Beige Book
For use at 2:00 PM EDT
Wednesday
July 14, 2021
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
July 2021
Federal Reserve Districts
Minneapolis
Boston
New York
Chicago
Cleveland
Philadelphia
San Francisco
Kansas City
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
St. Louis
Richmond
Atlanta
The System serves commonwealths and territories as follows: the New York Bank serves the
Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank serves
American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
This report was prepared at the Federal Reserve Bank of Boston based on information collected on or
before July 2, 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
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A-1
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 from each District’s
sources. Reports are published eight times per year.
B-1
What is the purpose of the Beige Book?
First District
New York
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
What is the Beige Book?
L-1
The Beige Book is intended to characterize the change in economic
conditions since the last report. Outreach for the Beige Book is one of
many ways the Federal Reserve System engages with businesses and
other organizations about economic developments in their communities. Because this information is collected from a wide range of contacts through a variety of formal and informal methods, the Beige Book
can complement other forms of regional information 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 from 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 from 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 ■ July 2021
Overall Economic Activity
The U.S. economy strengthened further from late May to early July, displaying moderate to robust growth. Sectors
reporting above-average growth included transportation, travel and tourism, manufacturing, and nonfinancial services.
Energy markets improved slightly, and agriculture had mixed results. Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods.
Strained car inventories resulted in somewhat lower car sales despite steady demand, and home sales rose slightly
despite limited supply. Nonauto retail sales grew at a moderate pace on balance, and tourism was buoyed by the further abatement of pandemic-related concerns. Residential construction softened in several Districts in response to
rising costs, while commercial construction was mixed but up slightly on balance. Bank lending activity increased slightly or modestly in most Districts. The outlook for demand improved further, but many contacts expressed uncertainty or
pessimism over the easing of supply constraints.
Employment and Wages
Three-quarters of Districts reported either slight or modest job gains and the remainder reported moderate or strong
increases in employment. Healthy labor demand was broad-based but was seen as strongest for low-skilled positions.
Wages increased at a moderate pace on average, and low-wage workers enjoyed above-average pay increases. Labor
shortages were often cited as a reason firms could not staff at desired levels, with firms in three Districts delaying expansion or scaling back services due to understaffing. Higher than average turnover and lower retention rates were
reported in three Districts. All Districts noted an increased use of non-wage cash incentives to attract and retain workers. Firms in several Districts expected the difficulty finding workers to extend into the early fall.
Prices
Prices increased at an above-average pace, as seven Districts reported strong price growth and the rest saw moderate
gains. Pricing pressures were broad-based and grew more acute in the hospitality sector, as the reopening of hotels
and restaurants confronted limited supplies of materials and workers. Construction costs remained high, but lumber
prices reportedly eased a bit. Container prices returned to very high levels after having moderated in the spring. Pricing
power was mixed, as some contacts reported that high end-user demand enabled them to increase their prices and
others said that input price pressures had reduced their profit margins. While some contacts felt that pricing pressures
were transitory, the majority expected further increases in input costs and selling prices in the coming months.
Highlights by Federal Reserve District
Boston
New York
Contacts reported solid increases in demand and modest gains in employment. Wage and pricing pressures
intensified, and several firms implemented significant
price and/or wage increases. Labor demand strengthened further but many contacts continued to complain of
labor shortages. The outlook was mostly unchanged but
prospects for office leasing appeared somewhat less
bleak.
The regional economy continued to grow at a strong
pace, and contacts were increasingly optimistic about
the near-term outlook. Both hiring and wages picked up
and businesses reported widespread labor shortages.
Tourism picked up further, and service-sector businesses reported widespread improvement. Input price pressures have intensified further, and more businesses
have raised or plan to raise their selling prices.
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National Summary
Philadelphia
all inflation pressures remain elevated, but firms report
varying degrees of pass-through to customers.
Business activity continued at a moderate pace of
growth during the current Beige Book period – still below
levels attained prior to the pandemic. More widespread
vaccinations have led to a faster resumption of normal
activity which has exacerbated labor shortages and
wage pressures for low-wage jobs. However, employment continued to grow modestly, as did overall wage
growth, while prices continued to grow moderately.
Minneapolis
The District economy saw strong growth despite challenges of inventory shortages, higher prices, and labor
needs. More workers entered the labor market, but still
lagged behind hiring demand. Consumer demand remained high, fueling continued growth in services, tourism, and manufacturing. Though commodity prices remained high, ag producers faced widespread drought.
MWBE firms had an optimistic outlook on the economy.
Cleveland
The District’s economy expanded at a solid pace amid
further progress in the fight against COVID-19, although
growth was hampered by labor and other supply constraints. Most firms remained optimistic about the
strength of demand in coming months but were less
certain that supply chain challenges would ease. Thus,
many expected that upward pressure on wages, other input costs, and prices would persist in coming months.
Kansas City
Economic activity expanded moderately in June, and
further gains were expected over the next few months.
Consumer spending increased moderately, with robust
gains in retail sales and a moderate pick up in restaurant
and tourism activity. Contacts in most other sectors also
reported stronger demand and increased activity levels.
Wage growth accelerated as labor shortages persisted,
and both input and selling prices rose robustly.
Richmond
The regional economy continued to grow moderately in
recent weeks. Manufacturers and service sector businesses experienced growth in sales, but in many cases,
growth was being restrained by lack of available labor,
raw materials, shipping capacity, or inventories. Employment and wages rose modestly, and firms continued to
struggle finding workers. Price growth increased slightly
from an already elevated rate.
Dallas
The District economy expanded at a solid rate, bolstered
by continued broad based growth across sectors. Supply
chain challenges and labor shortages were more widespread than in the last report and were slowing the pace
of expansion. Outlooks stayed positive, though uncertainty increased.
Atlanta
San Francisco
Economic activity expanded 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 strengthened. Manufacturing activity expanded.
Banking conditions were steady.
Economic activity in the District expanded notably, and
labor market conditions improved moderately. Wages
and inflation picked up further. Retail sales and activity in
the services sector strengthened solidly. Activity in the
manufacturing and agriculture sectors rose more modestly. Residential construction remained very strong,
while lending activity grew slightly.
Chicago
Economic activity increased moderately. Growth was
limited by supply constraints. Employment increased
strongly, business spending increased moderately,
manufacturing increased modestly, and consumer
spending and construction and real estate were flat.
Wages rose moderately while prices rose strongly. Financial conditions im-proved slightly. Prospects for
agriculture income in 2021 were little changed.
