Federal Reserve Board Publication

The Beige Book

Summary of Commentary on

Current Economic Conditions by

Federal Reserve District

August 2024

FE DE RAL RESERVE SYSTEM

Contents

About This Publication

.................................................................................................... ii

National Summary

........................................................................................................... 1

Federal Reserve Bank of Boston

.................................................................................. 5

Federal Reserve Bank of New York

.............................................................................. 8

Federal Reserve Bank of Philadelphia

....................................................................... 12

Federal Reserve Bank of Cleveland

............................................................................ 16

Federal Reserve Bank of Richmond

........................................................................... 20

Federal Reserve Bank of Atlanta

................................................................................ 23

Federal Reserve Bank of Chicago

.............................................................................. 27

Federal Reserve Bank of St. Louis

............................................................................. 30

Federal Reserve Bank of Minneapolis

....................................................................... 33

Federal Reserve Bank of Kansas City

........................................................................ 36

Federal Reserve Bank of Dallas

.................................................................................. 40

Federal Reserve Bank of San Francisco

.................................................................... 44

About This Publication

What is the Beige Book?

The Beige Book is a Federal Reserve System publication about current economic conditions

across the 12 Federal Reserve Districts. It characterizes regional economic conditions and pros-

pects based on a variety of mostly qualitative information, gathered directly from each District’s

sources. Reports are published eight times per year.

What is the purpose of the Beige Book?

The Beige Book is intended to characterize the change in economic conditions since the last

report. Outreach for the Beige Book is one of many ways the Federal Reserve System engages

with businesses and other organizations about economic developments in their communities.

Because this information is collected from a wide range of contacts through a variety of formal

and informal methods, the Beige Book can complement other forms of regional information gath-

ering. The Beige Book is not a commentary on the views of Federal Reserve officials.

How is the information collected?

Each Federal Reserve Bank gathers information on current economic conditions in its District

through reports from Bank and Branch directors, plus interviews and online questionnaires com-

pleted by businesses, community organizations, economists, market experts, and other sources.

Contacts are not selected at random; rather, Banks strive to curate a diverse set of sources that

can provide accurate and objective information about a broad range of economic activities. The

Beige Book serves as a regular summary of this information for the public.

How is the information used?

The information from contacts supplements the data and analysis used by Federal Reserve econo-

mists and staff to assess economic conditions in the Federal Reserve Districts. The qualitative

nature of the Beige Book creates an opportunity to characterize dynamics and identify emerging

trends in the economy that may not be readily apparent in the available economic data. This infor-

Note: The Federal Reserve officially identifies Districts by number and Reserve Bank city. In the 12th District, the Seattle

Branch serves Alaska, and the San Francisco Bank serves Hawaii. The System serves commonwealths and territories as

follows: the New York Bank serves the Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank

serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. The Board of Governors revised

the branch boundaries of the System in February 1996.

mation enables comparison of economic conditions in different parts of the country, which can be

helpful for assessing the outlook for the national economy.

The Beige Book does not have the type of information I’m looking

for. What other information is available?

The Federal Reserve System conducts a wide array of recurring surveys of businesses, house-

holds, and community organizations. A list of statistical releases compiled by the Federal Reserve

Board is available here, links to each of the Federal Reserve Banks are available here, and a sum-

mary of the System’s community outreach is available here. In addition, Fed Listens events have

been held around the country to hear about how monetary policy affects peoples’ daily lives and

livelihoods. The System also relies on a variety of advisory councils—whose members are drawn

from a wide array of businesses, non-profit organizations, and community groups—to hear diverse

perspectives on the economy in carrying out its responsibilities.

iii The Beige Book

National Summary

Overall Economic Activity

Economic activity grew slightly in three Districts, while the number of Districts that reported flat or

declining activity rose from five in the prior period to nine in the current period. Employment levels

were steady overall, though there were isolated reports that firms filled only necessary positions,

reduced hours and shifts, or lowered overall employment levels through attrition. Still, reports of

layoffs remained rare. On balance, wage growth was modest, while increases in nonlabor input

costs and selling prices ranged from slight to moderate. Consumer spending ticked down in most

Districts, having generally held steady during the prior reporting period. Auto sales continued to

vary by District, with some noting increases in sales and others reporting slowing sales because

of elevated interest rates and high vehicle prices. Manufacturing activity declined in most Districts,

and two Districts noted that these declines were part of ongoing contractions in the sector. Resi-

dential construction and real estate activity were mixed, though most Districts’ reports indicated

softer home sales. Likewise, reports on commercial construction and real estate activity were

mixed. District contacts generally expected economic activity to remain stable or to improve some-

what in the coming months, though contacts in three Districts anticipated slight declines.

Labor Markets

Employment levels were generally flat to up slightly in recent weeks. Five Districts saw slight or

modest increases in overall headcounts, but a few Districts reported that firms reduced shifts and

hours, left advertised positions unfilled, or reduced headcounts through attrition—though

accounts of layoffs remained rare. Employers were more selective with their hires and less likely to

expand their workforces, citing concerns about demand and an uncertain economic outlook.

Accordingly, candidates faced increasing difficulties and longer times to secure a job. As competi-

tion for workers has eased and staff turnover has fallen, firms felt less pressure to increase

wages and salaries. On balance, wages rose at a modest pace, in line with the slowing trend

described in recent reports. Skilled tradespeople and other workers with specialized skills

remained in short supply and continued to see stronger wage increases, as did those in unions.

Note: This report was prepared at the Federal Reserve Bank of Cleveland based on information collected on or before

August 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.

Prices

On balance, prices increased modestly in the most recent reporting period. However, three Dis-

tricts reported only slight increases in selling prices. Nonlabor input cost increases were largely

described as modest to moderate and as generally easing, though one District described input

cost increases as ticking up. A number of Districts observed that both freight and insurance costs

continued to increase. By contrast, some Districts noted that cost pressures moderated for food,

lumber, and concrete. Looking ahead, contacts generally expected price and cost pressures to sta-

bilize or ease further in the coming months.

Highlights by Federal Reserve District

Boston

Economic activity increased modestly, but results varied widely. Residential real estate led recent

activity, with strong increases in single-family home sales. Consumers’ increased budget con-

sciousness showed up in slightly softer retail and restaurant sales, and retailers perceived pres-

sure to lower their prices. Job creation slowed. The outlook was mixed between optimism and

increased caution.

New York

On balance, regional economic activity remained flat. Labor market conditions continued to mod-

erate, with ongoing cooling in labor demand and increased worker availability. Consumer spending

was unchanged. Housing markets remained solid, with home prices edging up. Selling price

increases remained modest.

Philadelphia

Business activity declined slightly in the current Beige Book period after rising slightly last period.

Employment appeared to decline slightly, while consumer spending fell modestly. Nonmanufac-

turing activity held steady. Wage growth continued at a modest pace, as did reported rises in input

costs and prices. Expectations for future growth remained slightly positive overall—growing more

widespread for manufacturers but waning for others.

Cleveland

District business activity declined slightly in recent weeks, though contacts expected activity to

increase slightly in the near term. Demand for manufactured goods softened further, and con-

sumer spending declined moderately. Employment levels were stable to slightly up. On balance,

wages and nonlabor costs increased modestly, while selling prices grew slightly.

2 The Beige Book

Richmond

The regional economy contracted slightly this cycle after increasing slightly last period. Consumers

pulled back on spending on goods and services, including travel and vehicles and other big-ticket

items. Manufacturing activity also declined slightly while nonfinancial services firms reported flat

demand in recent weeks. Employment continued to grow at a mild pace amid modest wage

growth. Year-over-year price growth remained somewhat elevated.

Atlanta

Economic activity in the Sixth District declined slightly. Employment increased modestly and wages

grew slowly. Prices grew modestly, and pricing power lessened. Consumer spending declined. Lei-

sure travel slowed, but business travel improved. Housing activity declined. Demand for transpor-

tation services weakened. Loan volumes increased. Manufacturing activity fell. Energy activity

expanded.

Chicago

Economic activity increased slightly. Employment and business spending rose slightly; manufac-

turing activity and consumer spending were flat; nonbusiness contacts saw little change in activity;

and construction and real estate activity edged down. Prices were up modestly, wages rose

moderately, and financial conditions were little changed. Prospects for 2024 farm income

declined some.

St. Louis

Economic activity has remained unchanged since our previous report. Contacts reported weak-

ening of household finances and overall lower demand. Employment has been stable and wage

growth continued to moderate back toward longer-run trends. Prices to consumers have increased

modestly, production costs have increased and are expected to be more persistent. The economic

outlook has remained slightly pessimistic since our previous report.

Minneapolis

District economic activity fell slightly. Employment was flat and hiring softened, while wage growth

was moderate. Price pressures eased as overall prices increased slightly but at a slower pace.

Consumer spending was slightly lower, but tourism held up and vehicle sales increased. Manufac-

turing and construction activity declined. Agricultural conditions remained weak.

Kansas City

Economic activity in the Tenth District remained stable. Many contacts indicated they recently

reduced hiring activity relative to their plans at the beginning of the year. Contacts reported par-

National Summary 3

ticular weakness in demand for entry-level work. In housing markets, both brokers and home-

builders indicated activity is poised to rise if borrowing costs decline even slightly.

Dallas

The Eleventh District economy expanded modestly over the reporting period. Employment was

stable, and wage growth remained moderate. Selling price growth continued below average in the

service sector but was more typical in manufacturing. Outlooks were somewhat mixed, though

most businesses expect demand to stay the same or increase over the next six months.

San Francisco

Economic activity remained stable, employment levels and prices rose slightly. Wages grew mod-

estly, while retail sales were stable. Activity in consumer services and manufacturing ticked down

a bit. Conditions in the agriculture, residential, and commercial real estate markets continued to

soften slightly. Activity in the financial services sector remained muted.

4 The Beige Book

Federal Reserve Bank of

Boston

Summary of Economic Activity

Economic activity was mixed, increasing modestly overall. Employment and wages were flat, and

prices increased only slightly. Consumer spending was mixed, as retailers and restaurants owners

posted slightly softer sales, but tourism spending grew modestly. Consumers were described as

increasingly inclined towards discounted goods and services. Manufacturers reported modestly

higher revenues, on average, while staffing firms experienced somewhat softer demand for labor.

Contacts reported substantial increases in single-family home sales and small-to-moderate

increases in condominium sales. In contrast, commercial real estate activity was mostly flat. The

outlook was a mix of optimism—mostly about home sales—and increased caution about the direc-

tion of consumer spending and labor demand.

