Beige Book

For use at 2:00 PM EDT

Wednesday

June 2, 2021

The Beige Book

Summary of Commentary on Current Economic Conditions

By Federal Reserve District

May 2021

Federal Reserve Districts

Boston

Minneapolis

New York

Chicago

Cleveland

Philadelphia

San Francisco

Kansas City

St. Louis

Richmond

Atlanta

Dallas

Alaska and Hawaii

are part of the

San Francisco District.

The System serves commonwealths and territories as follows: the New York Bank serve s the

Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank serve s

American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.

This report was prepared at the Federal Reserve Bank of Cleveland based on information collected on

or before May 25, 2021. This document summarizes comments received from contacts outside the

Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

National Summary

Boston

1

A-1

First District

New York

B-1

Second District

Philadelphia

C-1

Third District

Cleveland

D-1

Fourth District

Richmond

E-1

Fifth District

Atlanta

F-1

Sixth District

Chicago

G-1

Seventh District

St. Louis

H-1

Eighth District

Minneapolis

I-1

Ninth District

Kansas City

J-1

Tenth District

Dallas

K-1

Eleventh District

San Francisco

Twelfth District

L-1

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 prospects based on a variety

of mostly qualitative information, gathered directly f rom 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 f rom a wide range of contacts through a variety of formal and informal methods, the Beige Book

can complement other forms of regional information gathering. 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 completed 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 f rom contacts supplements the data and analysis used

by Federal Reserve economists 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 information 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, households, 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 summary 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 f rom a wide array of businesses, non-profit

organizations, and community groups—to hear diverse perspectives on

the economy in carrying out its responsibilities.

National Summary

The Beige Book ■ May 2021

Overall Economic Activity

The national economy expanded at a moderate pace from early April to late May, a somewhat faster rate than the prior reporting period. Several Districts cited the positive effects on the economy of increased vaccination rates and relaxed social

distancing measures, while they also noted the adverse impacts of supply chain disruptions. The effects of expanded vaccination rates were perhaps most notable in consumer spending in which increases in leisure travel and restaurant spending

augmented ongoing strength in other spending categories. Light vehicle sales remained solid but were often constrained by

tight inventories. Factory output increased further even as significant supply chain challenges continued to disrupt production.

Manufacturers reported that widespread shortages of materials and labor along with delivery delays made it difficult to get

products to customers. Similar challenges persisted in construction. Homebuilders often noted that strong demand, buoyed

by low mortgage interest rates, outpaced their capacity to build, leading some to limit sales. Nonresidential construction increased at a moderate pace, on balance, even as contacts in several Districts said that supply chain disruptions pushed costs

higher and, in some cases, delayed projects. Demand for professional and business services increased moderately, while

demand for transportation services (including at ports) was exceptionally strong. Lending volumes increased modestly, with

gains in both household and business loans. Overall, expectations changed little, with contacts optimistic that economic

growth will remain solid.

Employment and Wages

Staffing levels increased at a relatively steady pace, with two-thirds of Districts reporting modest employment growth over the

reporting period and the remainder indicating employment gains were moderate. As the spread of COVID-19 continued to

slow, employment growth was strongest in food services, hospitality, and retail. Manufacturers also added workers in several

Districts. It remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and

skilled tradespeople. The lack of job candidates prevented some firms from increasing output and, less commonly, led some

businesses to reduce their hours of operation. Overall, wage growth was moderate, and a growing number of firms offered

signing bonuses and increased starting wages to attract and retain workers. Contacts expected that labor demand will remain

strong, but supply constrained, in the months ahead.

Prices

On balance, overall price pressures increased further since the last report. Selling prices increased moderately, while input

costs rose more briskly. Input costs have continued to increase across the board, with many contacts noting sharp increases

in construction and manufacturing raw materials prices. Increases were also noted in freight, packaging, and petrochemicals

prices. Contacts reported that continuing supply chain disruptions intensified cost pressures. Strengthening demand, however, allowed some businesses, particularly manufacturers, builders, and transportation companies, to pass through much of

the cost increases to their customers. Looking forward, contacts anticipate facing cost increases and charging higher prices in

coming months.

Highlights by Federal Reserve District

New York

Boston

The regional economy continued to grow at a strong pace,

with growth broad-based across industries. Hiring picked up

and wages continued to grow moderately, with availability of

workers cited as a top concern. Consumer spending and

tourism picked up noticeably. Input price pressures have

intensified further, and more businesses are raising their

selling prices.

Business activity in the First District expanded at a moderate pace. Restaurant sales were up sharply, and restaurant

openings buoyed retail property leasing. Labor demand

strengthened but hiring was held back by labor shortages.

Recruiting efforts intensified, with varying degrees of wage

increases. Prices held mostly steady despite growing cost

pressures.

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National Summary

Philadelphia

Minneapolis

Business activity continued at a moderate pace of growth

during the current Beige Book period – still below levels

attained prior to the pandemic. Supply constraints continued to limit growth but may also be contributing to overstated perceptions of strong demand for labor and parts. Employment continued to grow modestly as did wage growth,

while prices grew moderately.

The District economy saw robust demand, tempered by

inventory shortages and rising prices. Job openings increased, but wage growth was not well aligned with firms ’

broader concerns over labor availability, and workforce

contacts cited low wages as a barrier to job seekers taking

available jobs. Manufacturing and construction activity

continued to grow despite strong input cost pressures.

Agricultural incomes grew sharply.

Cleveland

Kansas City

The pace of business activity quickened, and contacts

expect that demand will remain strong in the near term.

However, supply chain bottlenecks constrained growth and

caused materials costs to escalate. Price hikes became

more widespread as firms attempted to keep up with rising

costs. Hiring activity was reportedly modest because of a

dearth of job applicants. A greater share of firms boosted

wages, especially for hourly workers.

Economic activity rose moderately since the last survey.

Consumer spending increased moderately, and sales were

above pre-pandemic levels for the majority of retail, restaurant, and auto contacts. Most other sectors expanded as

well, including commercial real estate, which increased for

the first time since the pandemic started. However, about

two-thirds of firms reported a negative impact from rising

material prices and lack of availability.

Richmond

The regional economy expanded moderately in recent

weeks. Manufacturers and service providers reported increased activity but also faced higher labor and input costs

as well as shortages of materials. Employment rose moderately but was constrained by challenges filling open positions. Prices rose briskly in recent weeks as some increased costs of business were passed along to customers.

Dallas

Atlanta

San Francisco

The District economy expanded at a solid rate, bolstered by

continued strong growth in housing, manufacturing, and

nonfinancial services. Drilling activity rose further. Price

pressures intensified. Reports of labor shortages were more

widespread across sectors and skill levels than the last

report. Outlooks stayed positive.

Economic activity e xpanded at a moderate pace. Labor

markets improved and wage pressures picked up for some

positions. Some nonlabor costs remained elevated. Retail

sales increased. Leisure, hospitality, and tourism activity

strengthened. Residential real estate demand remained

strong. Commercial real estate conditions were mixed.

Manufacturing activity improved. Banking conditions were

steady.

Economic activity in the District expanded significantly, and

labor market conditions continued to improve modestly.

Wages and inflation picked up further. Retail sales increased, and activity in the services sector strengthened

moderately. Conditions in the manufacturing and agriculture

sectors continued to improve. Residential construction

remained strong, while lending activity grew somewhat.

Chicago

Economic activity increased moderately. Employment,

consumer spending, business spending, and manufacturing

production all increased moderately, while construction and

real estate was flat. Wages and prices rose moderately and

financial conditions improved slightly. Prospects for agriculture income in 2021 improved.

St. Louis

Contacts reported that economic conditions have moderately improved since our previous report. Many contacts described a situation in which growth in demand for their

products or services is outpacing their growth in capacity.

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Federal Reserve Bank of

Boston

The Beige Book ■ May 2021

Summary of Economic Activity

Business activity in the First District expanded at a moderate pace on average, with notable variation across sectors.

Restaurant sales were up sharply in recent months, surpassing their comparable 2019 levels. Automobile and home

furnishings sales were flat but at very high levels, and a discount retailer saw moderate sales increases. Most manufacturers reported moderate to strong revenue increases, while two had flat but robust sales. Commercial real estate markets were mostly stable but retail leasing increased notably. Residential real estate sales rose moderately as recent

data point to increased listings. Labor demand strengthened, but hiring was held back by widespread labor shortages.

Amidst intensified recruiting efforts, wage increases varied across sectors. Prices held mostly steady despite growing

cost pressures at some businesses, although restaurant prices rose sharply. Contacts generally maintained a cautiously

optimistic outlook.

labor and food costs, and a furniture retailer faced increased wholesale pricing pressure but did not report

any price increases. Staffing bill rates were either flat or

up slightly.

Employment and Wages

Labor demand strengthened but many firms reported

difficulties in hiring and retention. Staffing firms reported

high demand for labor across a range of sectors. Retail

headcounts were level despite accelerating labor demand, as firms—especially restaurants—faced pronounced labor shortages. Manufacturers described

ambitious hiring goals: one planned to hire 10,000 workers and another had open positions equal to more than

10 percent of total staff. While the former firm did not

anticipate market constraints on labor supply, other

manufacturers reported unusual difficulties finding workers. In this context of higher labor demand, wage increases were slight to moderate among manufacturers,

wages for restaurant workers also went up, and selected

hourly workers enjoyed wage increases of up to 30

percent. Signing bonuses and enhanced recruiting efforts were mentioned with increased frequency. Among

the barriers to labor supply, firms cited generous unemployment benefits, childcare responsibilities, and safety

concerns.