St. Louis
Economic conditions have continued to improve at a
moderate pace since our previous report. Contacts
continue to report that labor and material shortages are
re-straining their ability to meet customer demand. Over-
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Federal Reserve Bank of
Boston
The Beige Book ■ July 2021
Summary of Economic Activity
First District contacts reported solid increases in demand and modest gains in employment. Retail sales remained elevated, about on par with first quarter results. Air travel through Boston improved steadily in recent months and Cape
Cod tourism contacts saw further gains. Manufacturing sales improved moderately in recent weeks despite ongoing
supply disruptions. Software and information services firms reported strong gains from the first quarter, although sales
at one firm remained down from one year earlier. Commercial real estate markets improved further, led by robust industrial leasing and sales activity and impressive gains in retail leasing. Residential real estate markets remained strong as
over-the-year results were little changed. Employment rose modestly and wage increases were mixed. Reports of robust price increases became more common. The outlook remained cautiously optimistic and prospects for office leasing
appeared less bleak.
large ongoing cost pressures and the perception that
consumers will tolerate them. A food manufacturer reported a 12 percent increase in input prices over the
year and a packaging manufacturer saw an 8 percent
increase in paper pulp just since the first quarter. One
contact said that ocean container prices were back up to
the extreme heights seen in the winter after having fallen
in the spring. Increased freight costs were noted by
manufacturers as well as retailers. A furniture retailer
raised prices nearly 10 percent in recent months and a
total of 20 percent over the year. Software contacts
reported flat prices, consistent with their business models which allow only infrequent price changes.
Employment and Wages
Labor demand strengthened moderately and wage pressures increased, while employment increased modestly.
A few manufacturing contacts described the labor market
as tight for all skill levels, and one perceived that unemployment insurance held back the participation of unskilled workers. Nonetheless, a life sciences manufacturer resumed a plan to add hundreds more workers in
2021 following the resolution of regulatory uncertainty,
and a food producer is adding a new production line and
said that hiring difficulties and wage pressures had
eased. Retail contacts experienced difficulty finding
workers despite having implemented wage increases of
$1 to $2 per hour. Software employment remained
steady over the quarter, with turnover at average or
below-average levels. One software contact engaged
exclusively in replacement hiring while awaiting further
information on demand, while two others described
substantial hiring plans. Wages at software firms increased at their usual annual pace, but one firm felt that
larger wage increases would be necessary moving forward in order to meet hiring goals.
Retail and Tourism
Retail sales at First District contacts stayed at high levels
through the second quarter but were roughly even with
first quarter results. At a furniture retailer, sales volume
was up roughly 25 percent from 2019, which nonetheless fell slightly short of the pace of first quarter sales.
The same retailer faced delays in receiving goods and
difficulties hiring sales associates and warehouse workers. A clothing retailer said that sales in recent months
remained up 30 percent over pre-pandemic levels, owing
to continued strength in online sales, representing stable
results since their last report.
Prices
Price increases were robust on balance despite flat
prices at software and IT firms. Three manufacturing
firms planned to raise prices in 2021 and one raised
prices in 2021Q2, by margins of 8 to 10 percent; another
said that moderate price increases were possible in 2021
but uncertain. The price increases reflect a response to
Travel industry respondents reported that air travel
through Boston increased substantially in recent months.
Compared with the comparable months from 2019,
A-1
Federal Reserve Bank of Boston
passengers were at 40 percent as of April 2021, at 45
percent as of May, and are expected to surpass 50
percent in June and July. The recovery in international
and business travel was comparatively weak, however.
Hotel bookings, occupancy rates, and room rates on
Cape Cod held steady or improved further in a recordbreaking spring season. Restaurants and small retail
shops on the Cape also reported surging sales. Aside
from potential problems related to ongoing labor shortages, retail and hospitality contacts remained optimistic
that the summer would continue to yield very strong
results.
ences space edged close to zero amid substantial ongoing construction activity. Industrial and multifamily construction gained strength, but contacts perceive that
construction activity in those sectors would be more
robust if not for surging construction costs and tight labor
markets. A contact from Maine reported a robust increase in office leasing demand, but elsewhere office
demand was roughly flat and effective rents softened
slightly. Office vacancies were stable in Connecticut and
Maine, up in Rhode Island, and down somewhat in the
Boston area. Retail leasing improved sharply in Maine
and Rhode Island, in part for seasonal reasons, although
rents were seen as flat or down slightly. Loan rates for
industrial and multifamily properties fell a further 25 basis
points as banks sought to shed cash. The outlook improved somewhat, as contacts expected further growth
in retail leasing and forecasted smaller declines in office
footprints through early 2022 than they had in previous
reports.
Manufacturing and Related Services
Manufacturing contacts saw moderate growth amid
ongoing supply disruptions. Three contacts—a food
producer, a manufacturer of industrial membranes, and a
semiconductor manufacturer—said that second quarter
sales exceeded their expectations. The semiconductor
contact said that the enormous increase in demand for
their products from a year earlier derives from end users
and not from either hoarding or depressed sales during
the pandemic—the example cited was increased demand for car safety features which require semiconductors. Firms did not report any major revisions to capital
expenditures. Contacts experienced further moderate-tosteep cost increases that were mostly attributed to supply chain disruptions. Firms continued to be optimistic
but made no major revisions to their outlooks, and they
did not expect supply disruptions to ease before the end
of 2021 and maybe even later.
Residential Real Estate
New England’s residential real estate markets were
mostly stable amid a high-demand, low-inventory environment that has persisted for some time. Connecticut
data were unavailable. Closed sales increased substantially over the year to May in all reporting areas, but the
numbers largely reflect the pause in market activity in
May 2020 due to COVID-19. For the condo markets in
Rhode Island, New Hampshire, and Maine, May’s results
indicate a deceleration in sales activity from April, but
condo sales in Massachusetts and Boston increased
substantially from the last report. Single-family home
inventories did not improve but Boston condos again
saw a slight year-over-year increase in supply. Median
sales prices increased over-the-year by double-digit
percentages, representing little change from the previous
report for single family homes and a slight acceleration
for condos. The Massachusetts and New Hampshire
contacts perceived that low mortgage rates fueled demand. Three contacts mentioned the need for new construction to satisfy demand, but they acknowledged that
high construction costs could add further upward pressure to prices. The Massachusetts contact is hopeful
that, as pandemic restrictions ease, supply chain challenges will be resolved, and construction costs will fall.■
Software and Information Technology Services
Software and IT contacts in the First District reported
moderate-to-robust improvements in sales. One contact
said that customers saw value in their company’s cloudbased products after witnessing their usefulness during
the pandemic. Revenues at one firm remained lower on
a year-over-year basis, but that performance nonetheless reflected a moderate improvement over the previous
quarter, and others reported robust acceleration in yearover-year performance. Most contacts were cautiously
optimistic for stable or improving sales moving forward,
but one maintained an uncertain outlook given the possibility of a resurgence in COVID-19 cases later in 2021.