Labor Markets

Employment levels were unchanged on balance and no major layoffs were reported. Wages were

flat from the previous quarter but continued to rise moderately on a year-over-year basis. Staffing

contacts said that job creation had slowed owing to increased caution in the face of economic

uncertainty. Employers reportedly became more selective about workers’ qualifications and did not

face substantial hiring difficulties. Restaurant and retail contacts even said that labor supply had

improved somewhat, facilitating replacement hires. Nonetheless, certain positions, especially tem-

porary roles, remained difficult to fill. Manufacturers reported moderate annual wage growth rates

on average, although one said that merit increases put in place earlier in the year had been above

average. With rare exceptions, firms did not plan to expand their workforces moving forward, but

no major layoffs were planned either. Hotel industry representatives faced the possibility of a

large-scale worker strike pending the outcome of upcoming contract negotiations. A workforce

development contact expressed increased pessimism concerning job prospects for their trainees,

as recent graduates had faced unexpected difficulties finding suitable jobs.

Prices

Prices increased slightly on average, but the reported changes included decreases as well as

increases. Retailers aimed at gently lowering their average prices to consumers, whether by direct

price reductions on selected goods or by shifting product mix towards lower-priced items. For

example, a clothing retailer will enact planned price reductions in September on popular items in a

bid to win back customers deterred by a series of price increases since the pandemic at the

chain. Hotel room rates in greater Boston increased just 1.3 percent from a year earlier, the

lowest growth rate in that market in recent years. Manufacturers held output prices steady in the

most recent quarter but reported year-over-year price increases ranging from average to above-

average. Across industries, non-labor input prices increased modestly on average, reflecting a gen-

eral easing of non-labor cost pressures, including wholesale food prices, over the past year. Most

contacts expected pricing pressures to stabilize or slow further moving forward, but one manufac-

turer included upside cost risks in their outlook.

Retail and Tourism

Retail and restaurant sales were slightly weaker overall in recent months, but tourism spending

expanded modestly. A clothing retailer experienced improved results that nonetheless still

reflected slight declines in sales on a year-over-year basis. A discount retailer also recorded mod-

estly weaker sales from one year earlier, citing flagging sales of higher-priced items such as furni-

ture and flooring, but added perspective by noting that year-ago sales had been especially robust.

A Massachusetts restaurant industry contact reported a slight softening of demand throughout the

state but added that certain neighborhoods, such as Boston’s Seaport, continued to thrive. Hotel

occupancy rates in greater Boston were stable in recent months and were up two percent on a

year-over-year basis, consistent with annual growth rates observed earlier in the year. Restaurants

expected sales to continue to trail last year’s results slightly. Retailers were cautiously optimistic

that planned improvements in products and pricing would boost sales volumes over the remainder

of the year. Tourism contacts remained optimistic for strong hotel and convention activity in the

Boston area into 2025.

Manufacturing and Related Services

Among First District manufacturing contacts, average revenues increased modestly from the pre-

vious quarter. Results generally met or exceeded expectations. However, a maker of veterinary

products noted that sales had declined slightly on a year-over-year basis, extending a trend that

has been in place for several quarters and that was attributed to increasingly strained consumer

budgets. Capital expenditure plans were unchanged, although one contact noted that their capital

projects had proceeded more slowly than anticipated in the first half of 2024. On average, con-

tacts expected flat or modestly higher sales moving forward. However, the veterinary contact

revised its forecast downward to predict further declines in sales, consistent with its recent year-

over-year results. Other contacts maintained a stable or slightly more optimistic outlook.

6 The Beige Book

Staffing Services

Staffing firms’ revenues declined modestly on average from the previous quarter, but results

ranged from substantial reductions to slight increases. Contacts’ views on the state of the labor

market also diverged, as some saw flat or weakening labor demand, while others reported robust

staffing needs for selected roles. Even though demand for temporary hires was down at some

firms, supply of temporary labor reportedly still fell short of demand. Firms expected mostly flat or

even declining demand for their services moving forward, despite some upside demand potential

coming from the healthcare industry.

Commercial Real Estate

First District contacts described commercial real estate activity as mostly flat, but with improve-

ments along some dimensions. Leasing activity was generally steady across sectors, an outcome

that exceeded seasonal expectations, and rents and vacancy rates were also mostly unchanged.

Leasing activity stayed much weaker for office properties than for industrial and retail spaces.

Contacts agreed that remote work arrangements had dented office demand in a permanent way

and that the market was still adjusting. They cited a growing number of financially distressed

office buildings that might eventually be torn down. Nonetheless, contacts saw signs that the

office market may have bottomed out, as investors showed renewed interest in the sector. Lending

activity was also up slightly—particularly for multifamily and senior housing—but large loan origina-

tions remained scarce. One contact noted a modest increase in multifamily construction in Bos-

ton’s nearby suburbs. The outlook improved slightly on balance, but contacts remained very ner-

vous about distressed office properties and cautioned that softer consumer spending could hurt

retail properties.

Residential Real Estate

Single-family home sales in the First District increased by large margins compared with one year

earlier, based on data representing the New England states except Connecticut. The average

growth rate of sales was well into the double digits—the strongest showing for single-family sales

in over two years. Condominium sales were also up from the summer of 2023, by at least

small percentages in all states and by large margins in Vermont and Rhode Island. Industry con-

tacts attributed the stronger sales to recent declines in mortgage rates along with increased

inventories. Home prices continued to climb at a moderate pace on average on a year-over-year

basis, but prices were said to be levelling off in Massachusetts. Contacts were mostly optimistic

that strong sales would persist into the fall season, especially if mortgage rates fell further as

some contacts expected; others, however, maintained a more cautious posture based on the

uncertain timing and size of interest rate cuts by the Federal Reserve.

For more information about District economic conditions visit: https://www.bostonfed.org/in-the-

region.aspx.

Federal Reserve Bank of Boston 7

Federal Reserve Bank of

New York

Summary of Economic Activity

Economic activity in the Second District remained flat in the latest reporting period. Labor market

conditions continued to moderate, with ongoing cooling in labor demand and increased worker

availability across the District. On balance, employment and wage growth were little changed.

Selling price increases remained modest. Manufacturing activity was little changed, and shipments

were flat. Consumer spending held steady, and tourism activity in New York City was nearly back to

normal pre-pandemic levels. Housing markets remained solid, with home prices edging up. Com-

mercial real estate markets held steady. Activity in the finance sector continued to weaken as

delinquency rates worsened. Looking ahead, businesses anticipated little improvement in eco-

nomic conditions.

Labor Markets

Labor market tightness continued to moderate, with ongoing cooling in labor demand and

increased labor supply across the District. Contacts at employment agencies noted hiring activity

in both New York City and across upstate New York has slowed as firms are approaching hiring

decisions with greater hesitancy. Hiring has shifted to be primarily for replacement, rather than

growth, and with uncertainty pertaining to the presidential election ahead, many firms have put

hiring plans on hold. It has become much easier to find workers, particularly for firms offering

remote or hybrid work options. Still, some contacts from industries that require in-person work

reported some difficulty finding skilled workers, particularly in the skilled trades. Multiple contacts

reported that worker attrition has declined to exceptionally low levels, and job candidates are lin-

gering on the market for longer.

On balance, employment was little changed. Firms in construction and information services

reported some reduction in headcounts, but employment grew among retail, wholesale, and educa-

tion and healthcare firms. Still, contacts continued to report that there are no signs of major lay-

offs on the horizon. Wage growth has held steady at a moderate pace and even declined slightly

for some roles, as more workers have become available.

Prices

Selling price increases generally remained steady and modest. Input prices continued to increase

at a moderate pace. A food wholesaler in the region reported that tariffs and duties were contrib-

uting to elevated costs that were being passed on to customers. Although manufacturers reported

only modest increases in prices paid for inputs, freight and raw material costs continue to weigh

on firms in some industries. By contrast, with slowing construction activity and lower demand, the

prices for building materials, especially lumber and concrete, have declined substantially. Busi-

nesses expect little change in pricing pressures in the coming months.

Consumer Spending

Consumer spending on the whole held steady during this reporting period. Still, spending on enter-

tainment and recreation continued to decline, and retail spending was subdued. Consumer

spending sagged in New York City compared to the same time last year, though some parts of the

District, such as the Hudson Valley, saw an increase.

Auto dealers in upstate New York reported that sales picked up strongly since the last report, with

particularly brisk sales in July making up for the slow business in June caused by a cyber-attack on

software used by auto dealers. New car inventory has generally continued to build, and most cus-

tomers now have a good selection from which to choose. Used car sales have also remained solid

now that a more normal gap between new and used car prices has returned. Still, there has been

a continued shift to older models of used cars for affordability reasons.

Manufacturing and Distribution

Manufacturing activity was little changed. Shipments were flat, though orders declined modestly.

Transportation and warehousing firms reported a modest increase in activity, while wholesalers

reported that activity continued to grow moderately. Contacts reported little change in supply avail-

ability and delivery times. Manufacturers anticipated modest improvements in economic condi-

tions in the months ahead.

Services

On balance, activity in the service sector held steady. Activity declined in the information and the

leisure and hospitality sectors following increases in the previous reporting period and remained

weak in the business services sector, while businesses providing education and healthcare ser-

vices saw a moderate bump up in activity. Optimism among service firms remained weak.

Federal Reserve Bank of New York 9

Tourism activity in New York City continued to move toward normal pre-pandemic levels. Hotel

room rates are near record highs and are anticipated to rise even more in the fall when business

travel normally picks up. Visits to the Statue of Liberty—a proxy for international visitors—were

just about at pre-pandemic levels. However, a local tourism expert noted that international travel to

New York City has been sluggish. Visa processing delays and reduced long-haul flight schedules

have resulted in notably lower visitors from China, while visits from Latin America have been

curbed by economic woes at home.

Real Estate and Construction

The supply of homes for sale has risen slightly in much of District, though demand has continued

to outpace supply, and home prices have continued to edge up. The frequency of bidding wars has

declined slightly across the District, though homes continued to hold their value. New York City

saw a surge in signed contracts after a sluggish early part of the year. In upstate New York, outmi-

gration from the region has improved inventory, and demand remained solid. In New York City,

potential buyers worn down by high rents have lost their resolve to wait for lower mortgage rates

and are contributing to elevated demand. Contacts reported increased uncertainty has dampened

activity in the housing market due to court-mandated changes in compensation practices for real

estate agents taking effect this reporting period.

The residential rental market remained exceptionally tight, and new leasing activity in New York

City was the highest since 2008. Bidding wars on rentals there have remained fairly widespread,

and concessions have been low. Rents in New York City have remained flat at high levels, though

many New Yorkers are saving money by renting even smaller apartments.

Commercial real estate markets held steady, on balance. The office market in New York City

improved slightly, with some decline in vacancy rates and an increase in asking rents. The indus-

trial market was unchanged, with demand at a long-term low and vacancy rates remaining above

pre-pandemic levels.