Retail and Tourism

According to contacts, since March retail sales were

stable or moderately higher and restaurant sales surged,

while through March hotel occupancy rates showed little

improvement from winter. New and used automobile

sales were roughly steady at a very strong pace, straining inventories. The scarcity of processing chips continued to restrain production at some carmakers, threatening an otherwise strong market for 2021. A salvaged

goods chain reported moderately increased sales in

recent months, with revenues up 6 percent from the

same period in 2019. Online sales of home furnishings

remained robust and sales of outdoor furniture increased

earlier in the season than expected. A contact perceives

that the market for outdoor furniture expanded in the

pandemic and will stay strong.

Restaurants across Massachusetts experienced a dramatic uptick in sales in April and May, with recent revenues exceeding those in the same period of 2019. April

also brought the reopening of the majority of the roughly

500-700 restaurants in the state that temporarily closed

over the winter. The return of widespread outdoor dining

fueled the initial surge in sales, but more recently dining

room sales increased as well. Conventions in Boston

Prices

High demand and low inventory in the auto industry led

to modest price increases. A few manufacturers complained of further upward pressure on input prices—such

as freight—but held back from raising prices in favor of

cost-cutting measures. Others manufacturers reported

no substantive pricing pressures. In Massachusetts,

restaurant prices increased sharply to cover increased

A-1

Federal Reserve Bank of Boston

remain canceled through the fall, but major outdoor

events slated for October—including the Boston Marathon—are anticipated to bring large numbers of visitors

to the area. As of March hotel occupancy rates in greater

Boston stood at around 25 percent, similar to the previous report, but contacts remain optimistic for summer

tourism.

least a modest boost in labor supply as vaccination rates

climbed and infection rates declined.

Commercial Real Estate

Commercial real estate markets in the First District were

stable or improving. Robust demand for warehouse

space amid low inventories translated into very rapid

sales of listed properties. Industrial construction was

seen as still profitable despite high construction costs,

but some contacts warned that further cost increases

could become prohibitive. Life sciences construction

plans expanded moderately to include Rhode Island,

despite remaining concentrated in the Boston area.

Contacts were encouraged by fresh gains in retail leasing activity, due to a spate of openings and relaunches of

restaurants and smaller stores, but noted that largeformat retail leasing remained weak. Office leasing

showed no signs of improvement and the outlook for

eventual office occupancy rates and rents remains uncertain. Contacts expect to have a clearer picture of the

office market after Labor Day, which is when many firms

are expected to bring greater numbers of workers back

to the office.

Manufacturing and Related Services

Of the eight firms contacted this cycle, six reported moderate to strong revenue gains in 2021Q1 from the previous quarter and two said that sales were roughly flat. All

reported higher sales versus the same period a year

ago. Year-over-year growth was exceptionally strong for

suppliers to the semiconductor and health care industries, respectively, and a provider of diagnostic services

to veterinarians also reported strong sales increases

from one year ago. These results were not distorted by

pandemic-related declines in 2020. Two firms that reported being inundated with orders pointed out that

customers were placing the same order with multiple

suppliers, and so felt that results were perhaps inflated

relative to true demand.

Contacts cited two main limits to growth: labor scarcity

and supply chain issues. The dearth of semiconductors

remains a major problem, but contacts also cited long

lead times for a variety of other inputs. Supply constraints held back production for some contacts, but

most were able to meet their output goals and none

made major revisions to their capital expenditures plans.

All contacts were optimistic for the rest of 2021 and

some revised their forecasts up. All anticipated relaxing

any remaining COVID restrictions over the summer.

Residential Real Estate

Residential real estate markets posted robust sales and

further price increases to March and April 2021, with

growing strength in condominium sales. Vermont reported changes from March 2020 to March 2021 while all

other reporting areas provided changes from April 2020

to April 2021; Connecticut data were unavailable.

Closed sales, pending sales, and median sales prices

increased by moderate-to-large margins over-the-year in

all reporting areas, indicating a moderate acceleration in

activity since the previous report. Condominium sales

showed particular strength, with pending condo sales up

more than 100 percent in all reporting markets. However,

the outsized over-the-year sales gains in part reflect the

low sales levels in March and April of 2020, when the

market was on pause due to COVID-19. As in the last

report, homes for sale are down by double digit percentages for all reporting markets, although the Boston condo market saw a moderate increase in supply. Although

contacts continued to worry about low inventories, the

Massachusetts contact pointed out a substantial increase in listings in April, and some expected a seasonal

increase in listings in the coming months.■

Staffing Services

First District staffing firms reported mixed results ranging

from modest revenue declines to robust gains in the first

quarter of 2021 from the previous quarter. Two out of

four firms said that 2021Q1 had been their strongest

quarter since before the pandemic, with sales increases

as high as 28 percent. Firms described labor demand as

robust across most fields, and especially strong for direct

hires in skilled positions. Conversions from temporary to

permanent employment increased. Contacts expressed

growing concerns about weak labor supply, but one said

there was an ongoing surplus of low-skilled workers.

One firm reported sharply higher pay rates for selected

positions and said that the higher rates reflected a combination of labor scarcity and growing business confidence. Other firms launched new recruiting campaigns

to combat labor scarcity. Some contacts perceived that

generous unemployment benefits were the deciding

factor holding back labor supply, but others expected at

For more information about District economic conditions visit:

www.bostonfed.org/regional-economy

A-2

Federal Reserve Bank of

New York

The Beige Book ■ May 2021

Summary of Economic Activity

Economic activity in the Second District continued to grow strongly in the latest reporting period, as vaccinations expanded and COVID cases abated across the District. Business contacts expressed widespread optimism about the near

-term outlook. The labor market has strengthened further, with contacts reporting increased employment and wages, as

well as difficulties hiring and retaining staff. Input price pressures have intensified further, and more businesses report

that they are raising their selling prices. Consumer spending has strengthened, bolstered by accelerating auto and retail

sales and rising tourism. Housing markets have been steady to stronger, while markets for office and retail space appear to have stabilized at weak levels. Finally, contacts in the broad finance sector reported moderate improvement in

conditions, while regional banks reported higher loan demand and little change in delinquency rates.

Employment and Wages

Prices

The job market strengthened further in recent weeks,

with more businesses reporting a pickup in employment

and widespread labor shortages. A major New York City

employment agency noted a significant increase in hiring

and a greater sense of urgency to fill open positions.

Similarly, an upstate employment agency noted increased hiring activity for both payroll and contract workers and indicated that filling job openings have been

challenging. Many business contacts ranked staffing as

a top business concern, especially at the lower end of

the wage spectrum, and attributed this to a combination

of workers’ health concerns, child-care constraints, and

generous unemployment benefits.

Firms’ input prices have continued to accelerate across

the board, with an overwhelming majority of contacts in

construction and manufacturing noting increases. Businesses in all sectors expect widespread hikes in prices

they pay in the months ahead.

Selling prices accelerated modestly, with hikes widely

reported in manufacturing, retail, wholesale trade, and

transportation but steady prices in most other sectors.

The vast majority of manufacturers, retailers, wholesalers, and transportation firms plan price hikes in the

months ahead. More moderate increases were anticipated in other industry sectors. Uncertainty about future

inflation was also cited as a concern in planning and

formulating contracts.

A broad array of businesses plans to add staff in the

coming months—particularly those engaged in leisure &

hospitality, manufacturing, retail, and wholesale trade. A

major employment services firm expects the tight labor

market to intensity, as businesses bring staff back to the

office and many workers are looking to change jobs.

Consumer Spending

Consumer spending picked up to a strong pace of

growth in recent weeks. Non-auto retailers reported a

substantial increase in business, with some reports of a

sharp rebound in demand for luggage and formal wear.

A major retail chain noted that its sales in the region

have exceeded plan, though sales in New York City

continued to lag, partly due to weak international tourism. Retailers also expressed increasing optimism about

the near-term outlook. Consumer confidence among

Wages have continued to grow moderately, with especially widespread increases in the retail and wholesale

trade sectors. Looking ahead, a substantial proportion of

businesses across all major industry sectors plan to

raise wages.

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Federal Reserve Bank of New York

bidding wars. In Manhattan, sales volume has picked up

strongly, while the inventory of homes for sale has receded somewhat from the peak levels of last October but

remains higher than normal. Prices have stabilized at

about 6 percent below pre-pandemic levels.

New York State residents surged to a two-year high.

Sales of both new and used vehicles have strengthened

noticeably since the last report, far surpassing prepandemic levels, despite low inventories. However, a

persistent shortage of microchips is expected to keep

inventories lean for a number of months, and this is

expected to severely restrain new vehicle sales. Dealers

reported that credit availability continues to be satisfactory.

New York City’s rental market remains soft but appears

to have hit bottom. Rents in Manhattan are still down

roughly 20 percent from early-2020 level and down 1015 percent in Brooklyn and Queens. However, leasing

activity has picked up substantially across the city reaching the highest levels in well over a decade. A local real

estate expert ascribes this largely to more people moving for better deals.

Manufacturing and Distribution

Activity continued to grow strongly in the manufacturing

and wholesale trade sectors but slowed somewhat in

transportation & warehousing. Contacts continued to

report widespread supply disruptions and delays at ports

and in trucking. Looking ahead, businesses in all these

sectors continued to express widespread optimism about

near-term business prospects, despite ongoing concerns

about the future availability of workers and materials.

Commercial real estate markets have remained mixed

across the District but have shown signs of stabilizing

overall. Office markets in and around New York City

continued to slacken, with vacancy and availability rates

continuing to trend up and rents steady but moderately

below year-earlier levels in Manhattan and modestly

below across the rest of the metro region. Office markets

across upstate New York have been steady. The market

for retail space has stabilized, with scattered signs of a

pickup in some areas. The industrial market remains

fairly robust, with vacancy rates steady at low levels and

rents up 5-10 percent from a year earlier.