Commercial Real Estate
Commercial real estate markets in the First District remained mixed but showed modest improvements on
balance. The industrial market still had very strong leasing demand and industrial rents posted further modest
increases amid very low vacancy rates. Industrial sales
continued to grow, and capitalization rates fell to new
lows. In the greater Boston area vacancies for life sci-
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ July 2021
Summary of Economic Activity
Economic growth in the Second District remained strong in the latest reporting period, as low levels of COVID and widespread vaccinations have enabled most businesses to re-open. Contacts continued to express broad-based optimism
about the business outlook. The job market has strengthened further, as more businesses have added workers and
raised wages, with many reporting labor shortages. Input price pressures have continued to broaden, and a growing
proportion of businesses report that they are hiking their selling prices. Consumer spending has continued to grow,
albeit at a more moderate pace, led by sales of used vehicles and tourism, while consumer confidence in the region
climbed to near record highs. Home sales and rental markets have strengthened, while commercial real estate markets
were mixed. Finally, contacts in the broad finance sector reported a pickup in activity, and regional banks reported rising
loan demand and declining delinquency rates.
Employment and Wages
struction, and transportation & warehousing. Looking
ahead, businesses across all major sectors plan to raise
wages. A leading New York City employment agency
noted a wide gap between desired and offered salaries.
The job market strengthened further in recent weeks,
with businesses indicating more hiring and growing labor
shortages. A major New York City employment agency
noted increased hiring activity and expects a rebound to
pre-pandemic levels once most offices fully re-open. An
upstate employment agency reported a continued increase in job postings, noting that many remain unfilled—in part reflecting increased turnover and churn, as
more workers have changed jobs.
Prices
Firms’ input prices have generally continued to accelerate. As has been the case for several months, those in
construction and manufacturing noted the most widespread increases, but in the latest reporting period, there
has been a substantial increase among those in leisure
& hospitality, transportation & warehousing, and retail &
wholesale trade. Contacts in all sectors foresee widespread hikes in prices paid during the rest of 2021.
Businesses in a number of sectors have reported increases in their employment levels—particularly in the
leisure & hospitality, wholesale trade, transportation and
information sectors. Overall, business contacts report a
gap between actual and desired staffing levels—
especially in the leisure & hospitality, professional &
business services, and retail sectors; moreover, some
restaurants and hotels have reportedly been unable to
find enough staff to meet the surge in pent-up demand.
Selling prices accelerated modestly, with particularly
widespread price hikes in manufacturing and wholesale
trade and moderate hikes in retail, transportation, and
construction. A sizable share of contacts in all sectors
except information plan to hike prices later this year.
Businesses across all major sectors plan to add staff in
the coming months. Many employers that had shifted to
all or mostly remote work have begun to bring workers
back to the workplace, and this is expected to be most
pronounced in September.
Consumer Spending
Consumer spending has continued to grow, albeit at a
somewhat more moderate pace. Non-auto retailers
reported a continued increase in business, particularly
for seasonal and travel-related merchandise. A major
retail chain noted that its sales have continued to exceed
plan, with sales in New York City picking up but still
Wage growth has picked up somewhat, most notably for
jobs in leisure & hospitality, education & health, con-
B-1
Federal Reserve Bank of New York
Real Estate and Construction
lagging the rest of the region. Retailers continued to
express widespread optimism about prospects for the
second half of 2021. Consumer confidence among New
York State residents continued to improve in June, exceeding pre-pandemic levels and approaching record
highs.
Housing markets have been steady to stronger in the
latest reporting period. Sales markets outside New York
City have remained quite robust, though volume has
plateaued or edged back—largely due to lean inventories and high prices. In New York City, where inventories are not as low, sales volume continued to rebound,
though the upward momentum has slowed. Home prices
have been steady to higher across the District. In Manhattan, prices have stabilized well below peak levels of
three years ago; across the rest of the New York City
area, prices have been steady to slightly higher; and
across upstate New York, prices have continued to rise.
New vehicle sales were reported to be steady at high
levels, while sales of used cars strengthened considerably. Sales in both categories remained well above prepandemic levels, despite low inventories. A persistent
shortage of microchips is expected to constrain inventories and sales of new vehicles through the summer.
Manufacturing and Distribution
New York City’s rental market has shown signs of turning up. Rents are still down more than 10 percent from
early-2020 levels across New York City, but they have
begun to recover, with strong leasing activity continuing.
This is generally attributed to a combination of people
moving for better deals and a return to the workplace.
Businesses in the manufacturing, wholesale trade and
transportation & warehousing sectors noted ongoing
strong growth. Contacts continued to note supply disruptions, though to a somewhat lesser degree than earlier in
the year. Looking ahead to the second half of this year,
businesses in all these sectors remained widely optimistic about business prospects, with the main concerns
being about shortages of workers.
Commercial real estate markets have remained mixed
across the District. New York City’s office market has
continued to slacken, with vacancy and availability rates
continuing to trend up and rents drifting down. However,
office markets across the rest of the District have been
steady to modestly stronger—particularly in upstate New
York. The industrial market has strengthened throughout
the District, with vacancy & availability rates declining
and rents up 5-7 percent from pre-pandemic levels.
Services
Service industry contacts also reported robust growth in
the latest reporting period. Contacts in the information
and leisure & hospitality industries noted particularly
widespread improvement, while those in professional &
business and education & health services reported more
moderate gains. A major social services nonprofit noted
that increased food donations have enabled them to
expand their distribution efforts. Looking ahead, contacts in all these sectors continued to express widespread optimism about business prospects.
New office construction has weakened from already
sluggish levels, but multifamily residential construction
has picked up outside Manhattan where it remains moribund. Construction sector contacts expect business to
improve in the months ahead but expressed concern
about the cost and availability of materials and labor.
Tourism has strengthened further, particularly in New
York City, even as the volume of international and business visitors has remained well below pre-pandemic
levels. In New York City, hotel occupancy rates climbed
above 60 percent in June, a post-pandemic high, though
room rates have remained well below pre-pandemic
levels. With most restrictions now lifted, many more New
York City hotels, restaurants, museums, and entertainment venues have re-opened or eased capacity constraints. A survey of residents across the Northeast
indicated that many are eager to visit New York City, and
the city recently launched a large promotional campaign
to draw more domestic visitors.