Construction contacts reported that activity decreased slightly. A commercial real estate developer

in the District noted that difficulty obtaining credit has constrained new development and has led

to a pause in a number of ongoing projects.

Banking and Finance

Activity in the broad finance sector continued to weaken. Small-to-medium-sized banks reported no

change in loan demand, though demand for refinancing picked up from low levels. Credit stan-

dards tightened slightly, particularly for business loans and commercial mortgages. Deposit rates

10 The Beige Book

declined noticeably. Loan spreads were mostly unchanged. Delinquency rates continued to rise,

particularly for consumer loans.

Community Perspectives

Community leaders noted difficulty accessing and operationalizing recent federal grants for funding

to non-profits, community groups, and state and local governments, in part due to the limited avail-

ability of workers with the right skills to execute the work. To address this shortfall, state and local

governments are establishing programs and industry partnerships to develop fast-track training.

Public-private partnerships have been integral to the development of workforce skills in areas nec-

essary for the implementation of new community investments and improvements in technology

infrastructure, including green energy installation and high-tech manufacturing.

For more information about District economic conditions visit: https://www.newyorkfed.org/

regional-economy.

Federal Reserve Bank of New York 11

Federal Reserve Bank of

Philadelphia

Summary of Economic Activity

On balance, business activity in the Third District declined slightly after growing slightly last period.

Consumer spending in most sectors, including retail, restaurants, and autos, fell. Employment

appeared to decline slightly following a slight increase in the prior period, as a growing share of

nonmanufacturing firms reported decreases in their workforces. Staffing firms reported little

change in demand. Nonmanufacturing activity appeared flat after increasing modestly last period.

Wage inflation remained modest, with wage pressures at or below pre-pandemic norms, as labor

availability and retention continued to improve. Firm costs and prices continued to rise modestly.

On average, expectations for economic growth over the next six months remained slightly positive

overall but differed widely between manufacturers, whose positive expectations grew more wide-

spread, and other firms, whose optimism waned considerably.

Labor Markets

Employment appeared to decline slightly, following modest growth in the prior period. Based on our

July and August surveys, full-time employment declined for nonmanufacturing firms and was flat to

slightly higher for manufacturing firms, on average. While over half of both manufacturers and non-

manufacturers continued to report no change in employment during the period, a rising share of

nonmanufacturers reported a decrease in their number of employees.

Staffing contacts continued to report little change in demand. Multiple contacts reported that

hiring was broad-based across industries, except for the tech industry. One contact relayed that a

tech company had recently laid off its entire recruitment staff. Another contact mentioned that

some businesses had slowed internal recruiting efforts, turning to staffing agencies instead.

Overall, wage inflation remained at a modest pace. Most business contacts reported low or no

wage pressure for most jobs outside of specialty trades as labor availability continued to improve.

One contact highlighted that they were recently able to hire accountants for positions they had

been unable to consistently fill for nearly four years. Many contacts also continued to report low

employee turnover.

On a quarterly basis, firms’ expectations of the one-year-ahead change in compensation cost per

worker ticked up to a trimmed mean of 3.6 percent in the third quarter of 2024, from 3.3 percent

in the second quarter (but it is down from a peak of 5.8 percent in the third quarter of 2022).

Expectations averaged 3.2 percent before the pandemic. Expected compensation growth rose to

3.6 percent for manufacturers and to 3.7 percent for nonmanufacturers.

Prices

On balance, firm prices continued to rise at a modest pace. Firms reported that increases in

prices received for their own goods and services over the past year edged up in the third quarter

of 2024 compared with the second quarter. The trimmed mean for reported price changes, based

on responses to our quarterly survey, rose to 2.5 percent from 2.3 percent for all firms. Price

increases rose to 2.3 percent from 1.8 percent among nonmanufacturers and edged down to

2.7 percent from 2.8 percent for manufacturers.

In our monthly surveys, the diffusion indexes for both prices paid and prices received remained

mostly in line with their nonrecession averages for both manufacturers and nonmanufacturers.

Looking ahead one year, the increases that firms anticipate in the prices for their own goods were

little changed. The trimmed mean for all firms edged up to 2.4 percent in the third quarter of

2024 from 2.3 percent in the second quarter. The expected rate of growth rose from 2.0 percent

to 2.5 percent for nonmanufacturers and fell to 2.2 percent from 2.6 percent for manufacturers.

Manufacturing

Manufacturing activity quickened to a moderate pace of growth, following a slight decline in the

prior period. On average over the period, the indexes for new orders and shipments both rose

above their nonrecession historical averages.

Manufacturers’ expectations for growth over the next six months rose modestly after falling signifi-

cantly in the prior period. On average, the indexes for future new orders and shipments remained

below their historical averages during the period.

Consumer Spending

On balance, retailers (nonauto) reported modest decreases in real sales, following slight declines

in the prior period. Contacts reported that customers visited less frequently, purchased slightly

fewer items per visit, and opted for lower-priced options when available. Multiple contacts

described consumers as more budget conscious.

Federal Reserve Bank of Philadelphia 13

Auto sales continued to decline modestly during the period as ongoing affordability concerns led to

softening demand. Contacts reported that many dealers introduced or increased incentives in an

attempt to work through growing inventories of new vehicles.

On balance, tourism activity continued to hold steady across the Third District. The normally busy

summer months were mostly in line with the same period a year ago. Contacts noted that demand

for travel remained strong in the Poconos and at the shore. However, according to one contact,

tourists’ continued price sensitivity led to growing pushback on accommodation prices across all

hotel segments. Multiple contacts also mentioned that tourists were spending less at restaurants

and on other discretionary items—one contact highlighted a significant drop in alcohol sales.

Nonfinancial Services

On average, nonmanufacturing activity appeared to hold steady, slowing from modest growth last

period. However, activity appeared to improve in the latter half of the period. The indexes for new

orders and sales/revenues fell and turned negative in July but rose in August.

At the firm level, nonmanufacturers reported a significant drop in general activity in July before it

recovered somewhat in August. Nonmanufacturers’ perceptions of general activity for the region

declined throughout the period.

Expectations among nonmanufacturers for their own growth over the next six months fell moder-

ately from the prior period but remained positive on average.

Financial Services

The volume of bank lending (excluding credit cards) grew modestly during the period (not season-

ally adjusted), a pickup after it held steady last period. Loan growth was moderate during the com-

parable period in 2023.

District banks reported strong growth in commercial real estate and home equity lines. Home

mortgages and commercial and industrial loans grew moderately, while auto loans grew slightly.

Credit card volumes edged up after moderate growth last period, but the pace was down slightly

from the same period one year ago.

Banking contacts continued to report strong credit quality with low delinquency rates. One banker

noted a significant pop in mortgage applications toward the end of the period, with an almost even

split between customers looking to refinance and those looking to purchase. Meanwhile, a non-

profit agency that works with small businesses reported that almost all the businesses they’ve

recently spoken with are living on credit.

14 The Beige Book

Real Estate and Construction

Brokers reported that existing-home sales continued to grow slightly. Despite an uptick in new list-

ings and the inventory of for-sale properties, existing-home prices continued to rise, according to

brokers. One contact noted that some potential homebuyers have decided to stay on the sidelines

because they expect lower mortgage rates in the coming months.

Homebuilders reported a mostly steady level of contract signings, aided by a pickup in activity

toward the end of the current period. Demand had slowed slightly during the prior period. Contacts

cited the recent drop in mortgage rates as the primary cause of the improvement. One builder

noted that a wave of recent sales was concentrated in the least expensive models and that buyers

were starting to cut back on upgraded finishes.

Commercial real estate contacts continued to report steady construction activity at lower levels.

Contacts noted that institutional, infrastructure, and multifamily projects continued to enter the

pipeline. One architecture contact noted that while they’ve heard activity was starting to slow

slightly, their firm remained so busy they had to pass on new projects they would have other-

wise pursued.

For more information about District economic conditions visit: https://www.philadelphiafed.org/

regional-economy.

Federal Reserve Bank of Philadelphia 15

Federal Reserve Bank of

Cleveland

Summary of Economic Activity

Business activity in the Fourth District declined slightly in recent weeks. Although contacts gener-

ally expected activity to increase slightly in the months ahead, reports varied by sector. Demand

for manufactured goods softened further, and some contacts noted that shipments had not

returned to normal levels after expected summer slowdowns. Consumer spending declined moder-

ately, and retailers generally anticipated flat demand in the coming months. Residential construc-

tion and real estate activity declined, a circumstance which contacts attributed to elevated con-

struction costs and mortgage rates deterring prospective homebuyers. Nonresidential construction

contacts reported a slight decrease in demand and fewer projects available for bid than in recent

years. By contrast, demand for professional and business services grew moderately and was

expected to increase further in the near term. On balance, employment levels were stable to

slightly up, wages and nonlabor input costs increased modestly, and selling prices grew slightly.

Labor Markets

Overall, employment levels were stable to slightly up in recent weeks. Most firms reported keeping

their staffing levels unchanged over the recent reporting period, often citing steady demand and a

desire not to over-hire for current business conditions. For firms that are adding to their workforce,

some reported hiring to accommodate business growth. By contrast, several contacts reported

adjusting to weaker demand by leaving open positions unfilled. On balance, firms expected to

increase employment levels slightly over the coming months.

Wages grew at a modest pace in the recent reporting period, with the smallest net proportion of

contacts in more than three years indicating wage increases. Firms reported “no longer need[ing]

to offer above-market wages” to hire new staff or retain existing employees. However, some busi-

ness professionals and others with specialized skills, such as vehicle technicians, remained in

short supply. Contacts reported that requests for cost-of-living wage increases had become less

frequent as inflation had eased.

Prices

On balance, nonlabor input costs increased modestly in recent weeks, though the bulk of contacts

reported no change, and the net proportion of firms that reported an increase reached its lowest

point in over four years. Construction and manufacturing contacts mentioned that most input

costs were stable, though some raw material and freight costs rose. Several contacts mentioned

that insurance costs continued to increase. Restaurateurs indicated that food costs had stabi-

lized, and one contact noted that commodity prices had become more predictable. Transportation

contacts reported that costs continued to increase despite falling fuel prices, with several haulers

mentioning increases in the costs of tires, parts, and servicing.

Upward pressure on selling prices appeared to diminish in the current cycle, with the smallest net

proportion of contacts in four years reporting price increases. Moreover, as with recent reports,

roughly 60 percent of contacts reported keeping their prices unchanged. Some manufacturers indi-

cated that falling steel and copper prices caused their firms to lower selling prices because of

price variation clauses in contracts. Retailers reported that they were holding prices steady to

maintain sales. One restaurateur mentioned trying to keep overall prices stable while broadening

the price range of menu items to attract more customers. By contrast, transportation contacts

reported increased selling prices for the first time in several months.