Services

Service industry contacts also reported sturdy growth in

the latest reporting period. Contacts in the hard-hit leisure & hospitality sector noted exceptionally strong gains

in business activity. Businesses in the information, professional & business services, and education & health

sectors all noted a continuation of fairly brisk growth.

Looking to the months ahead, contacts in all these sectors expressed widespread optimism about business

prospects.

New office construction has remained sluggish, but

multifamily residential construction has picked up outside

New York City. Contacts in the District’s construction

industry have grown somewhat more positive about

current conditions and substantially more optimistic

about the near-term outlook, though there is widespread

concern about the cost and availability of materials,

especially lumber, and workers.

Tourism has strengthened further, particularly in New

York City, though the volume of international and business visitors has remained well below pre-pandemic

levels. In New York City, hotel occupancy rates have

continued to rise, exceeding 50 percent for the first time

since before the pandemic, with weekend occupancy

rates noticeably higher. Nightly room rates have risen

but remained well below normal levels. Moreover, as

restrictions have been lifted, a number of New York City

hotels have re-opened, and the city has waived the hotel

occupancy tax for the third quarter of this year. Museums

and restaurants have also seen a rebound in business.

Banking and Finance

Businesses in the broad finance sector noted moderate

improvement in business activity. Bankers reported a

pickup in loan demand, mainly from the commercial

sector. Credit standards were unchanged, except on

residential mortgages where bankers tightened standards. Loan spreads were little changed. Delinquency

rates were generally flat overall—down modestly for C&I

loans, but up somewhat for residential mortgages. Banks

reported that they have become less lenient toward

delinquent accounts, except for commercial mortgages.■

Real Estate and Construction

Housing markets continued to strengthen in the latest

reporting period. Sales markets outside of Manhattan

have remained quite robust, with rising sales volume,

lean inventories, strong price appreciation, and frequent

For more information about District economic conditions visit:

www.newyorkfed.org/regional‐economy

B-2

Federal Reserve Bank of

Philadelphia

The Beige Book ■ May 2021

Summary of Economic Activity

On balance, business activity in the Third District continued to grow moderately during the current Beige Book period;

however, activity in most sectors remained below levels observed prior to the pandemic. The share of adults who have

received at least one dose of a COVID-19 vaccine has climbed well past 50 percent. As normal activity resumes, contacts have reported increasing demand. However, labor shortages and supply chain disruptions have also continued.

Some contacts observed that some of the perceived strong demand may represent the broader (duplicative) search

efforts of employers for labor and producers for parts. On the housing front, an overly hot market may be discouraging

buyers. Net employment continued at a modest pace of growth, while wages and prices continued to grow modestly and

moderately, respectively. About two-thirds of the firms expressed positive expectations for continued growth over the

next six months – broadening among nonmanufacturers but narrowing among manufacturers since the prior period.

Employment and Wages

Prices

Employment continued to grow modestly overall. The

share of firms reporting employment increases broadened to one-third among nonmanufacturers, while reported increases edged back to one-fourth among manufacturing firms. Overall, average hours worked rose

again but for a smaller share of all firms.

On balance, prices continued to rise moderately over the

period. The share of manufacturers reporting higher

prices for factor inputs remained at about three-fourths,

while those receiving higher prices for their own products

rose well above one-third. In turn, the share of nonmanufacturers reporting higher prices for their inputs rose to

one-half; however, the share receiving higher prices from

consumers for their own goods and services fell to onefifth.

Nearly all firms reported difficulty hiring sufficient labor.

Contacts at staffing firms reported ongoing demand for

workers, unusually high levels of open orders, and a

dearth of qualified job candidates. While demand clearly

exceeds the supply, contacts did note that perceived

demand may be overstated by clients placing orders with

more staffing firms than is typical.

Contacts continued to note severe supply chain disruptions impacting most sectors of the economy. Microchip

shortages continued to limit current and future production plans, and container shortages continued to disrupt

logistics.

Wages continued to rise modestly. The percentage of

nonmanufacturing firms reporting higher wage and benefit costs per employee edged above one-third, while the

share reporting lower wages remained very low. Prior to

the pandemic, the share of firms reporting compensation

increases averaged well over one-third. Across all sectors, firms continued to report raising wages and offering

signing bonuses, retention bonuses, and referral bonuses to compete for scarce labor resources.

Looking ahead one year, the prices that firms anticipate

receiving for their own goods and services rose further

still – after the firms reported moderately high expectations last quarter. Firm expectations for compensation

increases were slightly higher than those for their own

prices, and expectations of general consumer price

increases rose the most. Unlike in prior quarters, firms

now expect general consumer inflation to be even higher

than firm prices.

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Federal Reserve Bank of Philadelphia

Manufacturing

only slightly, while home mortgages were flat. Credit

card volumes were also flat – in contrast, volumes grew

at a modest pace over the same period in 2019.

On average, manufacturing activity continued growing

moderately. About 40 percent of the firms reported that

increases of shipments and new orders were somewhat

higher. On net, manufacturing activity remained below

pre-pandemic levels.

Bankers, accountants, and bankruptcy attorneys continued to report that relatively few problems with bad debt

had emerged. Optimism had grown for many of their

clients in recent weeks; however, some creditors and

landlords have become impatient to collect, evict, or

foreclose. A credit counselor reported increasing activity

to fix credit scores for prospective first-time homebuyers,

to keep current homeowners in their houses, and to

consider personal bankruptcy options.

As with perceived demand at staffing firms, many manufacturers have stated that their production would be

higher but for labor shortages and supply chain disruptions. A good portion of the perceived demand appears

to be real, as order backlogs, inventories, and delivery

times increased further and were at or near record levels

in May.

An accountant reported more mergers and acquisitions,

with some clients choosing to sell their businesses –

giving reasons of retirement, uncertainty, stress, and

high valuations as motivating factors. A corporate lawyer

noted that a few smaller clients had simply paid their

debts and closed down their businesses.

Consumer Spending

Contacts reported continued modest growth of nonauto

retail sales. Survivors in the retail and restaurant sectors

are reporting strong sales and profits even against 2019

levels. Rising vaccination rates and an anticipated return

to “normal” are feeding positive expectations for the

remainder of the year.

Real Estate and Construction

Homebuilders reported modest growth in new contracts

as sales traffic slowed, yet construction activity continued apace. Contacts noted that higher prices and extended delivery times have dissuaded some buyers,

while builders remain challenged by the high costs of

building materials, ongoing supply chain disruptions, and

the unreliability of subcontractor scheduling.

Reports from auto dealers suggest that sales grew moderately. In some markets, year-to-date sales now equal

their 2019 sales for the comparable period. Some contacts suggested that buyers may have hastened recent

purchases to avoid an anticipated decline in dealer inventory as manufacturers contend with the microchip

shortage. Despite the tightening constraint on new car

sales, stronger used car sales and higher prices have

boosted profit margins.

Existing home sales were flat, as new listings continued

to fall – availability dropped below a one-month supply in

many locations. In the face of ongoing demand, contacts

noted a strong sellers’ market in which offers were often

above asking price, in all cash, or without inspections or

other buyer protections. One contact noted that some

potential buyers were giving up, while others commented

on the rising unaffordability, especially for buyers who

qualify for FHA but not conventional financing.

Overall, tourism continued to grow modestly – reflecting

a slow recovery as more potential leisure travelers are

vaccinated. Consumers have pent-up demand for travel

experiences, and many have extra savings to spend.

Contacts also noted improvements in business travel but

don’t expect a full recovery this year or next.

Philadelphia’s commercial construction activity appeared

to have improved slightly to 85 or 90 percent of prepandemic levels. Little change was evident in nonresidential leasing activity, although reports of future office

downsizing continued to grow. Demand for warehouse

space remained strong, and the weak supply of for-sale

homes appears to be boosting demand for rental units. ■

Nonfinancial Services

On balance, nonmanufacturing activity continued at a

moderate pace of growth. Over one-third of the firms

reported increases in sales or revenues; however, most

firms continued to note that output remains below prepandemic levels.

Financial Services

The volume of bank lending fell slightly during the period

(not seasonally adjusted); compared with the same

period in 2019, by contrast, loan volumes grew modestly.

Commercial and industrial loans, home equity lines, and

other consumer loans fell moderately, while auto lending

fell slightly. Commercial real estate lending grew, but

For more information about District economic conditions visit:

www.philadelphiafed.org/research-and-data/regionaleconomy

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Federal Reserve Bank of

Cleveland

The Beige Book ■ May 2021

Summary of Economic Activity

The economic recovery gained strength in recent weeks, and contacts across an array of industries reported healthy

gains in customer demand. Contacts often pointed to progress in the fight against the COVID-19 pandemic, the easing

of government-mandated restrictions, and the release of pent-up demand as key drivers of the recent improvement in

customer demand. For these same reasons, firms were decidedly upbeat that demand will continue to improve in the

near-term. That said, many contacts commented that supply chain bottlenecks were constraining growth by causing

extended lead times, depleted inventories, and escalating materials and transportation costs. Hiring activity was reportedly modest despite the improvement in customer demand, and many firms indicated they were operating with fewer

staff members than they would like because of a dearth of job applicants. Consequently, a greater share of firms boosted wages, particularly for hourly workers on the lower end of the pay scale. Price hikes became more widespread as

firms attempted to keep up with rising costs for materials and labor.

Employment and Wages

freight contacts. One staffing company contact remarked

that he turned away prospective clients that offered

starting wages of less than $13 per hour because he will

not be able to find anyone at that wage.