Banking and Finance
Businesses in the broad finance sector indicate that
activity has picked up since the last report. Small to
medium-sized banks in the District reported increased
demand for loans, driven by higher demand for consumer loans and commercial mortgages. Refinancing was
unchanged on net. Banks reported further tightening in
standards on commercial mortgages and C&I loans and
higher spreads on consumer loan and residential mortgages. Delinquency rates were down in all loan categories except residential mortgages, where they were
reported to be unchanged.■
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ July 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 fully vaccinated against COVID-19 grew to above 50 percent. As normal activity resumes, labor shortages have worsened.
Meanwhile, supply chain disruptions continue to challenge most sectors. Net employment continued at a modest pace
of growth, while wages and prices continued to grow modestly and moderately, respectively. Wage pressures have
been greatest for low-wage workers following years of stagnant wage growth. Over three-fourths of the firms expressed
positive expectations for continued economic growth over the next six months – broadening in anticipation of a further
uptake in vaccinations, the reopening of schools, a return to the workplace, and the phaseout of most stimulus
measures.
Employment and Wages
Over four-fifths of the nonmanufacturing firms reported
higher wage and benefit costs per employee – comparable with pre-pandemic levels. Almost no firms reported
lower compensation. A rural area manufacturer noted
that $20 an hour seems to be the wage required to attract entry-level workers. Firms continued to report raising wages and offering signing bonuses, retention bonuses, and referral bonuses to compete for scarce labor
resources.
Employment continued to grow modestly overall. The
share of firms reporting employment increases broadened to over one-third of the manufacturers but edged
back to one-fifth among nonmanufacturing firms. Overall,
average hours worked rose for over one-fourth of all
firms.
Attracting sufficient labor remained a challenge for many
firms across all sectors. Contacts at staffing firms reported that they were beginning to see somewhat better
candidate flow and were expecting supply to build
through September as schools reopen. However, contacts recalled that the labor market was tight before the
pandemic and expect it to remain exceedingly tight in the
fall. Contacts noted that the pandemic encouraged some
early retirements. Moreover, the warehouse industry and
the gig economy have created more labor market churn
and less workplace loyalty.
Prices
On balance, prices continued to rise moderately over the
period. The share of manufacturers reporting higher
prices for factor inputs edged over four-fifths, while those
receiving higher prices for their own products rose to
above one-half. However, the share of nonmanufacturers reporting higher prices for their inputs remained at
one-half, while the share receiving higher prices from
consumers for their own goods and services edged up to
nearly one-third.
Wages continued to rise modestly overall. The strongest
wage growth pressure remained largely constrained to
lower-wage jobs. Contacts expect wage growth at the
lower end to slow again after catching up with years of
stagnant growth, but they also expect the increases to
eventually move to mid-wage jobs.
Over three-fourths of the manufacturing contacts reported expectations of paying higher prices over the next six
months and expected to receive higher prices for their
own goods.
C-1
Federal Reserve Bank of Philadelphia
Manufacturing
addition, many nonprofits have managed to get by with
various government funding sources, but they don’t
expect a full recovery to normal operations until after
2022.
On average, manufacturing activity continued to grow
moderately. However, net increases of new orders
waned somewhat from the prior period’s level, while net
increases of shipments rose. In turn, the share of firms
reporting an increase of order backlogs, inventories, and
delivery times retreated from near record levels. Despite
the reported strong demand, manufacturing employment
and production remained below pre-pandemic levels.
Financial Services
Manufacturers continued to note significant production
constraints because of ongoing labor shortages and
supply chain disruptions. In response, many firms are
raising wages, outsourcing production, and increasing
automation.
The volume of bank lending fell modestly during the
period (not seasonally adjusted); during the same period
in 2019, by contrast, loan volumes grew modestly. Commercial and industrial loans contracted significantly,
while home equity lines and other consumer loans fell
modestly. Auto lending and home mortgages grew slightly, and commercial real estate lending was flat. Credit
card volumes grew moderately, as was the case over the
same period in 2019.
According to one contact, another firm “overcompensated” last year when the pandemic hit. Expecting a drop
in demand, the manufacturer laid off all temporary workers and eliminated overtime. Instead, demand increased.
However, the firm hasn’t raised wages to attract workers
back and still remains behind on orders.
Bankers, accountants, and bankruptcy attorneys continued to report that relatively few problems with bad debt
had emerged. Paycheck Protection Program loans have
notably helped many firms, but during the pandemic,
many more businesses than usual have also qualified for
the extremely beneficial Employee Retention Credit.
Consumer Spending
One attorney noted that clients were anxious to begin
collecting past-due rent and mortgage payments; several
clients anticipate problems, including a surge of personal
bankruptcies, when the moratoria on evictions and foreclosures are lifted.
Contacts reported continued modest growth of nonauto
retail sales. Survivors in the retail and restaurant sectors
reported strong sales against 2019 levels, except in
some urban markets and office parks where workers
have not yet returned.
Real Estate and Construction
Reports from auto dealers suggest that new car sales
edged slightly lower from a high level, as a lack of new
inventory from manufacturers began to empty sales lots.
Contacts noted that some manufacturers were holding
cars awaiting microchips, while others had slowed production. Rising prices and strong used car sales continued to boost profits.
Homebuilders continued to report modest growth, although several noted that the pace of traffic and sales
had slowed somewhat. Supply chain disruptions and the
high costs of materials continued to challenge builders –
resulting in higher home prices and longer delivery times
for new homes. Some expect supply chain issues to be
worse yet over the next three to four months.
Tourism contacts continued to report modest, incremental growth. Domestic leisure travelers were active
throughout the region and willingly spent their savings.
Business and group travel also improved, but at a much
slower pace, which is expected to continue through
2022.
Existing home sales held steady, and availability remained low. Although one broker noted an uptick in new
listings, availability remained at or below a one-month
supply in many locations.
The relative lack of single-family homes has continued to
support demand for multifamily construction. Those
projects, along with warehouses and life science labs,
continued to offset weakening demand for office space.
Both construction and leasing activity held steady overall. ■
Nonfinancial Services
Nonmanufacturing activity continued to grow moderately,
with over half of the firms reporting increases in sales or
revenues. However, on balance, output remained below
pre-pandemic levels, and some businesses will remain
shuttered until the fall.