Consumer Spending

Consumer spending declined moderately in recent weeks, and contacts anticipated flat demand in

the coming months. One large general merchandiser reported slowing sales since mid-June, both

in its stores and online, while other contacts reported continued price consciousness among

lower-income customers. By contrast, a lower-cost retailer reported positive sales growth through

the first half of the year. Restaurant contacts reported stable sales in recent weeks. Auto dealers

reported that affordability concerns continued to hamper sales, and reports varied on the avail-

ability and generosity of manufacturers’ incentives on new vehicle purchases.

Manufacturing

Demand for manufactured goods declined moderately after a modest decrease in the prior period.

Reports indicated fewer orders and shrinking backlogs because of still-soft demand for farm equip-

ment, low construction activity, or slower commercial and consumer vehicle production. Demand

for metal and metal products was particularly weak. One metal producer said shipments had not

recovered after expected seasonal slowdowns, and another noted “historically low levels of

demand.” On balance, manufacturers expected demand to decline slightly in the coming months.

Federal Reserve Bank of Cleveland 17

Real Estate and Construction

Residential construction and real estate activity declined in recent weeks. Contacts noted that

elevated construction costs and mortgage rates remained a deterrent for many prospective home-

buyers. Contacts also saw broader economic trends that were affecting the sector, pointing, for

instance, to lower consumer confidence as a contributor to slower sales. On balance, contacts

expected demand to remain flat over the months ahead.

Nonresidential construction contacts reported a slight decrease in demand over the last two

months. Fewer projects were available for bid after an increase in activity over the last several

years. Contacts anticipated that the slight decline in activity would continue in the coming months.

Regarding demand for existing space, commercial real estate contacts expressed differing views:

Some reported an increase in offers of rent concessions and discounts, reflecting reduced

demand, while one contact reported increased activity in recent weeks despite the typical pattern

of seasonal slowness.

Financial Services

On balance, bankers reported that loan demand from both businesses and households remained

relatively flat. However, one banker mentioned that mortgage activity increased slightly as rates

had “marginally declined.” Another banker reported that some loan demand was related to firms

that could “no longer wait for the rate environment to change” before making necessary capital

improvements. Bankers anticipated that loan demand would remain relatively flat in the near term.

Bankers reported that delinquency rates remained stable and at low levels. Finally, a slight

majority of bankers reported that their deposit levels remained essentially unchanged from the

prior reporting period.

Nonfinancial Services

Demand for professional and business services grew moderately in recent weeks, and contacts

expected demand to rise further in the coming months. A law firm anticipated an increase in refi-

nancings and other real estate-related transactions if interest rates fall. Freight contacts reported

slight demand growth in recent weeks and anticipated modest growth in the coming months. How-

ever, one contact indicated that the industry was still working through the additional capacity that

arose to address pandemic-era supply chain challenges.

Community Conditions

Overall, community college contacts reported increased enrollment for the upcoming academic

year, particularly in part-time and certificate programs. Some reported that enrollment increased

18 The Beige Book

among individuals who left during the pandemic. Demand for support services such as food, trans-

portation, and mental health services remained elevated, and one contact said it was “at an all-

time high.”

Contacts cited the need to adapt their programs to the changing demands of employers in areas

such as IT, manufacturing, and healthcare and to the needs of a shrinking traditional student popu-

lation. Despite concerns about long-term enrollment declines, one contact noted that “it is our

moment” to show community colleges’ return on investment.

For more information about District economic conditions visit: https://www.clevelandfed.org/en/

region/regional-analysis.

Federal Reserve Bank of Cleveland 19

Federal Reserve Bank of

Richmond

Summary of Economic Activity

Economic activity in the Fifth District slowed mildly this cycle, reversing from a slight increase

reported last period. Consumer spending on retail goods, vehicles, and tourism declined in recent

weeks. Manufacturing activity contracted slightly, as well. Residential real estate activity softened

alongside mortgage loan demand; however, banks noted an increase in demand for home equity

lines of credit. Commercial real estate activity picked up slightly amid an increase in demand for

retail leasing and continued strength in industrial construction. Port activity picked up moderately

while trucking demand remained flat. Employment increased slightly in recent weeks and several

contacts said that they were not looking to make changes to headcounts at this time. Price growth

slowed slightly but remained elevated on a year-over-year basis.

Labor Markets

Employment in the Fifth District increased slightly in the most recent period. Several contacts

reported satisfaction with current headcounts and were only backfilling for necessary positions.

Other contacts were allowing headcounts to decline mainly through attrition. A software company

did not expect to increase headcounts due to adequate staffing levels that could handle increases

in demand. Finding skilled workers continued to be a challenge. A construction company reported

plenty of work but not enough staff despite advertising for open positions. Some businesses

reported positive changes in skilled-worker availability. A brewer increased wages in their produc-

tion department and attracted higher-skilled workers while decreasing turnover. A stone cutter

reported more interest in learning trades due to investments at the local community college.

Worker wage expectations continued to be higher than what firms wanted to offer.

Prices

Price growth slowed somewhat this cycle but year-over-year growth in prices remained elevated,

particularly for services. According to our most recent surveys, annual growth in prices received for

services stayed elevated; price growth has generally remained between three and a half and

four percent so far this year. Meanwhile, year-over-year growth in prices received by surveyed

manufacturers edged lower, falling below two percent in the most recent reading.

Manufacturing

Fifth District manufacturing activity declined slightly in the most recent period. Several contacts

mentioned softening conditions. A manufacturer that supplies the hospitality industry reported a

decline in equipment sales due to their equipment being used less and not needing to be

replaced. A millwork manufacturer reported that persistently high inflation has caused customers

to not “upgrade their lifestyles,” resulting in order declines. Several contacts reported optimism

about future demand. For example, a North Carolina machines manufacturer expects increased

business due to new customers moving into the area. Additionally, a cabinet manufacturer’s orders

picked up as construction clients broke ground on previously delayed projects because they

expected interest rates to drop soon.

Ports and Transportation

Ports in the Fifth District reported moderate increases up to 7 percent in containerized cargo vol-

umes due to peak season retail activity. Contacts expect this to continue into the third quarter and

flatten later in the year. Increased capacity in ocean shipping has normalized air cargo volumes

with heavy materials like rubber moving back to sea and road freight. Reductions in air freight

movement led one Fifth District airport to downsize their cargo workforce by almost fifty percent.

Container prices have rapidly increased with spot rates four times higher than they were in

October 2023.

In the trucking segment, demand was steady at an unseasonably low level of volume. Contacts

cited high interest rates and the upcoming election as causes of uncertainty contributing to the

suppressed demand. Pricing held steady as firms negotiated contract increases, but downward

price pressure was reported for road freight. Trucking firms reported a downward drift in driver

headcount through the year as vacant positions were not being filled.

Retail, Travel, and Tourism

Consumer spending softened slightly in recent weeks. A majority of retailers reported a mild

decline in both sales and shopper traffic. A hardware store said that average ticket sales per cus-

tomer were down as fewer big-ticket purchases, such as grills and power tools, were being made.

A fast-casual restaurant chain said they were focusing on launching new value offerings in hopes

to boost sales in the coming months. Light vehicle and motorcycle sales were down modestly,

which some contacts attributed to elevated interest rates making the cost of financing more

expensive. Consumer spending on travel and tourism also contracted slightly. Hotels in coastal

regions of North and South Carolina reported a decline in room nights sold, but the decline was

from a high level in previous months.

Federal Reserve Bank of Richmond 21

Real Estate and Construction

Residential real estate activity showed a slight decrease in buyer traffic and a flattening in sales,

which agents said was better than expected for this time of year. Additionally, home listings and

new home construction were beginning to decrease slightly. According to an agent in Virginia,

those who were thinking about listing were struggling with losing lower mortgage rates. Agents

brought up the National Association of Realtors (NAR) policy changes, but there were mixed per-

spectives about the potential impacts this will have on residential real estate; some were con-

cerned about buyers’ ability to afford or finance their agent’s commission.

Commercial real estate activity continued to increase slightly in recent weeks. Retail leasing

picked up, but sales remained flat. New construction continued for pad sites, such as gas stations

and fast food, and for repurposing of vacant retail buildings. Office space continued to see right-

sizing with more investments going towards luxurious aesthetics to create a “country club feel,” as

one Virginia agent noted. Industrial remained strong with some projects being limited by power

and site availability. Commercial investors were increasingly struggling with loans maturing and

were declining replacement rates and potential new buyers were sitting on the sidelines.

Banking and Finance

Financial institutions reported a softening of loan demand primarily in the commercial real estate

and business loan portfolios. However, lenders continued to see modest increases in the demand

for home equity lines of credit. Some lenders started to report a slight increase in mortgage loan

refinancing activity brought on by the downward movement in rates. Institutions were seeing a sta-

bilization in deposit levels, but competition remained strong in the marketplace for new balances.

Some lenders noted that they have started to see a decline in the credit quality of borrowers, but

delinquencies remained stable.

Nonfinancial Services

Nonfinancial services providers continued to report that demand for their services and their rev-

enues remained stable. An executive search firm reported that an increase in unemployed tech

professionals had softened the need for their firm’s services, as their clients were finding it easier

to fill positions on their own. A few firms noted their clients felt hesitant because of international

conflicts, uncertainty within the economy, and the upcoming election, and therefore they were

delaying investments. Another respondent reported less discretionary spending by their customers

because consumers seemed nervous about the economy.

For more information about District economic conditions visit: https://www.richmondfed.org/

research/data_analysis.

22 The Beige Book

Federal Reserve Bank of

Atlanta

Summary of Economic Activity

Economic activity in the Sixth District declined slightly since the previous report. Labor markets

and wages grew modestly. Prices grew modestly, and firms’ pricing power diminished. Low- to

moderate-income consumers and small businesses remained financially challenged. Consumer

spending weakened amid growing price sensitivity. Leisure travel continued to slow while business

travel improved; spending at hotel properties declined. Demand for housing fell amid a persistent

lack of affordability, and housing starts contracted. Commercial real estate activity was mixed.

Activity in the transportation sector weakened. Manufacturing activity declined. Loan volumes grew

slowly. Energy activity increased.

Labor Markets

Employment in the Sixth District increased modestly over the reporting period. Most firms con-

tinued to report improvements in talent availability. A few noted labor reductions, mostly in the

form of cutting regular and overtime hours and, in a minority of cases, layoffs. However, several

firms said that further weakening of demand could result in future layoffs. While many firms

reported that they will continue to fill vacant positions, several noted that they were slowing the

pace of hiring for the remainder of the year. Only a few indicated they would be staffing up in antici-

pation of future growth.