Staff levels increased modestly, despite widespread

reports that customer demand had strengthened. Many

firms commented that their headcounts were below

desired levels because there were too few applicants for

open positions. The problem was acute for firms in consumer-facing industries. A few retailers and restaurants

noted they operated with reduced hours or had closed

locations because they were short-staffed. One convenience store chain tried to increase its staff level for the

past month, but unsuccessfully. As a result, 10 of its

stores operated for four fewer hours than desired each

day. Many manufacturers also said they were shortstaffed, and several noted they were using overtime to fill

the staffing gap. Others indicated that they were automating processes to keep up with demand and to reduce

labor needs. Contacts in several industries observed an

increase in employee turnover, which they attributed to

workers’ feeling more confident leaving their jobs for

higher wages or for more suitable positions.

Prices

Reports of rising input costs have grown more widespread. About three-fourths of contacts reported that

their nonlabor costs had increased in the last two

months. This share is up from about two-thirds in the last

report. Cost increases were broad across items and

were especially sharp for resins, metals, lumber, packaging, and freight services. Rising input costs were partly

attributed to supply chain challenges caused by suppliers who often did not have enough workers to meet

demand. A few manufacturing and construction firms

reported that suppliers were raising their prices more

frequently. One real estate developer said that quotes

from general contractors were now valid for only 10

days, whereas before the pandemic quotes would be

valid for 30 days or even as many as 180 days. Looking

to the second half of 2021, roughly 60 percent of contacts expect their nonlabor costs will increase by an

amount comparable to or more than the increases they

experienced in the first half of 2021.

The dearth of available workers motivated a greater

share of firms to raise wages. About 55 percent of our

survey respondents increased wages over the past two

months, up from about 40 percent in the prior period.

Reports of wage increases were widespread and were

especially common among manufacturing, retail, and

Reports of firms’ raising their selling prices also became

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more widespread. Many of the firms that raised prices

suggested they were able to pass through most of their

cost increases to customers. Contacts now expect it to

take longer than previously anticipated for these supply

chain issues to be resolved. This expectation motivated

some of them to be more aggressive with their pricing.

Looking ahead, about half of contacts plan to raise their

selling prices in the second half of the year, with most of

those firms intending to do so to an extent that will at

least preserve their margins.

strong, while others predicted that elevated prices would

discourage potential homebuyers.

Nonresidential construction and real estate activity increased in nearly all sectors as workers began to return

to their offices, more consumers resumed in-store shopping, and overall economic conditions continued to improve. Overall, nonresidential contacts were optimistic

that demand would increase further as the economy

continues to reopen and pent-up demand is released.

However, one contractor suggested that rising prices

and materials shortages may curtail construction.

Consumer Spending

Reports suggest that consumer spending grew significantly. General merchandisers and apparel retailers said

that demand remained strong beyond the expected

boost from stimulus funds in March. Several contacts

believed there was a good deal of pent-up demand that

was being released as government restrictions were

being eased. Hoteliers reported improvements in leisure

travel, and auto dealers commented that sales were

strong despite limited inventory and higher selling prices.

Contacts were optimistic that consumer spending would

continue to improve in the coming months thanks to

growing vaccination numbers and easing of governmentmandated restrictions.

Financial Services

Banking activity increased moderately. Contacts noted

that demand for auto loans and mortgages remained

strong, although the recent uptick in interest rates and

limited inventories in both markets dampened activity.

Multiple contacts reported improvements in business

lending, especially for commercial real estate loans.

However, overall loan demand remained relatively soft.

Lenders said that delinquency rates for consumer and

commercial loans were still low and that the number of

active forbearance agreements continued to drop. Bankers were optimistic that loan demand would continue to

pick up as social distancing restrictions ease, but they

also noted that potentially higher interest rates clouded

their outlooks. They were also concerned that supply

challenges could curtail their clients’ sales and soften

their demand for credit.

Manufacturing

Demand for manufactured goods continued to increase

strongly. Contacts cited strength in demand for products

related to housing, autos, and other durable consumer

goods. Aerospace-related production continued its modest recovery, although demand remained weak on balance. Many contacts noted that output growth was constrained by shortages of hourly-wage workers, extended

lead times for inputs, and depleted inventories. Many

contacts reported their capacity utilization was within its

normal range, although a sizeable minority reported

above-normal capacity utilization. Manufacturers generally expected demand to continue to rise in coming

months.

Professional and Business Services

Demand for professional and business services remained strong. Authentication services continued to

benefit from the further expansion of ecommerce. Also,

demand for consulting and technical services increased

as more companies began to recover from the pandemic. Overall, contacts anticipated that demand would

continue to grow as firms feel more comfortable moving

forward with projects that had previously been put on

hold.

Real Estate and Construction

Freight

Demand for freight services remained robust, and volumes increased as the broader economy continued to

recover. Contacts commented that shortages of shipping

containers and bottlenecks at ports continue to be problematic. Looking forward, contacts expected demand to

improve further in coming months, although many anticipate that a persistent driver shortage will constrain

growth. ■

Demand for residential construction and real estate

remained elevated as homebuyers continued to take

advantage of low mortgage interest rates. Even so, a few

contacts remarked that escalating construction costs

may have sapped some of the momentum in homebuilding. One homebuilder observed that elevated prices

made some customers hesitant to move forward with

projects. A realtor observed a slowdown in lot purchases

as builders in her market waited for construction prices

to settle. Expectations for demand were mixed. Some

contacts believed that housing demand would remain

For more information about District economic conditions visit:

www.clevelandfed.org/region

D-2

Federal Reserve Bank of

Richmond

The Beige Book ■ May 2021

Summary of Economic Activity

The regional economy expanded moderately since our previous report. Manufacturers reported strong growth in shipments and new orders, intensifying already-sizeable backlogs and long lead times. Port and trucking volumes also rose

as both import and export activity picked up. Retailers experienced moderate growth and increased foot traffic at physical stores. New car sales were limited by low inventories, which spurred higher demand for used vehicles. Consumer

travel and tourism rose, particularly for weekend destinations, while business travel remained low. Despite the easing of

COVID-related restrictions, some restaurants and hospitality services were unable to open to full capacity because they

were unable to hire more workers. Similarly, demand for nonfinancial services rose but growth was constrained by labor

shortages. The demand for residential real estate remained high amid very low inventory levels. Commercial real estate

leasing increased moderately, including some office leasing as businesses returned to working in-person. Loan activity

rose, particularly for business loans. Employment increased modestly, but many firms reported having difficulties filling

open positions. Prices rose sharply in recent weeks as shortages of labor and materials led to higher costs, some of

which translated to higher prices to customers.

ance manufacturer was able to pass along price increases because others in their industry faced similar rising

input costs and were also raising prices.

Employment and Wages

Employment rose modestly in recent weeks, but job

growth was somewhat constrained by labor shortages as

firms across a variety of industries reported having difficulty filling open positions. One contact speaking about

the hospitality sector thought that many former workers

were either choosing to remain unemployed or had found

new jobs in another industry. Several contacts also noted

increased turnover and one reported that employees

were leaving for advancement opportunities. Wages

increased moderately, overall. Strong demand for workers, particularly at the entry-level, drove up starting wages. Several employers also noted that raising wages for

entry-level positions led them to raise wages to retain

more experienced staff.

Manufacturing

Fifth District manufacturers saw strong growth in demand in recent weeks, as both shipments and new orders increased. Manufacturers of materials, home

goods, and food reported especially high demand. Lead

times lengthened, and inventories of inputs fell. Backlogs

of orders grew, as shortages of labor and input goods

constrained production. Trucking and shipping container

shortages, as well as delays at ports, contributed to

difficulties in receiving inputs and in getting final goods to

customers. Because of the delays in receiving and high

costs of inputs, many manufacturers looked for substitutions for regular inputs and eliminated certain products.

Prices

Overall, prices increased sharply in recent weeks. Price

increases were largely attributed to strong demand,

rising input costs, and supply constraints. Firms across

goods-producing and service-providing industries experienced increased prices paid for labor, energy, shipping,

raw materials, and inventories, but the degree to which

those price increases were passed on to customers

varied. For example, a furniture store said that they were

unable to pass along increased costs because of online

competition and MSRP pricing. In contrast, a small appli-

Ports and Transportation

Fifth District ports saw robust growth in recent weeks, as

volumes continued to break records. Growth of both

imports and exports was strong, with notable acceleration in the growth of exports. On the import side, volumes were driven by retail goods, especially furniture,

home goods, and home improvement goods. On the

export side, volumes of agricultural products were high.

Both imports and exports of automobiles were volatile,

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which contacts attributed to the microchip shortage.

and rental rates rose. Retail leasing strengthened, leading to falling vacancy rates as stores and restaurants

opened and expanded, and contacts noted an increase

in new construction. Office leasing improved as businesses returned to the workplace, and some agreed to

longer-term leases than in the past year and took advantage of leasing concessions. Industrial leasing remained strong despite increasing rates, and new construction continued.

Fifth District trucking companies reported moderate

growth from already high volumes in recent weeks.

Demand exceeded supply, as labor and equipment

constraints caused truckers to turn business away.

Shipments of most goods rose, as volumes of home

improvement goods were especially strong, and some

supplies for business conventions began to move. Supply shortages and long lead times for new tractors and

trailers led companies to rely more heavily on repairing

and reusing older equipment.

Banking and Finance

Overall loan demand rose moderately this period due in

part to the need for increased capital as businesses

continuing to emerge from the pandemic. Financial institutions indicated a moderate demand for conventional

commercial lending driven by improving consumer and

business sentiment as well as sustained low rates. In

addition, contacts noted a continued slight growth in

mortgage lending, but reported a slight decline in refinancing requests. Deposit growth was strong owing to

the recent round of stimulus payments. This has led to

increased competition among financial institutions as

firms seek to deploy these deposits. Credit quality and

delinquencies remained good.