Businesses that continue to struggle include fitness
firms, shopping malls, offices, and restaurants and hotels
– especially those that cater to the business traveler. In
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ July 2021
Summary of Economic Activity
The Fourth District economy continued to expand at a solid pace in recent weeks, although supply side constraints
limited many firms’ ability to keep up with growing demand. Overall, household spending increased as progress in the
fight against COVID-19 led many consumers to pursue activities they had foregone for more than a year, such as dining
out and traveling. However, auto dealers and residential real estate agents suggested that while demand remained
solid, sales were limited because depleted inventories left potential buyers with fewer buying options. Manufacturers
and construction contacts reported that materials shortages, delivery delays, and staffing shortfalls made it difficult to
keep up with increasing orders, let alone work down growing backlogs. Contacts in professional and business services
and financial services reported strong, steadily increasing activity. More generally, firms remained very optimistic that
demand would continue to increase in coming months but were less optimistic that labor and other supply constraints
would abate enough to alleviate some of the upward pressure on wages, nonlabor input costs, and selling prices.
Employment and Wages
Prices
Labor demand remained solid in recent weeks, but firms
continued to report difficulty in filling open positions.
Nearly half of contacts indicated they increased staffing
during the prior two months, with a nearly equal share
reporting that staffing levels were unchanged. However,
many of the firms that did not increase staffing commented that they simply could not find workers to fill new or
open positions. Looking forward, more than half of contacts expected to increase staffing levels in coming
months, with another 45 percent planning to hold staffing
steady. Here again, many of those in the latter group
suggested they would like to add workers but won’t be
able to because of a dearth of available labor.
Nonlabor input costs increased further. Nearly 80 percent of contacts indicated that nonlabor input costs rose
over the prior two months, a share that is roughly twice
the share reporting increases at the turn of the year.
Manufacturers noted rising costs for steel, aluminum,
electronic components, freight, chemicals, plastics, and
resins. Construction contacts cited widespread materials
cost increases, as well, although a few homebuilders
noted some relief in the cost of lumber. There were
scattered reports that higher wages were spilling over to
other input costs, including some business services. On
balance, firms expect nonlabor input costs to continue
increasing in coming months as supply constraints persist.
With the number of open positions seemingly exceeding
available workers, wage increases became more commonplace, especially within lower-wage occupations. In
addition to higher wages, more contacts reported paying
signing bonuses to keep up with competitors. However,
one contact indicated that she was putting off decisions
on further wage hikes and bonuses until she sees if labor
availability increases as states end supplemental unemployment benefits.
Selling prices increased moderately, on balance. Nearly
65 percent of contacts said they increased prices in the
prior two months. When asked the same question in
January, 34 percent indicated they had raised prices. In
most cases, recent price hikes were attributed to firms’
trying to maintain margins amid higher costs. As one
contact put it, “We're trying to pass along our increased
costs to our customers just like everyone else.” But in
many other cases, firms acknowledged that solid demand and limited supply provided them with opportuni-
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Federal Reserve Bank of Cleveland
ties to boost profit margins.
Demand for nonresidential construction and real estate
continued to strengthen across many segments. Activity
within the industrial sector remained strong, and demand
for office spaces experienced notable increases in activity. Even so, one commercial real estate agent noted that
many new developments and renovations had been put
on hold because of increased materials costs and labor
constraints among subcontractors. Looking forward,
contacts were optimistic that demand would remain
strong as more consumers and businesses return to
their prepandemic lives.
Consumer Spending
Reports suggest that consumer spending increased
moderately during the reporting period. General merchandisers and apparel retailers said that demand remained strong, and one department store contact noted
that sales during Mother’s Day and Father’s Day were
stronger than 2019 and 2020 sales on the same days.
Hoteliers and restaurateurs reported significant improvement in activity as pandemic fears waned, and a contact
at a large airport said that leisure travelers drove a
strong rebound in air travel that exceeded her expectations. Auto dealers said that demand remained elevated,
but sales dipped as the semiconductor chip shortage
continued to limit the supply of new vehicles. Overall,
contacts were optimistic that consumer spending would
continue to increase in coming months thanks to unused
stimulus funds and progress in the fight against the
pandemic, while auto dealers commented that sales will
Financial Services
Banking activity increased modestly in recent weeks.
Contacts continued to report growth in business lending,
especially for commercial real estate loans, as more of
the economy reopened and fiscal support to businesses
waned. Contacts also noted that demand for mortgages
and auto loans remained strong, but the recent uptick in
interest rates and limited inventories in both markets
limited loan demand. Lenders said that delinquency
rates for consumer and commercial loans were still low
and that the number of active forbearance agreements
continued to drop. Looking ahead, bankers were optimistic that loan demand, especially business lending, would
pick up once inventory levels recover.
Manufacturing
Demand for manufactured goods grew strongly across a
wider range of end-user markets, including some (such
as aerospace equipment) that have been lagging during
the recovery. Supply chains continued to be disrupted
both domestically and abroad, adding to longer lead
times and raising transportation costs. Many contacts
noted that a severe shortage of hourly wage workers
restricted output growth. One contact was unable to fulfill
10 percent of his orders because the firm failed to reach
its staffing goals. On balance, most respondents expected conditions to improve in coming months, although
rising attrition rates and materials shortages tempered
expectations for continued growth.
continue to pick up as COVID-19 restrictions ease.
Professional and Business Services
Demand for professional and business services increased further as more businesses resumed in-person
activities. Increased optimism also led many firms to
restart projects that had previously been put on hold. A
small management consulting firm reported that firms
had begun to move forward with projects that were in the
pipeline from 2019 and 2020. Overall, contacts were
optimistic that demand would remain strong as general
economic conditions improve further.
Real Estate and Construction
Freight
Homebuilders and residential real estate agents commented that although housing demand remains strong
because of low mortgage rates, construction activity
softened because of high materials prices. One homebuilder noted that input costs were “out of control,” with
steel and lumber being two of the main drivers of price
increases. Another homebuilder indicated that higher
home prices had led some potential customers to walk
away from projects. Existing home sales also slowed
because the supply of available housing remained limited. One real estate agent suggested that sales for her
firm were below 2019 levels entirely because of the
shortage of inventory. Contacts were hopeful that homebuyers would reenter the market when prices stabilize.