Most contacts indicated that wages grew modestly as wage pressure continued to ease. However,

some employers noted ongoing wage pressure for certain specialized positions where hiring chal-

lenges persisted.

Prices

On balance, prices grew at a modest pace. Increased container rates pushed freight costs higher.

Other nonlabor input cost increases moderated, with several contacts speculating that food costs

have likely plateaued. Labor and insurance costs remained the greatest expense for firms, but

those increases also diminished. Pricing power continued to wane, with increased reports of pro-

motions or targeted price cuts at the consumer level. The Atlanta Fed’s Business Inflation Expecta-

tions survey showed year-over-year unit cost growth ticked down to 2.7 percent, on average, in July

from 2.8 percent in June; firms’ year-ahead inflation expectations for unit cost growth remained

relatively unchanged at 2.4 percent, on average.

Community Perspectives

Organizations serving low- and moderate-income consumers said that clients’ economic experi-

ences were largely unchanged over the reporting period. Contacts specifically supporting small

businesses reported that many of their clients faced moderately more difficult financial conditions.

Challenges stemmed from an elevated cost of capital, higher cost of inputs, and decreasing finan-

cial support from the federal government. Elevated wage expectations among qualified workers

also presented a financial strain for many small businesses, as labor is often their single

largest expense.

Consumer Spending and Tourism

Consumer spending declined modestly since the previous report. While most retailers did not feel

that demand had fallen to concerningly low levels, many reported lower customer traffic and

shrinking ticket sizes. Contacts reported diminished discretionary spending but solid spending on

essentials. Consumer price sensitivity continued to rise, leading retailers to increase promotions.

While still most notable in lower income groups, shopping for deals and budgeting became more

evident among higher income shoppers. Retailers observed more trade-downs, bulk purchases,

and a shift to shopping at outlets. Auto dealers noted a modest decline in demand, as consumers

delayed big-ticket purchases.

Travel and tourism activity continued to grow at slight pace, on net, since the previous report. Hos-

pitality contacts noted that while leisure travel was slower than expected, business and group

travel increased. On-property spending on services, food, and beverage fell below expectations.

Industry contacts expect flat demand for the remainder of the year.

Construction and Real Estate

Housing activity continued to slow as the continuing lack of affordability hampered sales, despite

the decline in mortgage rates. As home prices in most markets neared record highs, the pace of

sales slowed modestly, remaining flat or slightly below year-ago levels. Inventories increased

sharply, especially in Florida, resulting in less upward pressure on home prices and an elevated

share of homes selling below the asking price. Homebuilder sentiment deteriorated as demand for

new homes declined moderately. Incentives offered to new homebuyers remained above seasonal

norms while builders pulled back on starts to avoid a build-up of speculative inventory.

24 The Beige Book

Commercial real estate (CRE) activity remained mixed. Vacancy rates rose in the office, industrial,

and multifamily sectors. While reporting modestly declining multifamily and industrial starts, CRE

contacts noted an increase in “clicks-to-bricks” investment, where online sales are supplemented

with a brick-and-mortar presence, driving more sales both in-person and online. Firms reported a

slight uptick in property sales transaction volumes, especially for smaller office properties.

Increasing CRE loan maturities continued to create challenges for lenders. Underwriting standards

remained tight, making access to loans challenging.

Transportation

Transportation activity declined modestly, on balance, over the reporting period. Inland barge car-

riers reported that overall demand had slowed, and shipments of construction materials declined

significantly. Demand for leased industrial space declined, and new warehousing construction

remained low. Trucking demand was mixed, but mostly down. Freight volumes at District ports

declined slightly but remained strong. Railroads saw a decline in automotive and steel shipments;

total rail traffic, however, increased. Most transportation contacts described activity as underper-

forming against expectations.

Manufacturing

Manufacturing activity declined modestly in recent weeks. New orders of consumer products

slowed, and manufacturers responding to the Atlanta Fed’s Business Inflations Expectations

Survey noted a decline in sales levels. Manufacturers of some retail goods noted that wholesalers

were reverting to just-in-time inventories amid growing uncertainty and softening consumer

spending. There were also reports of declines in orders of heavy equipment and of inputs for con-

struction. However, some manufacturers, particularly producers of materials for infrastructure proj-

ects and pharmaceuticals, continued to see strong demand.

Banking and Finance

Loan volumes at Sixth District financial institutions grew modestly. Asset quality remained stable,

though segments of their portfolios, such as commercial real estate, commercial and industrial,

and consumer lending, continued to soften. However, many institutions remained selective in their

credit risk appetite. Earnings showed improvement driven by new loan volume and higher asset

yields as compared to funding costs. Borrowing declined modestly as banks reduced reliance on

more expensive liquidity sources. Cash balances increased moderately due to balance sheet

repositioning.

Federal Reserve Bank of Atlanta 25

Energy

The pace of activity grew moderately across most energy sectors. Energy contacts reported that

Gulf of Mexico crude oil production remained robust. Refiners and petrochemical processors noted

that carbon capture and storage projects continued to grow moderately. Utility company contacts

described steady activity across residential, small commercial, and large industrial customers.

Economic development across the Southeast continued to drive demand for power. One utility

reported existing data center electricity usage grew by 17 percent in recent months, and high-

velocity growth in power demand over the medium- and long-term is expected to increase demand

for various forms of electricity supply, including natural gas turbines, solar, wind, and battery

energy storage systems.

For more information about District economic conditions visit: https://www.atlantafed.org/

economy-matters/regional-economics.

26 The Beige Book

Federal Reserve Bank of

Chicago

Summary of Economic Activity

Economic activity in the Seventh District increased slightly overall in July and early August, and

contacts generally expected a similar rate of increase over the next 12 months. Employment and

business spending rose slightly; manufacturing activity and consumer spending were flat; nonbusi-

ness contacts saw little change in activity; and construction and real estate activity edged down.

Prices were up modestly, wages rose moderately, and financial conditions were little changed.

Prospects for 2024 farm income declined some.

Labor Markets

Employment rose slightly over the reporting period, but contacts expected job growth to pick up to

a modest pace over the next 12 months. Many contacts continued to note difficulty filling higher

skilled positions. That said, there were signs of softening in the labor market. Contacts in both the

manufacturing and service sectors reported layoffs or shift reductions in response to slower

demand. One contact said they were only recruiting to backfill vacated positions, and a fabricated

metals manufacturer had paused hiring until demand from the housing sector picked up. In addi-

tion, a contact at a chamber of commerce noted that in a recent survey inflation had taken over

from labor availability as their members’ top concern. Wages and benefits costs continued to rise

moderately.

Prices

Prices rose modestly overall in July and early August, and contacts expected a similar rate of

increase over the next 12 months. Producer prices moved up modestly. Nonlabor input costs,

including those for energy and raw materials, continued to increase, though at a slower pace than

in the prior period. Consumer prices also rose modestly, with one retail sector contact noting that

general merchandise inflation had slowed.

Consumer Spending

Consumer spending was little changed overall during the reporting period. Nonauto retail sales

were flat. Large retailers’ annual summer promotions were about average in size, and one contact

said the start of the back-to-school shopping season was “decent.” However, sales were down at

discount stores and in the furniture, appliances, lumber, and building materials segments. Leisure

and hospitality spending was little changed on net, with growth for restaurants and amusement

parks offset by declines in tourism. Light vehicle sales were up slightly, supported by higher

incentives.

Business Spending

Business spending increased slightly in July and early August. The pace of capital expenditures

slowed modestly, with several contacts mentioning that they had decided to keep operating with

their existing stock of equipment instead of purchasing new equipment. Contacts continued to

note that high interest rates were putting a damper on their investment spending. Demand for

truck transportation further declined, helping push already low freight rates even lower. Inventories

for consumer goods were generally at comfortable levels, and one contact noted that retailers’

inventory buildup for the holidays reflected “measured” sales expectations. Manufacturing invent-

ories were slightly elevated. There were only a few, isolated instances of supply shortages; con-

tacts again noted long lead times for electrical equipment such as standby generators and

transformers.

Construction and Real Estate

Construction and real estate activity decreased slightly overall over the reporting period. Residen-

tial construction activity was up slightly. Contacts in environmental engineering reported that they

were busy with site reviews for single family homes, while other contacts noted slowing demand

for large multifamily construction. Residential real estate sales decreased slightly. Prices edged

higher while rents were unchanged. That said, the number of active listings increased as did the

average number of days on the market. Nonresidential construction activity was little changed.

Contacts reported that advance bookings were solid, though rising costs led a fair number of

in-progress projects to be put on pause. Demand remained strong for senior living projects and

office refurbishments. Commercial real estate activity decreased slightly, as did prices and rents.

However, vacancy rates edged down according to contacts. Demand for large industrial space

slowed, while demand for mid-sized space was steady. Several contacts reported that a growing

number of small retailers were struggling to stay in business.

Manufacturing

Manufacturing demand was flat on net in July and early August. Orders for steel fell slightly, with

one contact noting softening demand from agricultural machinery manufacturers. Elsewhere in the

machinery sector, sales rose modestly, with one contact highlighting greater demand from the oil

and gas sector. Auto industry contacts saw steady demand, while heavy truck sales grew slightly.

28 The Beige Book

Fabricated metals orders were down modestly, driven by weaker demand from the construction

industry.

Banking and Finance

Financial conditions were little changed on balance over the reporting period. Bond values ended

the period higher while equity values were flat. Volatility spiked in the middle of the period then

retreated to a moderately higher level by the period’s end. Business loan volumes decreased

slightly, with higher demand for construction loans more than offset by lower demand for commer-

cial real estate loans and commercial and industrial loans. Business loan rates decreased slightly,

and terms were unchanged. Business loan quality edged down. In the consumer sector, loan vol-

umes were flat, while rates were down slightly and terms were little changed. Consumer loan

quality decreased slightly, with several contacts noting higher delinquencies for credit card loans.

Agriculture

Expectations for farm income in the District continued to decline in recent weeks as corn and soy-

bean prices fell further. Crop conditions were favorable across most of the District, though some

areas were short on precipitation. Fall harvests were expected to approach previous records.

Amidst low prices, farmers were holding higher-than-usual levels of crops in storage. Fruit and

greenhouse revenues were coming in above average. Livestock operations benefited from lower

feed costs. Cattle prices eased some but remained high relative to historic levels. Dairy and egg

prices moved up, while hog prices were down slightly. In light of low crop prices and high interest

rates, several contacts expected building financial stresses on less-productive farms.

Community Conditions

Community, nonprofit, and small business contacts saw little change in economic activity, though

comments on a softening labor market were more prevalent than in recent reporting cycles.