Retail, Travel, and Tourism

Fifth District retailers reported moderate growth in demand and revenues in recent weeks. Shopper traffic

increased, and shoppers were generally serious about

making purchases. Clothing sales began to increase

after a soft year, and demand for home goods remained

strong. However, many retailers reported that supply

chain disruptions, such as shipping and production

delays, were limiting inventories. Auto inventories were

especially low and continued to shrink, as the microchip

shortage limited supply of new cars and increased demand for used vehicles, which were also in short supply.

Nonfinancial Services

Travel and tourism increased moderately in the Fifth

District since our last report. Visitation was especially

strong at beaches and other outdoor attractions. Some

museums and restaurants opened amid strengthening

business conditions. Hotels saw short booking-windows

but high occupancy on weekends, which contacts attributed to leisure travel, mostly from people who live in

drivable distance. Hotel occupancy was lower during the

week, as group and business traveled remained soft,

but inquiries for group travel increased. Restaurants,

hotels, and other attractions reported cutting services

and restricting capacity because of labor constraints.

The demand for nonfinancial services rose moderately in

recent weeks. An increase in health services demand

was driven by non-COVID-related services and elective

procedures. A university president reported a substantial

spike in applications, but noted that applications from

lower income students were down slightly. Meanwhile,

an advertising agency reported solid growth in new ad

spending, particularly from small businesses. There were

several reports, however, that the inability to find additional workers was limiting sales and revenue growth. ■

Real Estate and Construction

Demand for homes held fairly steady at high levels since

our last report. Prices continued to rise, and the average

time to sell a home shortened. Builders saw a continued

drop in inventories, with some communities selling out of

homes. Agents noted that more resale homes were

being put on the market but were being absorbed too

quickly to boost inventories. Construction and material

costs continued to increase, and shortages of materials

caused building delays. Real estate agents noted that

mortgage applications were getting approved, but they

were increasingly seeing cash sales.

Commercial real estate leasing expanded moderately in

recent weeks, but new projects were delayed by shortages and high costs of inputs. Multifamily occupancy

For more information about District economic conditions visit:

www.richmondfed.org/research/data_analysis

E-2

Federal Reserve Bank of

Atlanta

The Beige Book ■ May 2021

Summary of Economic Activity

Economic activity in the Sixth District expanded at a moderate pace, on net, from April through mid-May. Demand for

labor strengthened, though shortages among low-skilled workers persisted. Wage pressures increased for positions in

high demand. Some nonlabor costs continued to rise, and pricing power remained mixed. Retail sales activity increased,

and auto sales rose more than expected. Hotel occupancy levels rose due to robust leisure travel activity; however,

hotels dependent on business travel continued to struggle. Demand for housing remained strong and home prices continued to rise. Conditions in commercial real estate were mixed. Manufacturing activity strengthened as new orders and

production levels rose. Conditions at financial institutions were stable, and consumer loan demand grew slightly.

Prices

Employment and Wages

District contacts reported that input costs, particularly for

lumber, steel, transportation, and shipping remained at

elevated levels. Increased costs in construction materials

and labor slowed business expansion projects. Reports

on pricing power were mixed, but many contacts cited the removal of promotional pricing to maintain margins. The Atlanta Fed’s Business Inflation Expectations

survey showed year-over-year unit costs increased

significantly to 2.8 percent on average in May. Yearahead expectations increased to 2.8 percent in May, up

f rom 2.5 percent in April.

Overall employment in the District increased since the

previous report. Contacts reported strengthening demand for labor as economies in the region began to

reopen. Demand was strongest among lower-skilled

positions, and employers reported that labor availability

among that segment was very low. Shortages were also

noted among skilled trade workers, nurses, IT workers

and commercial drivers. Many employers continued to

state that expanded unemployment insurance benefits

and stimulus payments were keeping would-be workers

on the sidelines; others indicated that childcare, transportation issues, and the inability to guarantee hours

were key f actors in preventing potential workers f rom

seeking employment. Employers indicated there was a

great deal of churn among low-skill, low-wage positions,

and many reported that labor shortages had a limiting

eff ect on services to customers, as well as the production of goods, which is contributing to supply chain disruptions. Several contacts anticipate that labor shortages

will abate this fall but there is a great deal of uncertainty

around how much supply will materialize. For firms with

limited supply of labor in their markets, opportunities to

offer remote work for some positions have removed

geographic barriers, allowing employers broader access

to talent.

Consumer Spending and Tourism

District retailers continued to report healthy sales activity

over the reporting period, driven largely by tourism.

Although auto production and inventory levels f ell due to

tight chip supplies, sales rose well above forecasted

levels for April.

Travel and tourism contacts across the District reported

continued strong demand in leisure travel, with hotel

occupancy levels in the 80-90 percent range. Contacts

noted an uptick in bookings for business travel, conventions and special events planned for the second half of

the year. International travel activity continued to be

constrained as vaccine distribution in other countries

remained slow.

Wage pressure picked up f rom April through mid-May,

and upward pressure was most notable among lowskilled positions. Within this segment, reports of wage

increases were more widespread with referral and signing bonuses becoming increasingly more common.

Among the more skilled positions, wage increases were

more modest.

Construction and Real Estate

Housing activity throughout the District remained strong

over the reporting period. Relatively low interest rates

and a shift f rom renting towards home buying remained

primary drivers of demand, as well as an increase in

buyers moving to the region from higher cost markets in

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Federal Reserve Bank of

Chicago

The Beige Book ■ May 2021

Summary of Economic Activity

Economic activity in the Seventh District increased moderately in April and early May and approached its pre-pandemic

level. Contacts expected strong growth in the coming months. Employment, consumer spending, business spending,

and manufacturing production all increased moderately, while construction and real estate was flat. Wages and prices

rose moderately and financial conditions improved slightly. Prospects for agriculture income in 2021 improved.

Employment and Wages

food products, PVC pipes, and lumber were noticeably

higher. Business output prices moved up moderately,

driven by passthrough of higher material, energy, and

transportation costs. Many manufacturers said that unlike usual, they were able to raise prices with little

pushback. Consumer prices moved up moderately due

largely to increased costs; in response there were reports of some retailers limiting operating hours or trying

to cut costs by renegotiating leases.

Employment increased moderately over the reporting

period, and contacts expected a strong increase over the

next 12 months. Contacts again reported minimal employee absenteeism due to Covid-19 infections or exposures. Help wanted signs sprouted across the District as

businesses sought to meet growing demand. Contacts

across sectors reported greater difficulty in finding workers, particularly at the entry level. Employers, temp

agencies, and workforce development organizations

pointed to a number of factors limiting labor supply,

including health safety concerns, childcare challenges,

cutbacks in public transportation schedules, job search

fatigue, and financial support from the government.

Overall, wage and benefit costs increased moderately.

However, contacts across sectors noted strong pressure

to raise wages, particularly at the entry level, and there

were widespread reports of businesses offering signing

bonuses. In addition, there was an increase in reports of

firms hiring employees away from other firms by offering

greater pay.

Consumer Spending

Consumer spending increased moderately over the

reporting period. Contacts said that looser pandemicrelated restrictions and stimulus payments from the

American Rescue Plan supported activity, though the

impact of the payments had waned in recent weeks.

Spending on leisure and hospitality services rose but

stayed below pre-pandemic levels. Nonauto retail sales

increased moderately, with continuing high levels of

demand for furniture, home furnishings, home improvements, electronics, appliances, and sporting goods.

Grocery store sales remained healthy and there were

again reports of consumers trading up for more expensive items, such as premium meat cuts, finer wines, and

seafood. Contacts from some large open-air shopping

centers reported that consumer traffic levels had recovered to or remained just below 2019 levels. New and

Prices

Overall, prices rose moderately in April and early May,

and contacts expected similar-sized increases over the

next 12 months. Contacts noted that prices for copper,

steel, aluminum, metal products, resins, natural gas,

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used light vehicle sales increased modestly from a high

level, but with sales constrained by issues of vehicle

availability.

ness was above pre-pandemic levels. Auto output declined slightly due to parts shortages, notably of microchips. Steel production increased moderately to meet

growing demand from manufacturers, builders, and the

energy sector. Demand for heavy machinery also grew

moderately, spurred by growth for construction, mining,

and agriculture. Specialty metals manufacturers reported

a solid increase in shipments, but also a large increase

in backlogs as they struggled to keep up with demand.

Business Spending

Business spending increased moderately in April and

early May. Retail inventories were uncomfortably low for

many items, and contacts expected challenges to continue through much of 2021. New and used light vehicle

inventory levels fell further—to very low levels for new

vehicles. One dealer reported that their stocks were at

33% of normal and that the manufacturer indicated the

situation wouldn’t improve until August at the earliest.

Many manufacturing contacts said inventories were

below comfortable levels. Contacts noted that supply

chain issues had worsened, particularly for raw materials, microchips, and specialty parts. They expected little

improvement through the end of the year. Demand for

transportation services increased moderately. Many

contacts reported ongoing shipping delays, both from

overseas and within the U.S. Capital expenditures were

up moderately, and contacts expected a moderate increase over the next twelve months. Several contacts

said that long wait times for equipment were holding

back spending. Demand for commercial and industrial

energy consumption was little changed overall.

Banking and Finance

Financial conditions improved slightly over the reporting

period. Participants in the equity and bond markets

reported a small improvement in conditions, though

volatility remained elevated. Lenders continued to report

that businesses and households had large amounts of

cash on hand to finance spending. Business loan volumes were little changed on balance, with contacts

highlighting strength in construction and manufacturing,

but weakness in commercial real estate and leisure and

hospitality. Business loan quality increased slightly

across most segments. Contacts reported stiff competition for loan opportunities and that standards had loosened a bit. In consumer markets, loan demand increased

modestly, led by ongoing growth in residential mortgage

activity. Consumer loan quality increased slightly, while

credit standards were little changed.

