenders responding to an agricultural conditions survey. Capital spending also decreased on balance, while farm household spending continued to increase. Sector contacts reported that current prices for some commodities were below breakeven levels for many producers; however, input costs have moderated somewhat. Oil and gas exploration activity increased slightly since the previous report. District iron ore mines, already near capacity, increased production since the last report.

For more information about District economic conditions, visit minneapolisfed.org/region-and-community.

Federal Reserve Bank of Kansas City

Summary of Economic Activity

Economic activity in the Tenth District was stable over the past month. Job growth was modest. Though wage gains for new hires remained elevated, contacts indicated wage increases were targeted at workers who expanded their scope of responsibilities. Consumer spending stabilized, but contacts noted rising price sensitivity among consumers. Still, consumer prices rose moderately. Reports from commercial real estate (CRE) contacts indicated skepticism around any recent appraisals of property valuation, as they did not want to be in a position of trying to "catch a falling knife" early in a CRE downturn. Loan performance was generally stable for CRE deals, but banks' internal stress testing pointed to potential deterioration as CRE loans mature in a higher-rate environment. Despite climbing oil prices, the number of active oil rigs fell to levels observed several months ago, reverting from a recent spike before year-end. Agricultural credit conditions remained sound despite some softening in farm conditions.

Labor Markets

Hiring activity picked up slightly across the District. Most contacts continued to report tight labor markets, but they also indicated the quality of applicants and recent hires improved recently. As staffing levels improved, businesses in both manufacturing and services sectors continued to modestly reduce average weekly hours and their use of part-time work. Many employers indicated they increased efforts to retrain and promote existing workers. Though wage growth for new hires remained elevated, many contacts continued to indicate wage increases were focused primarily on workers who expanded their capabilities, responsibilities, and productivity.

Prices

Prices for industrial goods and business services declined slightly over the last month, but several consumer-oriented contacts reported moderate increases in prices. In particular, prices for core goods, food away from home, and hotels all rose moderately. Business contacts reported higher input costs broadly. Services businesses continued to note rising labor costs, with professional business services indicating more difficulty passing higher costs onto customers.

Consumer Spending

After declining recently from elevated levels, consumer spending stabilized over the past month. Several contacts noted a recent shift in sales across spending categories due to heightened price sensitivity among consumers. Hotels noted bookings by leisure and small-group "SMERF" customers fell, even though business and large event bookings grew robustly.¹ Retail contacts reported pockets of strength in auto part sales and grocery consumption, with spending shifting away from clothing and home electronics. Auto dealers noted sharp declines in EV sales, while demand for other vehicles was steady. Amid the rising price sensitivity of consumers, several contacts indicated their emphasis on protecting price margins over coming months.

Community Conditions

More contacts reported difficulties among low-to-moderate income (LMI) households in obtaining and maintaining affordable credit. Contacts noted increased utilization of, and defaults on, credit cards, payday loans, and pay-as-you-go purchasing among LMI households. Defaults on debts for medical services also reportedly rose. The increase in default rates among LMI households has led to a moderate increase in challenges among renters in qualifying for housing leases. Contacts also reported more denials of financing for car purchases among LMI households and a slight increase in vehicle repossession due to delinquency on existing loans.

Manufacturing and Other Business Activity

Business activity across the District grew slightly over the last month, while profitability declined slightly. Service firm activity rebounded moderately from declines earlier in the year. Manufacturing firms reported further declines in production over the last month. However, several manufacturing contacts noted the current weakness is partially driven by customers working through excess inventories, and that longer-term demand for machinery and manufactured products remained stable. Contacts in the logistics, transportation, and packaging sector reported softening demand for shipping, suggesting potential slowing in consumer goods sectors over coming months. Businesses broadly reported resolutions to supply chain issues domestically, with microchips still being an exception. However, many contacts raised concerns over international shipping due to both rising geopolitical tensions and physical disruptions to trade routes through Central America. Manufacturing and services contacts reported declining margins and lower profitability in recent months. Professional service firms reported more pronounced margin compression than manufacturing contacts, consistent with higher labor costs and an inability to pass costs onto customers. Contacts implemented a series of cost-saving strategies to maintain profit margins, including changing suppliers and reducing overtime work. Overall, contacts are more optimistic about margins and profitability, anticipating flat or slight margin expansion over the coming year.