Reports on tax revenues from state governments were mixed, with little change on balance. Small

business development centers noted an influx of interest in starting new businesses from people

who had recently been laid off. Existing businesses were seeking financing to cover higher oper-

ating costs because the ability to pass price increases onto customers had “sailed.” Leaders of

nonprofit organizations continued to report high demand for their services and lower revenues,

compelling some to dip into reserves. Help with utility, food, and housing costs were the leading

requests from low-income consumers, according to social service contacts.

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

Federal Reserve Bank of Chicago 29

Federal Reserve Bank of

St. Louis

Summary of Economic Activity

Economic activity across the Eighth District has remained unchanged since our previous report.

However, contacts provided some indications of slowing demand. Employment has remained

unchanged since our previous report. Contacts described wage growth as returning to normal.

While prices to consumers increased only modestly, production costs rose and are expected to be

more persistent, reducing profit margins. Consumer spending has slightly decreased, and credit

standards have remained unchanged since our previous report. The economic outlook is slightly

pessimistic, similar to our previous report: District contacts reported that slowing demand and

election uncertainty are negatively impacting their business.

Labor Markets

Employment has remained unchanged since our previous report. Contacts reported more people

applying for open positions. While the majority of contacts noted that hiring pressures have eased

noticeably, in several cases employers continue to face challenges filling open positions, particu-

larly for skilled workers. A construction materials supplier noted that finding quality candidates

remains an issue. A hotel contact in Memphis reported limited abilities of their workforce was a

continuing challenge but it had started to improve with recent hires. While quasi-governmental con-

tacts reported strong recruiting and staffing, business contacts expect slower employment growth

the remainder of this year. Contacts also noted they were continuing to reduce employment slightly

through attrition, although attrition had decreased considerably since the start of the year.

Wage growth has remained unchanged since our previous report. Contacts described wage growth

as returning to normal, but not there yet. A St. Louis retailer reported they have continued to raise

wages, and Little Rock manufacturing contacts noted increasing wages to remain competitive for

high skill workers.

Prices

Prices have continued to increase modestly since our previous report. Most contacts noted that

their costs continued to increase with limited ability to pass-on those higher costs to households.

Contacts generally shared that they are expecting some cost increases that will continue to put

upward pressure on prices, though to a lesser degree. Contacts in Missouri anticipate they will be

able to pass-on higher labor costs to customers when contracts renew in the coming months. A

healthcare contact noted that the cost of drugs continues to rise while the prices of other medical

supplies, like gauze, remain stable. A bike shop noted that sales were up, but profit margins were

down due to a reduction in manufacturers’ suggested retail prices. Most retail and tourism con-

tacts expect prices to be either the same or lower in the next quarter.

Consumer Spending

Consumer spending has either remained unchanged or decreased slightly since our previous

report. Restaurant and hospitality contacts have generally reported consumers have spent less

per visit, and automotive and retail contacts reported that sales had fallen short of expectations.

Restaurant contacts noted that customers have been spending less by purchasing to-go items

rather than dining in. A hospitality contact reported declining occupancy rates across their hotels

in Mississippi as leisure travel was down. Marina owners in Kentucky noted that boat rentals were

lower, and customers were anchoring boats in coves and swimming instead of cruising the lake to

save on gas. An auto dealer noted that many customers have been postponing buying decisions

as higher inventories have reduced buying pressure. A retailer from Illinois reported seeing a good

response to discounts and couponing, and a performing arts center noted that subscriptions were

the highest they had been since 2020.

Manufacturing

Manufacturing activity has either remained unchanged or decreased slightly since our previous

report. Many firms reported that sales had been below expectations and inventory levels of fin-

ished goods had increased due to lower demand. A manufacturer from Kentucky noted that they

were sitting on finished goods inventory longer, as customers reduce the frequency of their pur-

chase orders, which has led to intentional efforts to draw down excess inventory through lower

production. An automotive parts manufacturer reported slowing their production to less-than-

expected volumes this year. A food processing firm indicated they were now expecting to finish the

year below their initial annual operating plan.

Nonfinancial Services

Activity in the nonfinancial services sector has either remained stable or decreased slightly since

our previous report. Contacts indicated sales either met expectations or fell short due to lower

demand. The outlook in the sector is slightly weaker. For example, a Missouri transportation con-

tact described lower shipments and revenue due to weak demand coupled with higher costs as

“not a good scenario.” Air travel conditions were mixed: A Memphis contact reported softening

Federal Reserve Bank of St. Louis 31

demand, with budget airlines cutting routes and shrinking networks, while a Little Rock airport con-

tact indicated that consumer demand for air travel continues to be strong.

Real Estate and Construction

Existing residential home sales have slowed slightly since our previous report, with several con-

tacts noting that sales were below expectations. A St. Louis contact attributed weaker sales to

less homebuyer confidence and higher mortgage rates. Housing inventories have modestly

increased, along with the average number of days on the market, suggesting a more buyer-friendly

market. Yet, a contact from Kentucky noted that while the market is becoming more balanced with

higher inventory, strong demand is putting upward pressure on prices.

Commercial real estate continues to differ by property type. Contacts reported seeing more proper-

ties on the market in anticipation of lower interest rates. Office and industrial sectors continued to

show lower demand relative to inventory, whereas retail property demand was slightly stronger

than in the previous quarter. A Louisville construction contact noted that activity fell short of

expectations as developers wait to initiate projects and schedules are postponed. Missouri con-

tacts noted that federal infrastructure spending had significantly boosted construction activity and

it was expected to continue into 2025.

Banking and Finance

Banking activities have remained stable although the outlook is slightly worse than in our previous

report. Contacts provided mixed reports on loan demand growth. Bankers in the Mississippi Delta

region noted limited lending opportunities. Mortgage loan demand continued to be low to mod-

erate. Several contacts noted that commercial real estate lending was strong throughout Ten-

nessee. Contacts provided mixed reports on deposits. A Memphis banker reported competition for

deposits is easing slightly, while a Louisville banker reported the competitive landscape for core

deposits has intensified. Contacts noted credit standards have not changed since our previous

report. Past-due loans were seen as being at acceptable levels. A Kentucky banker noted that

small business loan workouts are increasing, but there were few signs of widespread issues.

Agriculture and Natural Resources

Agriculture conditions have been mixed since our previous report. Several District contacts noted

that sales had been below expectations due to lower demand. However, crops were in generally

good shape due to a wet planting season and rains in July. In Arkansas, the summer heat wave

and severe drought has driven up irrigation costs and stresses on livestock. District contacts have

also noted that commodity prices had fallen below expectations, which negatively impacts the

repayment capacity of farmers who took on operating loans and projected a higher cash flow.

32 The Beige Book

Federal Reserve Bank of

Minneapolis

Summary of Economic Activity

The Ninth District economy contracted slightly since the previous report. Employment was flat and

hiring activity softened. Prices increased slightly overall, and wage growth was moderate. Activity

decreased in consumer spending, manufacturing, commercial construction, and commercial real

estate. Activity among minority- and women-owned business enterprises was lower on balance.

Residential construction was flat, while growth was noted in auto and residential real estate sales,

and in energy. Agricultural conditions remained weak on balance.

Labor Markets

Employment was flat since the last report. Employers again reported fewer job openings. A small

majority of firms reported that they were hiring, but many were replacing turnover, and a smaller

share were adding full-time staff compared with earlier in the year. The share of firms cutting

workers also grew but remained in the single digits. Overall, firms do not expect staffing levels to

grow much over the next six months. A Minnesota staffing contact reported that job orders were

down, “and a lot of businesses are getting a lot more picky” about who they hire. Labor availability

continued to improve, though labor quality remained an issue. A South Dakota manufacturer said

that labor “has undergone shrink-flation. [We’re] paying more for lower quality.”

Wage growth was moderate. Survey respondents reported wage increases consistent with levels

seen earlier in the year. Employers noted that union workers often negotiated raises of three to

five percent, depending on the sector; however, wages for nonunion employers were rising more

slowly. A medium-sized retailer in North Dakota said, “If you are not offering a higher-than-inflation

raise, you will potentially lose employees.”

Prices

Prices increased slightly overall, but the pace of growth eased further since the previous report.

Nearly two-thirds of firms responding to a monthly survey reported no change to their sales prices

in July compared with the previous month, while one in five increased their prices. Input prices

continued to see more pressure than output prices, but contacts’ expectations for upcoming price

increases were subdued. Contacts continued to report burdensome health care and other insur-

ance costs. Manufacturing and other contacts reported recent increases in freight costs. Retail

fuel prices in District states decreased slightly since the last report.

Worker Experience

Workers and job seekers across the District continued to prioritize flexibility in the workplace,

according to various contacts. A labor contact in the Upper Peninsula of Michigan shared that

while there were fewer job opportunities compared with previous months, the labor market

remained strong in some areas. “Anyone with a commercial driver’s license or mechanic license is

still largely in demand,” they said, adding that younger workers in the area were prioritizing per-

sonal life over work and quitting at higher rates. “If they get hired somewhere and they don’t like

it, they aren’t afraid to leave.” Some public sector workers reportedly changed jobs after their

employers transitioned from defined benefit pensions to 401(k)s. A workforce development con-

tact in South Dakota pointed out that insufficient affordable child care in the area was the main

reason workers were demanding flexibility or disengaging from the labor force.

Consumer Spending

Consumer spending was slightly lower overall since the last report. Recent sales in retail, food ser-

vice, and entertainment were unchanged overall from the previous quarter but lagged last year’s

sales. A contact in home goods reported that summer demand had dropped because “the

lower-end customer was really challenged.” A northern Wisconsin retailer said that tourist numbers

seemed strong, “but they are spending money on ‘need’ items, not ‘want’ items.” A Minnesota

retailer reported that “foot traffic is down and lots more lookers than buyers.” Three of the five

District states saw summer hotel occupancy rise, while two states declined modestly; however,

each state saw an increase in average revenue per room. Regional airports have seen strong

traffic compared with last summer. Auto sales in the western part of the District were also up mod-

estly from July through mid-August compared with last year. However, District sales of recreation

and powersport vehicles have been sluggish.

Construction and Real Estate

Construction activity declined slightly since the last report. Industry data showed that new con-

struction starts in July were mostly flat compared with the previous year. But contacts reported

that there were fewer projects out for bid and more competitors. A Minnesota landscape company

said it was converting a lower share of estimates into business. “Clients are feeling the economic

pinch, and declining to move forward.” A Montana architecture and design firm noted that “lots of

projects have been dormant due to interest rates and the resulting lack of capital.” Single-family

residential permitting in July grew year over year in most of the District’s larger markets, but multi-

family permitting fell.