Demand for freight services grew modestly from an
already high level. The rise in activity stemmed from
customers’ needing to replenish low inventories and from
continued increases in overall economic activity. While
demand for new routes grew, a shortage of truck drivers
limited capacity. Looking forward, contacts expected
demand to increase further in coming months, but expectations were tempered by concerns about difficulty
finding drivers and uncertainty around the new administration’s regulatory priorities. ■
For more information about District economic conditions visit:
https://www.clevelandfed.org/en/region/regional-analysis
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ July 2021
Summary of Economic Activity
The regional economy continued to grow at a moderate rate in recent weeks. Manufacturers experienced robust demand and increases in shipments and new orders. District ports reported strong growth in volumes driven by imports of
retail goods and exports of agriculture products. Trucking companies also reported strong growth and a level of demand
that exceeded supply. Retailers saw strong growth, particularly for home goods and clothing. Auto sales picked up,
overall, but car sales were limited by low inventory levels. Travel and tourism, particularly in vacation destinations, was
strong, but some companies had to limit services due to labor shortages. Nonfinancial businesses reported moderate
growth in revenue and some firms cut back on advertising because demand was exceeding their ability to meet it. The
residential real estate market remained strong and new listing sold quickly. Commercial real estate leasing picked up
and office vacancies declined. Banks reported modest loan growth, solid credit quality, and historically low default rates.
Employment rose modestly and firms continued to struggle to fill open positions. Wages rose modestly, overall, as firms
increasingly turned to non-wage incentives to attract workers. Price growth edged up further from already elevated yearover-year rates.
Employment and Wages
Manufacturing
Total employment in the Fifth District rose modestly in
recent weeks. The demand for workers remained strong
and contacts continued to report difficulties filling open
positions. Some employers said that they were investing
in automation or using more part-time workers as a
result. A firm in Charlotte was able to recruit tech workers
from the west coast by allowing them to work remotely.
Overall, wages rose modestly. Many contacts continued
to report raising entry-level wages, which created pressure to increase wages for existing employees. Additionally, employers were increasingly turning to non-wage
cash incentives such as referral and sign-on bonuses to
recruit workers.
Fifth District manufacturers reported robust growth in
demand since our last report leading to increases in
shipments and new orders. Producers of retail goods,
including food and furniture, saw especially high demand. Many manufacturers were unable to meet demand as shortages of labor, raw materials, and equipment constrained output. Manufacturers tied to the auto
industry reported slowing production because of the
microchip shortage. Lead times and backlogs lengthened as inventories remained low. Transportation issues
also caused delays in getting finished products to customers, both domestically and internationally.
Prices
Fifth District ports saw strong growth of both imports and
exports and handled record volumes since our last report. Import growth was primarily attributed to retail
goods, including furniture, home goods, and food. Industrial and medical imports were also strong. Export growth
was largely driven by logs, grains and soybeans. Ports
increasingly stored imports, as trucking and rail disruptions caused delays getting imports from ports to customers.
Ports and Transportation
Price growth picked up slightly in recent weeks from an
already elevated rate. According to our surveys, service
sector firms reported, on average, a four percent increase in prices received compared to a year ago. Meanwhile, manufacturers reported little change in selling
prices in recent weeks; however, on a year-over-year
basis, price growth remained robust. Firms across sectors also reported sharp increases in input costs and
many noted that they were only passing a portion of
those higher input costs on to customers.
Truckers in the Fifth District reported robust volume
growth in recent weeks. Volumes were high for most
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Federal Reserve Bank of Richmond
goods, but especially for retail and industrial goods.
Companies were unable to meet demand amid labor
constraints and equipment shortages, which led to higher spot market prices and increased profit margins.
Contacts reported keeping trucks and trailers longer
than intended, to help with both increased demand and
delays in equipment arrivals.
restaurants were looking for more land in order to add
drive-throughs. Multifamily leasing also increased, and
rents rose. Industrial leasing continued to grow from
already high levels.
Banking and Finance
Overall loan demand increased modestly this period.
Financial institutions indicated soft business loan demand and low utilization rates on commercial lines of
credit, attributed in part to temporary labor and supply
shortages. Respondents noted continual modest growth
in both commercial real estate and mortgage lending, but
remarked that the limited inventory of homes on the
market has reduced mortgage originations. However,
contacts reported increased loan competition, particularly focused on interest rates. Deposits exhibited moderate
growth this period. Banks stated that credit quality continued to be good and delinquencies remained at historically low levels.
Retail, Travel, and Tourism
Fifth District retailers saw robust growth in demand and
revenues since our last report. Sales of hardware, furniture, and home goods grew from already strong levels.
Clothing stores reported increased demand, particularly
for formal apparel, including wedding dresses, as consumers began to plan events and return to the office.
However, many retailers struggled with inventory shortages and delays in receiving products. Auto dealers, in
particular, faced shrinking inventories of new cars because of microchip shortages, but experienced higher
profit margins on sales of used cars.
Nonfinancial Services
Travel and tourism in the Fifth District showed strong
growth in recent weeks. Some beach communities
reported record visitation, as hotels saw record-breaking
occupancy and beach short-term rentals were booked
solid through the summer and into the fall. Outdoor
attractions continued to do particularly well, although
some indoor attractions, such as movie theaters, museums, and bowling alleys also saw increased visitation.
Many hotels and restaurants continued to report labor
shortages that led them to limit capacity or services.
Contacts attributed demand to domestic travel, and
visitation to the District of Columbia strengthened but
remained below pre-pandemic levels.
Nonfinancial services firms reported a moderate increase in revenue and demand in recent weeks. An
accounting firm saw steady growth with new activity
coming from merger and acquisition and tax accounting
work. Meanwhile, an IT service provider noted an increase in demand for cloud and security solutions. An
advertising and marketing agency contact said that
clients were cutting back on advertising because demand was strong and outpacing their ability to meet it, so
they didn’t want to attract any new business. Lastly, an
education services provider was expanding summer
programs for children and was looking for other creative
ways to support workers with children. ■
Real Estate and Construction
Fifth District home sales remained strong, average
selling prices rose, and the average days on the market
declined. Inventories remained low as new listings sold
quickly and many home builders were either sold out or
limited the sales of homes. Realtors noted that many
buyers offered cash in order to close quickly and then
refinanced. One contact noted that buyers are increasingly willing to buy homes in poorer or unknown condition.
Fifth District commercial real estate leasing expanded
moderately since our last report. Office leasing increased modestly as more companies returned to onsite
work and began to sign longer term leases, leading to
an overall decline in office vacancy. Office rental rates
increased, but realtors noted that office tenants generally required high incentives and concessions. Demand
for retail leasing grew, and contacts noted that many
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ July 2021
Summary of Economic Activity
Economic activity in the Sixth District continued to expand at a moderate pace from mid-May through June. Demand for
labor strengthened, and worker shortages across multiple skill levels and job types intensified. Wage pressures increased and were more widespread. Some nonlabor costs continued to rise, and pricing power remained mixed. Retail
sales activity strengthened. Auto sales slowed somewhat. Hotel occupancies increased due to robust leisure travel
activity; however, hotels reliant on business travel continued to experience weakness. Demand for housing remained
strong, inventories were soft, and home prices accelerated further. Commercial real estate activity improved. Manufacturing activity accelerated and supply delivery times lengthened. Conditions at financial institutions were steady, deposit
balances grew, and demand for consumer loans picked up.