Construction and Real Estate

Agriculture

Construction and real estate activity increased slightly

over the reporting period. Residential construction was

little changed from a strong level. Contacts said that

rising costs due to limited lot availability and higher material costs (particularly for lumber) were putting a damper on building. Home remodeling activity was strong and

continued to grow. Residential real estate activity increased moderately despite low inventory levels. Strong

demand pushed home prices up noticeably, with many

selling for well above list price. Residential rents edged

up. Nonresidential construction increased slightly, with

contacts highlighting growth in the industrial and transportation infrastructure sectors. Commercial real estate

activity was little changed overall. Rising demand for

industrial space was offset by falling demand for office

and retail space. That said, a few contacts noted that

retail space that had emptied earlier in the pandemic

was starting to fill again. Commercial real estate prices

increased marginally and rents were unchanged. The

availability of sublease space was up modestly as some

offices trimmed their post-pandemic footprint.

Expectations for farm income in 2021 strengthened

across sectors in April and early May. Drought and dry

weather conditions were an issue across a substantial

portion of the District, though timely rains could still

erase most of the impact. Frosts damaged some plants

and trees, with potentially heavy losses for fruit producers. Corn and soybean planting proceeded ahead of the

normal pace. Corn, soybean, and wheat prices moved

up and were near multi-year highs. Hog, cattle, and milk

prices rose, helped by strong meat and dairy exports.

Egg prices dropped however. Despite higher prices,

livestock producers’ margins were little improved because of higher feed costs. Farmland values increased

once again, because of strong demand and limited inventory. ■

Manufacturing

Manufacturing production increased moderately in April

and early May despite widely reported supply chain

challenges. Most manufacturing contacts said that busi-

For more information about District economic conditions visit:

chicagofed.org/cfsbc

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H-2

Federal Reserve Bank of

Minneapolis

The Beige Book ■ May 2021

Summary of Economic Activity

Ninth District economic activity grew at a moderate-to-strong pace since early April. Employment grew moderately, with

strong hiring demand outpacing labor availability. Wage pressures were moderate overall, and wholesale price pressures increased briskly while consumer prices increased more moderately. Growth was noted in consumer spending,

construction, real estate, manufacturing, agriculture, and energy. Minority- and women-owned businesses in the region

reported moderate improvements in business activity.

Employment and Wages

Worker Experience

Employment grew moderately since the last report, with

strong hiring demand outpacing labor availability. Job

postings saw strong increases in recent weeks,

particularly in South Dakota and Montana. A Minnesota

staffing firm with multiple offices said every location had

at least 100 job openings. Hiring demand was healthy

across all sectors, but was strongest in manufacturing,

construction, health care, and hospitality. Recent hiring

and near-term hiring expectations improved for firms of

all sizes; however, large firms reported significantly

stronger hiring tendencies. For those hiring, most said

their ability to find and hire staff was moderately or

extremely difficult. Contacts in the Dakotas and Montana

expected some improvement in labor availability with the

early elimination of enhanced federal unemployment

benefits in those states. But the action itself was weeks

away, and competition for new entrants would be high.

Job seekers saw modest improvement in labor market

conditions since the last report. While hiring demand was

robust, job service contacts reported low wages as a

moderate or significant barrier keeping job seekers from

taking available jobs. They also noted increased interest

in telework, but few viable options. A workforce contact

said that displaced high-income earners were actively

seeking jobs to replace lost income, while low-income

earners were more likely to stay on the sidelines if they

were receiving government benefits. Contacts also cited

the challenges of childcare and children’s school

schedules in making employment decisions. Several

contacts pointed to increased inoculations and the

gradual return of activities in travel and hospitality as

positives for frontline workers. A labor contact expressed

that while employment for janitorial workers remains 10

percent below pre-pandemic levels, more janitors were

finding work deep cleaning commercial spaces.

Wage pressures were moderate overall. Wage growth

among the large majority of contacts remained below 3

percent on an annualized basis. Workers at construction,

manufacturing, and hospitality firms saw stronger wage

growth, while many service-related firms saw weaker

growth. Future wage expectations were slightly higher,

but not well aligned with firms’ broader concerns over

labor availability. A manufacturer of construction

products recently increased hourly wages by $3 an hour

and saw job applications jump significantly.

Prices

Wholesale price pressures increased briskly, while

consumer prices increased more moderately, as ongoing

spikes in certain inputs fed through to final prices. Nearly

a quarter of respondents to a business conditions survey

reported nonlabor input price increases of greater than

10 percent relative to pre-pandemic levels. Pressures

were slightly lower for final/retail prices charged to

customers. Respondents to a construction survey noted

increases in materials costs across the board, but

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particularly sharp increases for lumber, steel, and copper

wire. Manufacturing contacts continued to report higher

final prices due to increased costs for raw materials,

packaging, and transportation. However, contacts

offered that growing demand was allowing firms to pass

along a greater share of markups to customers. Retail

fuel prices increased at a moderately strong pace since

the previous report.

elimination of eviction moratoriums remained.

Residential real estate continued to see strong home

sales across the District. In many District markets,

inventories of homes for sale were half—or less—of last

year’s levels; shortages were acute among lower-priced

homes, sparking offers above asking prices.

Manufacturing

District manufacturing activity increased briskly since the

last report despite sharp cost increases. An April index of

regional manufacturing conditions indicated strong

expansion in activity in Minnesota and increased activity

in North Dakota and South Dakota from a month earlier.

More than half of manufacturing contacts reported that

they expect revenues to increase in the second quarter

of 2021 from the previous quarter.

Consumer Spending

Consumer spending was slightly higher since the last

report, but remained at elevated levels. Restaurants,

bars, hotels, and recreation firms all reported increased

activity in recent weeks. However, many reported

difficulty hiring and were operating at limited hours and/

or capacity. A Montana contact said tourism firms were

“facing the toughest recruiting season ever.” Auto sales

in the western portion of the District remained strong,

with low inventories remaining the biggest obstacle.

“Most new units are spoken for by the time they arrive at

the dealerships,” said one Montana contact. Similar

demand was reported for recreational and marine

vehicles. Airline passenger levels have hit a seasonal lull

before the summer travel season, but a North Dakota

travel contact said activity was expected to rise “once

families begin summer vacations.” A regional shopping

center in Minnesota said that traffic had been rising;

while still below pre-pandemic levels, growth was

expected to continue due to pent-up demand.

Agriculture, Energy, and Natural Resources

Agricultural conditions improved sharply since the

previous report. Contacts expected strong farm incomes

heading into planting season, building on recent

commodity price increases and export demand. Crop

progress as of mid-May was generally well ahead of

recent averages in District states. However, extreme

drought conditions spread in portions of the District.

District oil and gas exploration activity increased slightly

since the previous report, but remained well below its pre

-pandemic level.

Minority- and Women-Owned Business Enterprises

Minority- and women-owned business enterprises

(MWBEs) in the region reported moderate improvements

in business activity, according to a May survey.

Customer traffic and revenue is modestly to significantly

higher compared with the same period a year ago, when

restrictions were imposed. A contact working with

minority entrepreneurs warned that barriers faced by

many businesses to access financial assistance during

the pandemic continued to put them behind in the

recovery. They further indicated that while many

businesses have been technologically adapting to the

new environment, some clients lack the knowledge and/

or capacity to do so. A contact in the hospitality industry

expressed difficulty finding employees and highlighted

the inability of small businesses to match current income

from government benefits. Like firms overall, MWBE

manufacturing and construction businesses were faring

well, but also faced labor and material shortages,

respectively. ■

Construction and Real Estate

Commercial construction activity grew slightly overall,

held back by supply chain disruptions and rising costs for

materials. Overall project activity showed signs of

increasing, according to two industry trackers and

contacts across the District. However, many contacts

also noted that supply chain problems and inflated

materials costs were creating significant project delays

and some outright cancellations, and lack of available

labor was further eroding their ability to either take on

work or complete projects. All of these pressures were

having a noticeable effect on profits. Similar difficulties

were evident in residential construction. However,

contacts noted stronger overall demand and outlooks,

and recent residential permitting remained robust across

many of the District’s larger markets.

Commercial real estate improved modestly overall,

though subsectors varied. Industrial property remained

strong, with some speculative building reentering the

market. Vacancy rates rose in office and retail, with

sublease activity also increasing. Apartment vacancy

rates remained low across the District, and rents were

reportedly rising again, but uncertainty related to the

For more information on the Ninth District economy, visit:

minneapolisfed.org/region-and-community

I-2

Federal Reserve Bank of

Kansas City

The Beige Book ■ May 2021

Summary of Economic Activity

Conditions in the Tenth District economy continued to improve at a moderate pace in April and May, and contacts in most

sectors anticipated additional gains in the months ahead. Consumer spending increased moderately as retail, restaurant,

and tourism sales rose. Sales exceeded pre-pandemic levels for the majority of retail, restaurant, and auto contacts, while

tourism and healthcare sales remained below pre-pandemic levels. Manufacturing activity expanded robustly, and almost

two-thirds of manufacturers reported that new orders were at or above pre-pandemic levels. Contacts also reported sales

gains in the wholesale trade, professional and high-tech, and transportation sectors. Residential real estate activity increased and home prices rose robustly as inventories fell further from already low levels. Commercial real estate activity

increased slightly for the first time since the pandemic started. The energy sector expanded as production, commodity

prices, and capital expenditures moved higher. The farm economy remained strong, but drought conditions continued to

strain producers in the western part of the region. Employment rose at a modest pace, and wages increased moderately.

Input prices increased robustly, while selling prices increased at a moderate pace.

manufacturing and services sectors since the previous

survey, while selling prices increased at a slightly more

moderate pace. The majority of respondents also indicated that selling prices were above pre-pandemic levels.