Real Estate and Construction

Contacts in commercial real estate noted appraisers were facing difficulty assessing property values amid very few property transactions over the past several months. Buyers expressed skepticism around any recent appraisals, not wanting to be in a position of trying to "catch a falling knife" early in a CRE downturn. Developers indicated new private development activity has all but ceased, especially for multifamily housing. In some District states, substantial municipal project construction activity offset headwinds to private development, which, combined with projects already under development, supported demand for construction labor.

Energy

Total oil and gas production declined slightly across the District. Despite climbing oil prices, the number of active oil rigs fell to levels observed three to six months ago, reverting from a recent spike before year-end. Gas rig counts stayed steady as drilling for gas remained unprofitable. The number of drilled and completed wells decreased in Colorado and Wyoming's Niobrara Basin, while they stayed mostly steady in Oklahoma's Anadarko Basin. Accordingly, the number of drilled but uncompleted wells was constant in the Anadarko but fell in the Niobrara, portending a potential for decreased production in coming months. Coal production in Wyoming rebounded somewhat from lower production levels earlier in the year, and coal prices remain slightly higher than pre-pandemic levels.

Agriculture

Conditions in the Tenth District farm economy softened in February, but agricultural credit conditions remained sound. Crop prices declined moderately over the past month alongside reports of stronger yields and production in the 2023 growing season than was previously estimated. Grain stocks were higher coming into 2024 than a year ago in most Districts states. Although strong yields could support revenues, producers with large shares of the harvested grain currently in storage appeared likely to sell at unfavorable prices. In the livestock sector, cattle prices remained strong alongside reports of additional declines in cattle herds. Farm financial conditions have moderated over the past year, but credit stress and farm loan delinquencies remained low. Looking ahead, contacts continued to cite ongoing risks associated with high expenses, commodity market developments, and high interest costs.

For more information about District economic conditions visit: KansasCityFed.org/research/regional-research.

¹ "SMERF" is a hotel industry acronym referring to Social, Military, Educational, Religious and Fraternal group bookings.

Federal Reserve Bank of Dallas

Summary of Economic Activity

The Eleventh District economy expanded modestly, with activity in most sectors holding steady or experiencing slight to modest growth. Employment rose modestly, and wages grew at an average pace. Input costs grew moderately. Selling prices rose at an average rate in the service sector but were flat in manufacturing. Demand for nonprofit services remained solid. Overall, Texas firms were more bullish on demand expectations than last quarter, with more than half expecting demand to increase over the next six months, up from 38 percent in November 2023. Overall outlooks were less pessimistic, although geopolitical instability and heightened domestic policy uncertainty were cited as key headwinds.

Labor Markets

Employment expanded modestly over the past six weeks. Labor availability improved, though contacts continued to cite difficulty in filling certain positions, particularly truck drivers, mechanics, engineers, health care professionals, and machinists. One contact said they were holding on to some workers with suboptimal performance due to a tight labor market.

Wage growth was moderate across most sectors. Staffing firms cited some reprieve in wage pressures. One food manufacturer noted paying above-average wages and offering more flex time to retain staff, while a professional and business services firm said they have been able to retain employees without giving raises by offering them the ability to work remotely.

Prices

Input costs rose moderately. Selling prices rose at an average pace in the service sector but prices were flat for manufactured goods. Airfares rose in response to higher costs, and unplanned refinery outages in the Midwest and on the Gulf Coast placed modest upward pressure on fuel prices. Home prices were flat to up. Auto dealers reported lower prices for vehicles, and many energy contacts expect the level of oilfield services prices to ease slightly this year.

Manufacturing

Texas manufacturing activity stabilized in February after contracting sharply in January. New orders rose after 20 months of decline. Weakness was concentrated in durables, particularly metals manufacturing in part due to competition from imports. Demand for and output of nondurables rose, led by growth in food manufacturing. New orders for basic chemicals and plastics ticked up slightly in January, while petrochemical manufacturers noted sluggish industrial demand, stemming from weakness in demand for construction-related products and aluminum. Utilization rates dipped as refineries along the Gulf Coast experienced unexpected outages during the reporting period. Overall, manufacturing outlooks remained negative, though pessimism waned.