Prices
Employment and Wages
District contacts noted continued rising fuel, shipping,
and freight costs over the reporting period, and other
input costs such as lumber, though stabilizing somewhat,
remained elevated. Reports on pricing power were
mixed. Some contacts noted the ability to pass through
rising costs, while others absorbed the increases to
maintain demand. Most firms considered input cost
increases as transitory and expect them to ease as
supply chains normalize. The Atlanta Fed’s Business
Inflation Expectations survey for June showed year-overyear unit costs increased to 3 percent on average. Yearahead expectations increased to 3 percent in June, up
from 2.8 percent in May.
Overall employment in the District increased since the
previous report. Many contacts reported that labor shortages were impeding hiring and putting upward pressure
on wages; however, some noted shortages had eased in
recent weeks. Lack of available labor remained acute
among lower-skilled positions. Shortages of nurses,
drivers, IT, and skilled trades workers, particularly mechanics and maintenance workers, persisted. Due to an
inability to fully staff, some restaurants and retailers
reduced hours, and hotels offered limited guest services
and amenities. Manufacturers responded to hiring challenges by reducing the number of shifts, requiring more
overtime than typical, and accelerating plans to automate. Some construction firms reported an inability to fill
entry-level positions at a reasonable wage and turned to
contract and temporary employees as a result. Contacts
reported increased poaching of talent, and burnout was
mentioned as a concern among under-staffed firms.
Many contacts were optimistic that labor availability
would improve in the fall as schools restart and enhanced unemployment benefits end; however, there
were several who do not expect labor supply to improve
for six to nine months.
Consumer Spending and Tourism
District retailers reported strong sales in malls located in
vacation destinations. Contacts expect consumer spending dollars to shift over the summer to leisure travelrelated activities from home related spending. While year
-over-year auto sales levels remained elevated, the pace
of sales growth slowed since the previous report due to
the shortage of new car inventories.
Travel and tourism contacts reported a strong increase
in the number of leisure travelers over the reporting
period. Atlanta, Miami, and Orlando were among the top
destination cities for Memorial Day weekend, kickstarting
the summer travel season. Hotel occupancy levels at
lower-priced hotels were elevated, but demand for higher
-priced hotels dependent on business travelers remained
weak. While leisure travel is expected to continue to
grow at a healthy pace over the summer, business travel
and convention activity is expected to remain soft.
Wage pressures intensified over the reporting period and
upward pressure on wages was more widespread.
Though wage pressure was most notable among lowskilled positions, wage increases began spreading
across more industries and skill levels. Growing demand,
poaching of talent, and retention of employees were
cited as the primary drivers of rising wages. Some manufacturers noted that bargaining power had shifted more
to the employee, as reports surfaced of employees being
allowed to customize individual shift schedules.
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Federal Reserve Bank of Atlanta
growth was flat to slightly negative for a majority of portfolios; however, there was some growth in vehicle and
other consumer loans. Deposit balances continued to
increase and banks added to securities portfolios as a
means to generate margin on the additional liquidity.
Asset quality remained strong as there was little change
in the level of nonperforming assets. Delinquency rates
held steady while net charge-offs continued to decline.
Construction and Real Estate
While low interest rates continued to fuel housing demand, the combination of limited inventory and declining
affordability across the District damped home sales
somewhat. While many District markets remained attractive to homebuyers looking to migrate from higher cost
regions such as the Northeast and West Coast, existing
home inventories continued to lag behind demand, causing home prices to rise to peak levels. Although lumber
costs declined from peak levels, they remained wellabove historic norms. Homebuilders continued to limit
sales to stay ahead of rising costs.
Energy
The outlook among District energy contacts continued to
improve over the reporting period. Contacts cited
strengthening demand for oil and gas, which outpaced
exploration and production activity. Chemical manufacturing output surged over the reporting period, and some
contacts noted activity returned to or exceeded prepandemic levels. Utilities contacts reported rising commercial and industrial activity and stable residential
demand. Energy firms continued to pursue investment in
renewable energy sources, specifically wind and solar
production, and battery storage.
On balance, commercial real estate (CRE) activity
strengthened since the previous report. Conditions in the
retail and hotel segments improved modestly. Multifamily
activity improved notably from earlier this year. The
softness in the office sector persisted as employers
remained cautious about future office space needs, and
negative absorption and new deliveries pushed office
vacancies upward. Contacts noted that competition is
accelerating among lenders for a small segment of CRE
loans. Smaller banks and non-bank lenders were noted
as the more aggressive CRE lenders.
Agriculture
Agricultural conditions remained mixed. Widespread rain
across parts of the District resulted in abnormally moist
to excessively wet conditions while much of Florida and
southern Georgia experienced abnormally dry to moderate drought conditions. Planting progress for much of the
region's cotton, soybean, and peanut crops were mostly
on par with the five-year average. On a month-overmonth basis, the production forecast for Florida's orange
crop was up in June while the grapefruit production
forecast was down; both forecasts remained below last
year's production levels. The USDA reported year-overyear prices paid to farmers in May were up for corn,
cotton, soybeans, cattle, broilers, eggs, and milk, but
down for rice. On a month-over-month basis, prices were
up for corn, rice, soybeans, broilers, eggs, and milk, but
down for cotton. Cattle prices were unchanged. ■
Manufacturing
Manufacturing firms indicated that business activity
accelerated since the previous report. Supply delivery
times lengthened as supply chain disruptions continued,
which coupled with worker shortages, interrupted production for some manufacturers. Expectations for future
production levels remained optimistic.
Transportation
District transportation activity strengthened over the
reporting period, and contacts noted that demand for
transportation services far outstripped the supply across
the industry. Trucking firms and freight brokers reported
robust activity combined with limited availability of container, trailer, and truck capacity. Southeast ports experienced unprecedented container volumes and capacity
utilization amid continued strong demand for imported
goods. Railroad contacts reported solid increases in
overall traffic as compared with year-earlier levels. However, dwell times in rail yards rose due to significantly
low trucking capacity. Logistics companies saw doubledigit increases in volumes and revenues, driven primarily
by growth in direct-to-consumer ecommerce activity.
Inland barge contacts reported improved utilization,
though not to pre-pandemic levels. Transportation contacts expect supply chain disruptions to persist over the
next six to 12 months.