More than one-third of contacts reported that rising materials prices and supply issues, such as lack of availability or increased delivery times, were having a strong

negative effect on their firm, and an additional one-third

of contacts reported a slight negative impact from these

factors. About 80 percent of contacts expected these

factors to persist for 12 months or less. Contacts in both

sectors expected input prices to continue to rise robustly

over the next six months, while the growth rate of selling

prices was anticipated to accelerate.

Employment and Wages

District employment continued to increase modestly

during the survey period in both the services and manufacturing sectors, with a slight majority of contacts in

both industries indicating that employment levels were

now at or above pre-pandemic levels. Recent employment gains in the services sector were driven by hiring in

the retail and wholesale trade industries, while transportation, auto, and real estate contacts reported slight

declines. Looking ahead, services contacts expected

modest increases in employment in the coming months,

with slightly stronger gains in tourism and wholesale

trade. Manufacturers anticipated both employment levels

and hours to rise moderately in the next few months.

Consumer Spending

The majority of contacts reported labor shortages, with

many contacts noting demand for all positions and several others in need of truck drivers and technicians. More

than three-quarters of contacts reported that the inability

to find workers with the required skills was restraining

hiring plans. Wages rose moderately, and while the

majority of contacts expected wage growth to remain

moderate throughout 2021, more than one-third of manufacturing and services contacts expected to raise wages by 4 percent or more at their firms.

Consumer spending grew moderately over the survey

period, and the majority of contacts noted that sales

were above pre-pandemic levels. The strongest sales

gains in April and May were observed in the retail, restaurant, and tourism sectors. Compared to pre-pandemic

levels, more than 70 percent of retailers and half of

restaurant owners indicated higher sales, while the majority of tourism contacts continued to report lower sales.

Health services and auto sales held fairly steady since

the previous survey, with health services sales still below

pre-pandemic levels and auto sales above. Respondents

across all consumer sectors expected sales gains in the

Prices

The prices of raw materials rose robustly in both the

J-1

Federal Reserve Bank of Kansas City

coming months, with restaurant and tourism contacts

expecting particularly strong gains.

recent weeks, with anecdotal evidence suggesting the

increase is concentrated in liquid accounts, such as

demand deposit accounts and savings accounts.

Manufacturing and Other Business Activity

Energy

District energy activity expanded in April and May as the

number of active oil and natural gas rigs rose due to the

addition of several oil rigs in Oklahoma. With a larger

number of active rigs compared with a year ago, production levels also increased modestly. Multiple firms indicated capital spending plans aimed at increasing production in 2021 while reducing costs after restructuring over

the past year. Employment in the energy sector inched

up slightly across the District since the last survey period, but the number of jobs remained considerably below

year-ago levels. A slight increase in commodity prices

since the last survey period supported higher revenues

and profits for regional firms. Contacts across the District

expected stable to slightly higher oil prices for the remainder of the year as impacts from the pandemic continue to wane and demand recovers.

Manufacturing activity expanded robustly since the last

survey as production and new orders increased at both

durable and nondurable goods plants, albeit with stronger gains among durable goods producers. Almost twothirds of respondents indicated that new orders were

either at or above pre-pandemic levels. Looking ahead,

both durable and nondurable goods manufacturers expected moderate gains in production, new orders, and

capital expenditures in the coming months.

Outside of manufacturing, sales rose robustly at wholesale trade firms, moderately at transportation firms, and

modestly at professional and high-tech services firms in

May. In addition, capital expenditures increased modestly over the survey period in all three sectors. Transportation and wholesale trade contacts expected moderate-tostrong sales gains over the next six months, while sales

at professional and high-tech services firm were expected to continue to rise moderately.

Agriculture

The Tenth District farm economy remained strong, but

drought continued to strain all types of producers in the

western part of the region. Prices for corn, soybeans,

wheat, cotton, and hogs increased in recent weeks and

remained at multi-year highs through the early part of

May. In contrast, prospects for the cattle industry remained subdued as cattle prices were near prepandemic levels but profit opportunities were limited due

to elevated feed costs. Alongside severe drought in the

western portion of the District, the wheat crop was in

poorer condition in Colorado relative to other states.

Contacts also reported that the impact of drought on

pasture quality and hay production continued to worsen.

■

Real Estate and Construction

Residential real estate activity continued to expand

moderately in April and May, while commercial real

estate activity increased slightly for the first time since

the pandemic started. Home prices sustained robust

growth as sales increased moderately and inventories

continued to decline. Contacts expected these trends to

continue in the coming months. Construction supply

sales rose modestly since the last survey, and similar

gains were expected in the next few months. Commercial real estate contacts noted modest increases in absorption rates, sales, prices, rents, and construction as

well as a slight decrease in vacancy rates. Growth in

commercial sales and construction was expected to pick

up in the coming months, and vacancy rates were expected to fall modestly. However, developers’ access to

credit was expected to become modestly more difficult.

Banking

Loan demand rose slightly since the previous survey,

with gains driven by modest growth in the demand for

consumer installment loans and slight growth in the

demand for commercial real estate loans. Commercial,

industrial, and residential real estate loan demand held

steady, while demand for agricultural loans declined

modestly. Credit standards remained stable across all

lending categories, and bankers reported that overall

loan quality had improved strongly since last year. Additional improvement in loan quality was anticipated over

the next six months. Deposit levels increased robustly in

For more information about District economic conditions visit:

www.KansasCityFed.org/research/regional-research

J-2

Federal Reserve Bank of

Dallas

The Beige Book ■ May 2021

Summary of Economic Activity

The Eleventh District economy continued to expand at a solid pace during the reporting period. Growth in the manufacturing and nonfinancial services sectors was strong, though activity remained below pre-pandemic levels. Retail sales

were mixed. Home sales and single-family construction remained robust, but activity was being constrained by labor, lot,

and materials shortages. Apartment demand rose, while office leasing stayed weak. Overall loan volume increased

sharply, buoyed by continued strength in real estate lending. Energy activity and agricultural conditions improved. Employment growth was moderate, and upward wage pressures continued as hiring remained a key challenge for many

companies. Ongoing supply chain disruptions intensified price pressures, particularly in the construction and manufacturing sectors. Outlooks improved, though there was widespread apprehension about the sustainability of current demand growth in light of supply constraints, difficulty hiring, and rising costs.

Employment and Wages

metals, and vehicles, as well as rising freight costs.

Some contacts expect costs to remain elevated for some

time due to strong demand and/or supply chain challenges. Selling prices rose at a fast clip in many sectors.

Housing contacts noted difficulty obtaining appraisals

due to rapid escalation in home prices. Compared to

yearend 2020, business contacts have revised upward

their expectations for input and selling price increases in

2021.

Employment expanded at a moderate pace. Lack of

labor availability, particularly for low-skilled positions,

was a growing concern among firms trying to hire or

recall workers, with a majority noting a lack of applicants

and generous unemployment benefits as impediments to

hiring. Many contacts, particularly accommodation and

food service firms, reported sizable numbers of unfilled

positions, and some noted that existing staff have had to

take on responsibilities outside of their normal jobs.

Some firms noted difficulties getting applicants to show

up for interviews, which further hampered hiring.

Manufacturing

Solid expansion continued in the manufacturing sector,

though the pace of growth eased from the prior reporting

period. Several durable goods manufacturers noted

large backorders and a lack of capacity to keep up with

strong demand. Those noting slower activity said supply

chain issues combined with inventory or raw materials

shortages led to slowdowns in production schedules.

Refining operations were recovering from the disruption

caused by the Colonial pipeline outage, and contacts

were increasingly optimistic for strong U.S. fuel demand

in the third quarter. Margins are expected to rise in the

second half of the year to near 2019 levels. Petrochemical production has mostly recovered from Winter Storm

Uri outages, but supply chain disruptions were likely to

persist through yearend 2021. Overall outlooks improved, although some manufacturers voiced concern

about the dampening effect on activity of supply constraints, extended lead times, and proposed tax hikes.

Wages continued to increase, with reports of significant

upward pressure in industries having trouble finding and

retaining workers. There were multiple reports of considerable wage pressures for mechanics, warehouse employees, construction specialty trades, and truck drivers.

A manufacturer said that even with a starting hourly

wage of $14 for non-skilled workers, they were unable fill

20-plus open positions.

Prices

Price pressures intensified further in part due to persistent supply chain issues, and multiple firms noted that

this was affecting business growth. Input costs surged,

with contacts in the construction, manufacturing, and

retail sectors citing the steepest increases. There were

several reports of higher prices of fuel, petrochemicals,

agricultural commodities, building materials, lumber,

K-1

Federal Reserve Bank of Dallas

Retail Sales

that there is a lot of money chasing multifamily deals and

pricing on assets is quite aggressive. Industrial construction and leasing remained robust. Demand for office

space remained weak and vacancies ticked up further.

Retail sales grew robustly in April but dipped in May,

which contacts attributed to supply chain issues and low

inventories. Auto sales expanded as well during the

reporting period, though new car supplies were limited

by microchip shortages. Outlooks were positive, buoyed

by the reopening of the economy and current pace of

vaccinations, though rising costs and inventory shortages remained a concern.

Financial Services

Loan volumes rose robustly over the past six weeks

supported by continued strength in commercial and

residential real estate activity. Commercial and industrial

loan volumes ticked up, while consumer lending was flat.

Nonperforming loans declined, and credit standards

stayed somewhat tight. Loan pricing remained competitive, and multiple contacts said they were flush with

liquidity and that it was difficult to deploy the excess

capital to generate reasonable returns. Sentiment regarding general business activity improved markedly,

with 68 percent of respondents citing an increase over

the past six weeks. Outlooks were optimistic, with contacts expecting continued declines in non-performing

loans, strong loan demand, and increased general business activity six months from now. Nearly half of respondents also noted that they expect long-term rates to

rise over the next 12 months.