Retail Sales

Retail sales somewhat stabilized in February after having weakened notably in January. Durable goods wholesalers and construction-related retailers saw a pickup in demand, while nonstore retailers and auto dealers noted declining sales and higher inventories. Retail outlooks remained pessimistic, though uncertainty in outlooks subsided somewhat.

Construction and Real Estate

Home sales rose during the reporting period, and contacts noted that the spring selling season was generally off to a good start. Cancellation rates were down, buyer incentives were less prevalent, and builders said they were raising prices slightly in some markets. Outlooks were positive, although contacts cited economic and political uncertainty, diminished affordability, and tight lending for loans as headwinds.

Activity in commercial real estate held steady during the reporting period. Apartment leasing was solid, but rents were flat to down as new supply continued to outpace demand. Office leasing remained weak; vacancy rates were elevated, and concessions remained widespread. A few contacts noted that tenants were screening the landlord's credit before leasing up space. Industrial demand was solid and in line with pre-pandemic averages. Outlooks were mixed, with economic uncertainty, high capital costs, and tight credit standards cited as deterrents to launching new projects or attracting investors.

Energy

Oilfield activity held steady during the reporting period. Oil and gas production ticked up, but only modest increases in production were expected over the next few quarters as firms seek opportunities to consolidate. Overall, contacts expect U.S. oil production growth to slow notably this year.

Agriculture

Drought conditions receded further in Texas but remained prevalent in southern New Mexico. Recent rainfall improved pasture conditions, refilled ponds, and boosted crop prospects. Tighter supplies of cattle continued to push up prices, while crop prices moved down over the past six weeks amid increased production expectations. Farmers cited high input costs and weak crop prices as a concern and noted that above-average yields will be needed this year to break even. An increase in cotton acreage could be seen as farmers may favor cotton over grain crops due to a relatively more favorable price.

Community Perspectives

Nonprofits reported continued elevated demand for services, as lower-income households faced increased difficulty in making ends meet. There were also reports of an uptick in white-collar professionals seeking financial assistance. Housing affordability remained a widespread concern, and contacts said in some instances multiple generations were living together in order to pay for housing costs. Contacts said that along the Texas-Mexico border, there was a need for migrant housing beyond the temporary assistance provided by FEMA. Mental health was cited as a growing need among youth.

For more information about District economic conditions visit: dallasfed.org/research/texas.

Federal Reserve Bank of Minneapolis

Summary of Economic Activity

The Ninth District economy grew slightly since the previous report. Respondents to a January survey reported a slight increase in sales and orders over the previous month. Employment grew slightly, but overall labor demand softened somewhat. Wage pressures were moderate but continued to ease, and prices rose modestly. Consumer spending and agricultural conditions declined, while commercial real estate activity was flat. Construction, manufacturing, and residential real estate activity increased slightly. Activity among minority- and women-owned businesses declined slightly.

Labor Markets

Employment grew slightly since the last report. Hiring demand remained positive overall but softened somewhat. Demand for full-time, year-round employees fell modestly, particularly among leisure and hospitality firms affected by unseasonal winter conditions. Softer labor conditions were also reported in construction, manufacturing, wholesale, and transportation sectors. More firms cut workers, though this number was still a small fraction compared with those looking for workers. Contacts reported modestly improved labor availability. A Minnesota finance company said, "It depends on the position. Higher-level positions are hard to find qualified candidates. Lower-level positions are starting to have more applications." A large manufacturer in South Dakota reported that slowing demand over the last year cooled its labor needs, but "finding workers to replace turnover is still moderately difficult." Firms were a bit less optimistic about future hiring needs than they were previously, but still positive overall.

Wage pressures were moderate overall but have been easing compared with previous levels. A survey of almost 700 firms found that roughly half reported wage increases of 3 percent or more, with 18 percent seeing increases of more than 5 percent; both measures were moderately lower than those of earlier surveys. Some firms reported wage pressure was easing due to better labor availability, reduced business, an inability to pass higher costs on to customers, and declining reimbursement rates from government health care programs.