34 The Beige Book

Commercial real estate remained soft. Office vacancy rates ticked slightly higher after some

improvement earlier in the year; subleasing also increased. Several major office buildings in the

Minneapolis-St. Paul region reportedly went to auction. However, vacancy rates in retail and indus-

trial remained low. Multifamily vacancy rates rose in some markets with large numbers of comple-

tions, but that’s expected to plateau, given a decline in new development. Residential housing

sales grew modestly overall in July compared with last year; however, there was considerable vari-

ability among District markets.

Manufacturing

Manufacturing activity contracted further since the previous report. A regional index of manufac-

turing conditions indicated decreased activity in July from the previous month in Minnesota, North

Dakota, and South Dakota. Most sector contacts reported that orders were down in July from a

month earlier. A producer of electrical inputs for equipment noted that their customers had excess

inventories and weren’t placing new orders. A custom manufacturer commented that the “ag and

construction portion of our business is super slow.”

Agriculture Energy and Natural Resources

District agricultural conditions remained weak on balance. Low prices for crops continued to weigh

down incomes, while livestock and dairy producers were faring better. However, crops were mostly

in good or excellent condition in most of the District, and soil moisture conditions improved in

some areas that were experiencing flooding earlier in the summer. District oil and gas exploration

activity increased slightly since the previous report.

Minority- and Women-Owned Business Enterprises

Activity among minority- and women-owned business enterprises (MWBE) was lower on balance. A

contact at a services firm in Minnesota that relies on discretionary income noticed a “continual

downturn” in spending in recent weeks. Only a small share of contacts reported higher profits over

the past month. A contact in South Dakota added that although profits were up, that “doesn’t

mean [they] are where they should be.” Capital expenditures, staffing levels, and job openings

were unchanged for most contacts. A Minnesota entrepreneur attributed higher costs to rising

shipping fees. A South Dakota entrepreneur noted their firm’s ability to pass on increased costs to

consumers was greatly diminished.

For more information about District economic conditions, visit: https://www.minneapolisfed.org/

region-and-community.

Federal Reserve Bank of Minneapolis 35

Federal Reserve Bank of

Kansas City

Summary of Economic Activity

Economic activity in the Tenth District remained stable. Consumer spending continued to expand

at a moderate pace, but growth in other business and manufacturing activity was more subdued.

Employment levels were mostly unchanged. Many contacts indicated they recently reduced hiring

activity relative to their plans at the beginning of the year, indicating expectations for slower job

gains through the remainder of the year. In particular, demand for entry-level jobs and hiring of less

experienced workers softened significantly. Wage growth remained modest as more contacts

reported they were less willing to compete on compensation amid a greater availability of high-

quality applicants. Many low-income homeowners exhibited more stress due to the loss of over-

time hours they had relied on for paying their mortgages. Sales of single-family homes picked up

slightly in recent months, concentrated among homes near or below the median price points for

local markets. Both brokers and homebuilders indicated activity is poised to rise if borrowing

costs decline even slightly. Similarly, bankers noted the most significant impediment to loan

growth was the level of interest rates, rather than the economic outlook or risk appetites.

Labor Markets

District contacts reported little job growth over the last month. In the service sector, a slight

decline in employment at professional business service firms was offset by modest hiring at

consumer-oriented businesses. Overall, business contacts reported their current hiring plans for

the remainder of the year will leave their headcount slightly below levels they expected at the

beginning of the year, as many firms reigned in their recruiting efforts in recent months. Busi-

nesses reported particular weakness in the labor market for entry-level occupations and in the

demand for workers with limited experience. Contacts expressed less willingness to hire inexperi-

enced workers as applicant quality improved with greater availability of more experienced workers.

Furthermore, contacts noted they posted fewer entry-level positions as they sought instead to real-

locate existing employees from business lines with waning demand. Skilled workers in the trades

were a notable exception, where demand for workers remained strong regardless of experience.

Wages continued to grow at a modest pace over the last month. More business contacts reported

unwillingness to compete on wages for new hires or for retaining employees, reflecting the greater

availability of workers.

Prices

Prices continued to grow at a modest pace over the last month. Business input prices grew moder-

ately on average, but cost pressures reportedly varied across business size. Small- and medium-

size businesses reported relatively greater business cost pressures compared to larger firms, due

to their limited scale and persistently thinner margins. Contacts in the construction sector

reported mixed input cost dynamics, with labor costs rising and some input costs, like drywall, still

increasing. However, other material inputs like windows and framing materials are falling alongside

moderating lumber prices.

Consumer Spending

Consumer spending grew at a moderate rate across several, though not all, discretionary catego-

ries. Air travel accelerated, and activity at hotels and resorts expanded accordingly. Contacts in the

entertainment sector noted modest growth over already healthy spending levels. Home building

and materials stores indicated a moderate pickup in sales to consumers on items related to home

maintenance but noted that declines in contractor activity offset household purchases. After rising

for several months, contacts at restaurants indicated activity declined modestly due to greater

price sensitivity among consumers. Both ticket counts and average ticket values at restaurants fell

as consumers ate out less and selected lower price menu options.

Community Conditions

More low- and moderate-income (LMI) mortgage borrowers exhibited signs of stress in recent

months. Housing counselors reported the ability of LMI borrowers to absorb a financial shock

declined significantly due to two significant factors. First, many LMI homeowners reportedly were

losing overtime hours they had relied on for paying their mortgages. Second, lenders indicated

many LMI borrowers were struggling to make up the gap on their escrow to meet increases in

monthly payments resulting from higher property insurance and taxes. The most common mitiga-

tion step was shopping for new insurance, with some contacts noting that homeowners purchased

insurance with less coverage and greater personal liability.

Manufacturing and Other Business Activity

Business activity was generally unchanged in the District over the last month. Service contacts

reported a slight increase in activity, while manufacturing contacts indicated a slight decline.

Reductions in manufacturing were driven by a contraction in durable goods production, as new

order activity in this segment declined notably in recent months. Durable manufacturing contacts

reported slowing demand for finished goods and equipment, which caused a build-up of excess

inventories of intermediate parts provided by smaller less well-capitalized manufacturing firms.

Federal Reserve Bank of Kansas City 37

Those smaller manufacturing firms expressed concerns about financial stress from lower working

capital levels, as inventories have risen.

While global shipping rates increased substantially in recent months, District contacts reported

limited impacts on their businesses. Most contacts reported they are not currently facing supply

chain disruptions and their transportation costs have only increased modestly in recent months.

Contacts anticipate a slight increase in transportation costs over the coming months.

Real Estate and Construction

Sales of single-family homes picked up slightly in recent months, concentrated among homes near

or below the median price points for local markets. Contacts noted both pent-up demand for and

pent-up supply of homes across the District. Specifically, contacts indicated buying activity is

poised to accelerate and property listings are likely to become more available if interest rates

were to decline even slightly through the end of the year. Builders of single-family housing also

reported expectations construction activity could rise over the near-to-medium term given the avail-

ability of development projects that would pencil out at slightly lower borrowing costs, especially

given recent declines in the costs of several building materials. However, the limited availability of

skilled construction labor remained a challenge for many builders.

Community and Regional Banking

Loan demand was mostly unchanged across categories, though several bankers noted decreased

demand for consumer installment loans. Contacts indicated interest rates are the most significant

headwind to overall loan growth, followed by concerns about the economic outlook and a lower

overall risk appetite on the part of the bank. Few banks noted liquidity as a concern for loan

growth, and only as a mild concern if mentioned. While overall loan quality was mostly unchanged,

the outlook for credit performance shifted somewhat with more respondents expecting deteriora-

tion over the next six months, specifically in the CRE and consumer loan categories. Credit stan-

dards were unchanged across lending categories. Deposits grew across a variety of deposit types,

with significant drivers of growth being local economic health and regular seasonality. Respon-

dents’ commentaries on deposit rate trends were mixed.

Energy

Tenth District oil and gas activity increased slightly over the last month. Profit margins for oil

drilling remained solid. Oil rig counts in the District grew slightly in Oklahoma, Wyoming, and Colo-

rado in recent weeks despite a slight decrease in oil prices from this time last month. However,

gas rig counts in the District were flat over the last month as spot natural gas prices remained

steady and below profitable levels for producers. Additionally, coal production in Wyoming

38 The Beige Book

increased considerably in recent months as coal prices rose this summer following a period of

steady declines since the start of 2023.

Agriculture

Conditions in the Tenth District farm economy deteriorated slightly alongside weakness in the crop

sector and drought in some areas. Prices for major row crops remained low alongside expecta-

tions of strong yields and production across many key states. Crop conditions in the District were

particularly favorable in Nebraska and Missouri. Winter wheat production was also strong in

Kansas and Oklahoma, but recent reports indicated less favorable corn and soybean conditions in

Kansas as drought intensified. In the livestock sector, cattle prices remained strong but drought in

southern and western portions of the District could hinder hay production and dampen profits.

Contacts continued to cite elevated production and living expenses, high interest rates, and

declining liquidity as key concerns for the months ahead.

For more information about District economic conditions visit: https://www.KansasCityFed.org/

research/regional-research.

Federal Reserve Bank of Kansas City 39

Federal Reserve Bank of

Dallas

Summary of Economic Activity

The Eleventh District economy expanded modestly over the reporting period. Activity grew in the

nonfinancial services and energy sectors. Manufacturing output was flat, while retail sales and

home sales declined. Demand for nonprofit services increased. Employment was stable, and wage

growth remained moderate. Selling price growth continued below average in the service sector but

was more typical in manufacturing. Outlooks were somewhat mixed, though most businesses

expect demand for their goods and/or services to stay the same or increase over the next six

months. Concerns included weakening demand as well as rising domestic policy and economic

uncertainty.

Labor Markets

Employment was largely flat over the past six weeks. Some firms reported implementing hiring

freezes due to economic uncertainty or weak demand, though most view this as a temporary

measure and anticipate hiring later in the year. Still some firms noted difficulty hiring for openings

ranging from entry-level positions to upper-level management, and especially mid-skill workers

including commercial drivers.

Wage growth remained moderate overall. Staffing services firms stated employers were concerned

about keeping costs down and employers subsequently lowered compensation offers to new hires.

Some industries continued to report notable upward wage pressure, particularly airlines and

healthcare.

Prices

Price growth was largely typical over the reporting period. In the service sector, selling price growth

was running below average even as input price growth ticked up in August to an average pace. By

contrast, growth in manufacturing, raw materials and finished goods prices have normalized after

more modest increases earlier this year. Retailers meanwhile noted that selling prices were flat. A

few firms noted the rising prices of auto, home, health, and liability insurance and the negative

effect these increases were having on businesses and households. One financial firm observed

that some low-income households are dropping or not renewing their home insurance. A staffing

services firm reported higher fixed costs due to increased insurance premiums.