Nonfinancial Services

Nonfinancial services expanded strongly over the reporting period. Demand growth was broad based, led by

increases in leisure and hospitality, transportation, and

professional and business services. Restaurateurs and

hoteliers said leisure activity was largely driving demand

as business travel remained sluggish. Airlines also cited

modest increases in ticket sales, which they attributed to

improvement in COVID statistics and easing restrictions.

Leisure travel continued to dominate airline bookings,

and contacts noted a pickup in reservations a few

months out. Staffing firms reported broad-based increases in demand. In transportation services, air cargo volumes rose sharply due to continued strength in domestic

e-commerce activity. Container shipments coming

through the Port of Houston picked up, and small parcel

shipments increased as well. Outlooks were positive,

although there was apprehension regarding the sustainability of current demand growth along with proposed

changes in tax policies among other regulations.

Energy

Drilling and completion activity rose further during the

reporting period. Oilfield services firms noted modest

hiring to support increased oil field activity. Exploration

and production firms expect the market to support a

West Texas Intermediate price of $60-65, and reiterated

that, at this price, capital spending plans would likely

remain unchanged among large U.S. producers. E&P

firms have slightly revised up their production outlook for

2021 thanks to strong year-to-date results. Sentiment in

the oil and gas industry improved further, though contacts remained cautious about changes in tax policy and

rising fuel, materials, and labor costs.

Construction and Real Estate

Activity in the single-family housing market remained

brisk. Sales continued to be robust, though builders were

struggling to keep up with demand and had to limit sales.

Several builders are shifting away from build-to-suit

construction to only starting inventory homes and selling

them at the framing or drywall stage due to production

challenges and escalating costs. In fact, in some instances, builders were selling lots and/or inventory homes to

the highest bidder. Others who were still doing build-tosuit jobs noted including price escalation clauses in

contracts to cover cost increases incurred during the

construction phase. Lot supply remained very tight as did

existing and finished vacant home inventories. In the

existing-home market, realtors reported bidding wars on

listings and homes getting snapped up quickly. Outlooks

were mixed, with contacts voicing concern about constrained lot supply, appraisal issues, rising costs, and

labor and material shortages.

Agriculture

Recent rainfall eased drought conditions in parts of the

District and improved prospects for row crops. Agricultural commodity prices moved higher across the board,

spurred by tight world supply and robust export demand.

Overall, row crop farmers were optimistic for improved

production and revenues this year. Significantly higher

grain prices, however, have negatively affected the

livestock sector with feed costs double what they were a

year ago. Beef exports were strong, which together with

continued capacity constraints in meat packing plants

have driven up beef prices to well-above-average levels.

■

Apartment demand was solid, pushing up occupancy

and rents. Apartment construction was ramping back up

after a slowdown last year due to COVID. Contacts said

For more information about District economic conditions visit:

www.dallasfed.org/research/texas

K-2

Federal Reserve Bank of

San Francisco

The Beige Book ■ May 2021

Summary of Economic Activity

Economic activity in the Twelfth District expanded significantly during the reporting period of April through mid-May.

Conditions in the agriculture and resources sectors improved notably, while manufacturing activity continued to expand

at a modest rate. Contacts reported ongoing strength in residential real estate markets, but largely unchanged conditions in the commercial real estate sector. Lending activity rose somewhat, with increased competition for new loans

and deals. Employment levels continued to increase modestly, accompanied by moderately higher wages. Price increases stepped up considerably, driven by increased material costs and supply chain disruptions. Retail sales increased a fair bit as vaccinations continued, allowing for further easing of social-distancing restrictions. Activity in the

consumer and business services sectors strengthened somewhat.

Employment and Wages

Prices

Overall employment levels continued to increase as the

labor market tightened in some regions. Employment

accelerated in states that only recently lifted business

restrictions, like California, and slowed modestly in

states where unemployment levels were already low, as

in the Mountain West. Most of the job growth was concentrated in the hospitality, retail, tourism, and food

services sectors, with employers seeking to rehire workers as the economy reopens and demand for these

services strengthens. However, many of these employers also reported facing difficulties hiring and retaining

workers for low-skilled jobs, as did contacts in manufacturing, construction, transportation, and agriculture.

Labor demand also picked up in the technology and

entertainment sectors while holding steady in the financial and other professional services sectors.

Price increases stepped up considerably over the reporting period. Continuing supply chain disruptions, low

inventories, and increasing labor costs have contributed

to upward pricing pressures in recent weeks. These

were most pronounced for users of raw materials, especially fuel and lumber. With burgeoning demand for food

services, prices for many agricultural products have also

risen, which translated into higher prices at grocers and

some restaurants. Additionally, prices for airline tickets,

rental cars, and lodging have started to normalize from

previous lows.

Retail Trade and Services

Retail sales increased a fair bit over the reporting period.

Sales growth was particularly strong in restaurants and

drinking establishments during recent weeks, as the

continued pace of vaccinations allowed for further easing

of social-distancing restrictions. A number of contacts

reported increased foot traffic in retail stores, while ecommerce sales continued to be strong. However, retailers across the District highlighted several supply chain

disruptions, including port issues, container shortages,

and manufacturing delays. As a result, most retailers,

even consignment and thrift stores, reported low inventory stock and raised concerns that the current sales pace

might slow in coming months. Sales of new and used

motor vehicles remained robust, although constrained by

low inventories, as did those of home improvement

goods. Demand for airline reservations was noted to

Wage pressures increased moderately. Employers in the

construction, manufacturing, technology, retail, healthcare, restaurant, and hospitality sectors reported having

to increase wages to retain and attract workers for both

high- and low-skilled jobs. In addition to raising wages,

these employers also mentioned offering other incentives such as sign-on bonuses, reduced or flexible hours,

and the ability to work remotely. Wage increases were

especially high in restaurants and hospitality services

ramping up to reopen, and employers reported difficulties in rehiring workers. Wages in financial services

remained stable.

L-1

Federal Reserve Bank of San Francisco

have picked up for the first time since the onset of the

pandemic.

Real Estate and Construction

Residential construction activity continued to expand at a

brisk pace. Demand for single-family homes remained

strong, although construction still failed to meet high

demand since the previous reporting period. The lack of

available homes was further exacerbated by increasing

labor and transportation costs, as well as widespread

shortages of raw materials, including lumber, asphalt,

cement, steel, and wallboard. The lack of available land

caused some homebuilders to start building smaller

homes or to move further into rural areas. Contacts in

the Pacific Northwest noted that bidding wars are common for newly listed properties, and some homebuilders

are delaying price quotes until completion of new homes

due to overall cost uncertainties. Demand for multifamily

homes also increased, although a few contacts noted

that projects in metropolitan areas had to be put on hold

due to increasing costs. Several contacts in California

mentioned a backlog of permits due to COVID-related

shutdowns in local governments.

Activity in the services sector also strengthened moderately. Following the further unwinding of pandemicrelated restrictions, conditions in the travel, leisure, entertainment, and hospitality industries improved, albeit

slowly. Bookings for hotel rooms slightly increased due

to a pickup in leisure travel. Restaurants reported operating at almost full capacity outdoors, although indoor

dining capacity was still limited. Demand increased for

automotive parts and services, as well as for car rentals.

In health care, elective services and non-COVID-19 lab

testing increased modestly, but preventive services

remained subdued. Demand for transportation and logistical services continued to be strong, while that of legal

and other professional services was largely unchanged.

Manufacturing

Manufacturing activity continued to expand at a modest

rate. New orders growth remained strong, especially for

wood products, chemicals, manufactured metals, computers, electronics, and manufactured food products. Yet

delivery delays and shortages of input materials, such as

semiconductors, continued to hold back production and

decreased inventories in some cases. Wood product

manufacturers in the Pacific Northwest, already operating at full capacity, reported having to delay production

of some orders. A contact in Southern California noted

that capacity utilization rates in manufacturing of renewable energy equipment have normalized, and new orders

are generally growing.

Conditions in the commercial real estate market were

largely unchanged. Demand for new office, retail, and

hospitality space stayed muted with reports of high vacancies and declining lease rates. However, demand for

industrial, warehouse and distribution spaces strengthened especially in the suburbs, and vacancy rates were

noted to be relatively low with lease rates either steady

or rising. One contact in Southern California mentioned

that the continued pace for vaccinations has contributed

to a slight pickup in demand for retail space, as people

return to metropolitan areas in preparation of in-person

work.

Agriculture and Resource-Related Industries

Conditions in the agriculture and resources sectors

notably improved. Loosened capacity restrictions in

restaurants and drinking establishments contributed to

stronger demand for agriculture products, including

wheat, corn, nuts, and fruits. Demand from abroad also

increased, aided by the depreciating dollar in the later

part of the reporting period. As a result, inventories of

fruits and nuts were noted to have decreased to lowerthan-usual levels. However, supply chain disruptions

continued to negatively affect many producers with one

reporting both domestic and international logistical issues that resulted in significant delays in seafood product sales. Growers in California noted that current

drought conditions are expected to negatively impact

annual crops this year, driving up labor and electricity

costs as farmers depend more on wells and water

pumps for irrigation.

Financial Institutions

Lending activity rose somewhat during the reporting

period. Most new growth in loan origination was led by

demand for commercial and multifamily real estate.

Residential mortgage and refinancing activity also continued to be solid, while demand for auto loans and

credit cards held steady. However, contacts across the

District noted increased competition among financial

institutions for new loans and deals, which led a few to

raise concerns over deteriorating loan quality. Overall

though, banks reported low delinquency rates, ample

liquidity, and high asset quality. Mergers and acquisitions

activity continued to increase, although one contact in

Southern California observed a decline in SPACs

(special purpose acquisition companies) origination in

recent weeks. ■

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