Prices

Prices increased modestly since the last report. A quarter of respondents to a District business survey reported increasing customer prices in January from a month earlier, while 63 percent reported no change in pricing. Input price pressures remained greater than final prices; 41 percent reported increases in January. Retail fuel prices in District states increased slightly since the last report. Prices received by farmers increased in December from a year earlier for chickpeas, dry edible beans, lentils, chickens, and cattle; prices decreased for corn, wheat, soybeans, hay, sugar beets, potatoes, canola, milk, hogs, turkeys, and eggs.

Worker Experience

Workers highlighted opportunities for career development, income improvement, and schedule flexibility as their top three priorities when looking for a job. The majority were confident that they would find a job in the next three months. Contacts who switched jobs or recently became employed after a period of unemployment said the most challenging part of their job search was finding a job that pays what they need. Most of them got jobs in health care, followed by education and manufacturing. The majority had applied for up to five jobs before being hired. Contacts reported higher prices across most items in recent weeks, mainly in food. "I wish my twenty-dollar [sandwich] lunch went back to [costing] ten," said a Minnesota worker. "It instead keeps going up."

Consumer Spending

Consumer spending was down since the last report. Unseasonably warm weather hurt businesses catering to winter activity; firms in retail, accommodation, and entertainment saw lower revenues across the District. Ski hills in Montana and Michigan's Upper Peninsula (U.P.) closed due to lack of snow. January hotel occupancy fell in most District states, including by 12 percent in Montana. An accommodations firm in the U.P. said bookings were 20 percent higher to start the year, but "most guests cancel due to lack of snow. We are now showing a 25 percent decline. This is having a devastating effect on all local businesses." However, contacts reported healthy underlying demand; weather was a confounding factor, but expectations for spring tourism were positive. Consumer spending remained active in some other areas; new-vehicle sales rose 18 percent in January at one large dealership, and sales of powersport vehicles also rose across the District. Contacts noted that some consumers continued to adjust purchasing habits due to high prices. A grocer in southern Minnesota said that customer counts remained strong, but "customers are starting to pull back on their purchases."

Construction and Real Estate

Construction declined overall since the last report. Firms reported that both active and future projects out for bid were lower. Commercial permitting for new projects in January was widely lower. Single-family development remained soft, with modest but spotty increases in some District markets compared with a year earlier. Multifamily permitting has slowed significantly. Home remodeling activity has also slowed for some firms. A Minnesota contact said that "consumers quite abruptly stopped spending discretionary income on larger home improvements."

Commercial real estate was flat. Office space continued to see negative absorption due in part to soft employment in office-using sectors. Industrial vacancy rates rose slightly, but slowing speculative development allowed rental rates to rise. Retail vacancy rates were comparatively low, thanks to very slow development of new space and new leasing activity. Residential real estate grew modestly from low levels, with a modest majority of larger markets seeing year-over-year sales growth in January.

Manufacturing

Manufacturing activity increased slightly since the previous report. A regional index of manufacturing conditions indicated expansion in activity in Minnesota, North Dakota, and South Dakota in January relative to a month earlier. However, demand continued to slide. Two-thirds of manufacturing sector respondents to a District business survey reported that January sales fell from a month earlier. A large custom fabricator reported that demand from large customers had slowed, but they were "not sure if they are reducing inventories to free up cash, or if demand is softer." In contrast, several producers of construction materials and electronics reported an uptick in demand.

Agriculture, Energy, and Natural Resources

District agricultural conditions declined. Ninth District farm income declined in the last quarter of 2023 relative to a year earlier, according to most lenders responding to an agricultural conditions survey. Capital spending also decreased on balance, while farm household spending continued to increase. Sector contacts reported that current prices for some commodities were below breakeven levels for many producers; however, input costs have moderated somewhat. Oil and gas exploration activity increased slightly since the previous report. District iron ore mines, already near capacity, increased production since the last report.

For more information about District economic conditions, visit minneapolisfed.org/region-and-community.