Manufacturing

Texas manufacturing activity was flat in the past six weeks. Hurricane Beryl and the ensuing power

outages disrupted production at some manufacturers and refineries, but the dip in production was

brief. Despite the disruptions, refineries on the gulf increased the volume of crude oil processed.

Some paper, fabricated metal, computer and electronics, and machinery manufacturers reported a

slowdown that was independent of weather conditions. New orders for durable goods were flat

while new orders for nondurables declined. The manufacturing outlook was weak with firms citing

economic uncertainty, upcoming elections, high interest rates, and anemic global demand as the

main strains.

Retail Sales

Retail sales declined slightly during the past six weeks. Firms attributed the weakness to reduced

consumer demand and bad weather. Not all sectors experienced a slowdown, as auto dealers and

wholesalers reported a moderate increase in sales. Retail inventories increased moderately after

several months of little to no growth. Overall, outlooks remained pessimistic although less so for

auto dealers and wholesalers.

Nonfinancial Services

Service sector activity picked up over the reporting period, with revenue accelerating to closer to a

typical pace. Growth was strongest in professional and business services and information. Airlines

reported higher demand for premium and international travel. In contrast, the leisure and hospi-

tality sector reported widespread revenue declines this summer, with some of the weakness attrib-

utable to bad weather. Some services firms reported temporary disruptions to operations due to

Hurricane Beryl. In addition, air cargo volume was down due to halted operations during the power

outages. Outlooks were generally positive albeit less so than the last reporting period, reportedly

weighed down by political and economic uncertainty and high interest rates.

Construction and Real Estate

The housing market weakened during the reporting period. The softening was attributed to a

slower pace of relocations, a softer job market, and Hurricane Beryl, which disrupted economic

activity. Both new and existing-home sales were sluggish, with seasonal slowness more pro-

nounced than usual for this time of year. Several contacts noted lighter traffic, while others said

traffic was steady, but sale conversion rates dipped. Builder incentives such as free upgrades,

Federal Reserve Bank of Dallas 41

discounting, and rate buy downs remained widespread, squeezing margins. Outlooks were cau-

tiously optimistic.

Apartment leasing was solid during the reporting period. The office market remained weak, though

there were reports of a pickup in leasing demand for small spaces. Industrial demand grew moder-

ately, and rents were flat to up. Outlooks were mixed.

Financial Services

Loan volumes were flat in August after increasing in the prior two periods, and loan demand

slipped. While overall credit tightening continued, standards and terms stabilized for residential

real estate and consumer loans after more than two years of tightening. Loan prices held steady,

marking the first time since 2021 that rates didn’t rise. Loan nonperformance continued to

increase. A greater share of bankers reported a high level of concern regarding the performance of

office real estate loans. Liquidity and net interest margins remain top concerns for bankers.

Bankers’ outlooks faltered somewhat: They expect a deterioration in loan demand, loan perfor-

mance, and business activity six months from now.

Energy

Oilfield activity was flat to up with a slight decrease in the number of active rigs and a slight

increase in the number of active frac fleets. Producers also noted better than expected well pro-

ductivity, but pipeline delays pushed back some production growth to the fourth quarter. The lack

of takeaway capacity has regularly kept local natural gas prices below zero this summer, inflating

costs and suppressing profits as producers must pay to have natural gas piped away. The offset-

ting effects of pipeline delays and improved well productivity growth are keeping outlooks

unchanged from six weeks ago which called for a modest production growth by year-end.

Agriculture

Crop and pasture conditions generally remained favorable, though hot and dry conditions were put-

ting strain on certain areas while Hurricane Beryl caused some flooding along the coast. Crop

prices moved down, and contacts reported that it was a tough financial situation for farmers this

year. One noted that the smaller producers especially are still trying to make up for the losses

from the 2022 crop year, and the fact that this year isn’t materializing into the profitable year

needed could put a segment of growers out of business.

42 The Beige Book

Community Perspectives

Nonprofit service providers noted an uptick in demand stemming from Hurricane Beryl. Some con-

tacts noted difficulties in serving clients because their own establishments suffered damages and

power outages. In addition to food and water, organizations handed out gift cards to meet essen-

tial needs. One contact raised the concern that disasters disproportionately affect low-to-

moderate-income households, and the impact can last for weeks to months. Several contacts are

looking to prepare for future storms, such as addressing the lack of power generators in senior

living facilities. A contact in Houston noted the need to be proactive and not reactive to disasters

as “disasters are constant in our communities.”

For more information about District economic conditions visit: https://www.dallasfed.org/

research/texas.

Federal Reserve Bank of Dallas 43

Federal Reserve Bank of

San Francisco

Summary of Economic Activity

Economic activity in the Twelfth District remained stable on net during the July through mid-August

reporting period. Labor availability continued to improve, and employment levels rose slightly.

Wages grew modestly, and prices continued to increase at a slight pace on net. Retail sales and

demand for business services were generally steady. Activity in consumer services and manufac-

turing ticked down a bit. Conditions in the agriculture and resource-related sectors continued to

soften slightly, as did activity in residential and commercial real estate markets. Activity in the

financial services sector remained muted. Communities across the District faced affordable

housing shortages, and demand for community services generally remained high. Looking ahead,

contacts expected the economy to be somewhat weaker, and some have curtailed their capital

spending citing economic uncertainty and elevated credit costs.

Labor Markets

Employment rose slightly over the reporting period overall. Most contacts across the District cited

steady to slightly higher employment levels and improved retention rates, while others, including

those in banking and professional services, expanded their payrolls moderately. Nonprofit organi-

zations reported increased hiring to meet the growing demand for community and support ser-

vices. In contrast, companies in the entertainment and aerospace sectors lowered their head-

counts through layoffs. Many contacts continued to note an increase in job applicants, although

some cited skills mismatch and difficulty filling specialized positions. Employers continued to see

labor turnover slowing, in part due to engaging in more selective hiring and offering enhanced pro-

fessional development.

Wages grew at a modest pace on net, up relative to the prior reporting period’s pace. Contacts

noted wage growth outpaced recent averages in agriculture, banking, business services, commu-

nity services, and leisure and hospitality. The main drivers behind the increased compensation

pressures were competition for specific types of highly skilled labor, union contract renegotiations,

and higher minimum wage requirements. Wage growth was relatively tamer in real estate and con-

struction, with a few contacts reporting offers for longer contracts at a lower wage level and others

expecting to give lower end-of-year bonuses.

Prices

Prices rose slightly overall, at a rate similar to the previous reporting period. Many contacts

reported stable prices, including those from the finance, healthcare, manufacturing, and retail sec-

tors. Other businesses, such as those in leisure and hospitality and food services, increased their

prices due to higher labor and overhead costs. A few contacts from the agricultural sector noted a

drop in prices for some products, including commodity crops, fish, and some produce. Businesses

across the District noted higher costs for utilities, energy, insurance, professional services, and

shipping.

Community Conditions

Demand for community and support services rose somewhat as individuals and households con-

tinued to seek housing, medical, and food assistance. Closures of childcare facilities and recent

heat waves in some regions led to higher demand for related support services. Nonprofit organiza-

tions faced more difficulties securing funds despite a slight increase in contributions from govern-

ment sources. Small businesses continued to face challenges with access to credit and sluggish

demand in urban cores, forcing some of them to close. One Washington contact noted a rise in

demand for educational and training services such as credential and certificate programs.

Retail Trade and Services

Retail sales remained generally steady on net in recent w eeks. Some contacts highlighted slightly

increasing demand for retail goods relative to the pre vious repor ting period, especially in the Moun-

tain West. Demand w as stable for groceries and fresh produce, while sales of nonessential goods

weakened fur ther. In par ticular, sales at home center s fell in recent w eeks as households seemingly

engaged in fe wer do-it-your self projects. Contacts continued to characterize consumer s as more cau-

tious with spending decisions and reluctant to pa y full price. One large online retailer noted that

many visitor s mostly sought products with mar kdowns and those with promotional prices.

Activity in the consumer ser vices sector s decreased some what, while demand for business ser vices

was unchanged relative to the pre vious repor ting period. Repor ts indicated that consumer s con-

tinued to pull back their spending at restaurants and for other leisure and hospitality ser vices.

Demand for air tra vel weakened fur ther overall, and convention attendance in Souther n Nevada was

reportedly down. Demand for legal ser vices and business consulting w as unchanged at low le vels,

while demand for janitorial ser vices and medical laborator y services remained solid.

Federal Reserve Bank of San Francisco 45

Manufacturing

Manufacturing activity ticked down a bit in recent weeks. Demand for manufactured goods, capital

equipment, and fabricated metal generally weakened, although some contacts reported a recent

pickup in inquiries and order pipelines. Sales of manufactured wood products remained modest,

largely due to slower construction activity and weaker sales at home improvement centers. Labor

availability in manufacturing returned to normal levels recently as contacts reported more appli-

cants and less turnover.

Agriculture and Resource-Related Industries

Conditions in the agriculture and resource-related sectors softened slightly, as in the prior

reporting period. Demand from the food services sector was unchanged, while demand from the

retail sector fell slightly in response to higher prices. A strong dollar curtailed overall exports

somewhat. The supply of produce crops and seafood remained high due to elevated yields from

the current season and stored inventory from the past season for some products such as salmon.

Agricultural producers across the District reported higher financing costs and difficulties accessing

credit, leading some to cut back on investment.

Real Estate and Construction

Residential real estate activity decreased somewhat, similar to the prior reporting period. Demand

was down in both single-family and multifamily markets. New residential construction remained

slow overall, though demand and construction activity increased in some areas in Hawaii and the

Mountain West. Developers reported delaying plans and refraining from starting new projects

because of high financing costs. Landlords of multi-family properties lowered rents and gave more

concessions amid a general rise in vacancy rates. A Southern California contact noted that vacan-

cies and completion of construction projects were up in the high-end rental market but that vacan-

cies were notably lower in the market for affordable housing.

Conditions in commercial real estate weakened slightly overall. Leasing activity fell for industrial

and office space, but a contact in Utah noted that demand for retail space had ticked up. Con-

struction of new commercial properties was down in most sectors as projects shifted towards less

costly renovations. However, new construction was stable in the medical sector and up for govern-

ment and military projects. Building materials and inputs were readily available with little change

to costs, though backlogs remained for some products such as electrical components.

46 The Beige Book

Financial Institutions

Activity in the financial services sector remained muted. Reports indicated that businesses and

households had increased appetites for new loans but were discouraged by elevated interest rate

levels. Credit quality remained high, and credit card delinquencies were unchanged after ticking up

over several past reporting periods. Competition for deposits was strong, and several contacts

noted that many customers looked to lock in their current rates for longer than normal terms as

they anticipated reductions in deposit rates going forward.

Federal Reserve Bank of San Francisco 47

www.federalreserve.gov

0924