Banking and Finance
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
Conditions at financial institutions remained stable. Loan
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ July 2021
Summary of Economic Activity
Economic activity in the Seventh District increased moderately in late May and June and growth was limited by labor
and materials supply constraints in many sectors. Contacts expected strong growth in the coming months. Employment
increased strongly, business spending increased moderately, manufacturing increased modestly, and consumer spending and construction and real estate were flat. Wages rose moderately while prices rose strongly. Financial conditions
improved slightly. Prospects for agriculture income in 2021 were little changed.
Employment and Wages
Prices
Employment increased strongly over the reporting period, and contacts expected a similar-sized increase over
the next 12 months. Contacts across sectors reported
continued difficulty in finding workers at all skill levels.
Some businesses seeking to ramp up production, particularly restaurants, had limited operating hours because
of a lack of workers. A temp agency contact said their
openings increased and turnover rates were elevated;
furthermore, with the ease of finding new positions,
workers were being more selective about workplace
environment, scheduling flexibility, and pay. Employers,
temp agencies, and workforce development organizations pointed to childcare challenges, retirements, and
financial support from the government as important
factors limiting labor supply, and remarked that worker
concerns about health safety related to COVID-19 had
largely gone away. Overall, wage and benefit costs
increased moderately. However, contacts across sectors
noted strong pressure to raise wages and there were
widespread reports of businesses offering signing bonuses. One contact at a university noted that salaries
and retirement benefits that had been cut early in the
pandemic had been restored.
Overall, prices rose strongly in late May and June,
though contacts expected a moderate increase in prices
over the next 12 months. There were large increases in
business output prices, driven by passthrough of higher
materials, energy, and transportation costs. Contacts
highlighted higher prices for a wide range of materials
including metals, metal products, petroleum-based products, chemicals, electronics, and paper. Consumer prices moved up robustly, particularly for new and used
vehicles. Contacts pointed to solid demand, limited inventories, and increased costs as sources of consumer
price increases.
Consumer Spending
Consumer spending was flat over the reporting period,
but remained at elevated levels as retailers strained to
meet pent-up demand. Contacts said that overall, higher
prices hadn’t deterred consumers’ willingness to spend.
Spending on leisure and hospitality services continued to
rebound. Contacts noted especially strong recoveries at
restaurants, casinos, and concessionaires at sporting
venues and national parks. Nonauto retail sales remained strong, particularly in the appliance, grocery,
jewelry, and sporting goods sectors. Spending on building materials and lawn and garden slowed, but remained
at a high level. Brick-and-mortar stores regained some
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Federal Reserve Bank of Chicago
market share from e-commerce. New and used light
vehicle sales slowed due to a lack of inventory and dealers indicated that profit margins had widened. Dealers
reported that they were increasingly selling from future
vehicle allocations from automakers.
greater demand from most industries, with the exception
of autos. Demand for heavy machinery increased, led by
growth in construction and agriculture. Specialty metals
manufacturers reported a moderate increase in orders
from an already high level. Many had reached full capacity and were dealing with shortages of materials and
longer lead times from suppliers.
Business Spending
Business spending increased moderately in late May
and June. Retail inventories were low for many items,
and contacts expected inventory challenges to continue
through the end of 2021. New and used light vehicle
inventories decreased and remained low, and dealers
didn’t expect new vehicle inventories to improve until the
end of the third quarter. Many manufacturing contacts
said inventories remained below comfortable levels.
Contacts reported ongoing supply chain issues, especially for raw materials, metals, microchips, and specialty
parts, and expected the problems to continue into 2022.
Demand for transportation services was strong and
many contacts reported shipping delays, both from within
the U.S. and overseas. Capital expenditures increased
moderately, and contacts expected a similar-sized increase over the next twelve months. Many contacts
noted that lead times for capital equipment were much
longer than usual. One contact said higher inventory
expenses were crowding out their capital purchases.
Commercial and industrial energy usage increased
modestly.
Banking and Finance
Financial conditions improved slightly over the reporting
period. Participants in equity and bond markets reported
a small improvement in conditions. Business loan demand increased moderately. One contact said that once
firms were successful in getting their PPP loans forgiven,
they were more comfortable taking out new loans to fund
capital expenditures. Business loan quality increased
slightly, with improvements reported across all sectors.
Business loan standards loosened a bit in a very competitive environment. In consumer markets, loan demand
increased slightly. Contacts reported that demand remained high, particularly in the auto and housing markets, and that consumer credit quality remained favorable. Loan quality increased slightly, while credit standards were unchanged on balance. Banks continued to be
awash in deposits from both businesses and households.
Agriculture
Agriculture stayed on course to earn higher marketbased incomes relative to last year, as most product
prices remained high enough to offset increased costs
for freight, energy, fertilizers, and labor. On net, corn
prices were little changed, while soybean prices were a
little lower over the reporting period. Although planted
corn and soybean acreage was up from last year, it was
lower than expected earlier in the growing season, which
helped maintain prices. Crop conditions for corn and
soybeans were mixed, as some parts of the District were
in excellent shape and others were stressed by drought.
Hog and milk prices eased off highs during the reporting
period, while cattle prices were flat. One contact noted
that a lack of workers in slaughterhouses had led to the
suspension of some contracts with poultry producers.
Farmland values moved higher again. ■
Construction and Real Estate
Construction and real estate activity was little changed
from the prior reporting period and remained at a high
level. Residential construction decreased modestly, but
activity levels were healthy. Residential real estate activity increased slightly, as did home sales, though the low
number of homes on the market continued to hold back
activity. There was a large increase in home prices,
while rents went up a bit. Nonresidential construction
was unchanged. A contact in southeast Michigan reported that an increasing number of projects were being
postponed because of high concrete and steel prices.
Commercial real estate activity was also little changed,
and prices and rents were steady.
Manufacturing
Manufacturing production increased modestly in late
May and June. Most manufacturing contacts indicated
that business was above pre-pandemic levels, but there
were also widespread reports of logistical and supply
issues holding back growth. Auto output was little
changed, as assemblers and suppliers remained constrained by ongoing shortages of parts, notably microchips. Steel production increased slightly and capacity
utilization was at a multiyear high, with contacts reporting
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ July 2021
Summary of Economic Activity
Economic conditions have continued to improve at a moderate pace since our previous report. Contacts continue to
report that labor and material shortages are restraining their ability to meet customer demand. Overall cost pressures
remain elevated, but firms reported varying degrees of pass-through to customers. Reports on consumer spending
continue to be strong, although inventory shortages are restraining auto sales. Reports on the real estate sector were
unchanged, and sales remained high despite strong price growth and low inventories. Banks reported slight improvements in loan demand and stable credit quality. District agriculture conditions declined modestly but remain favorable
when compared with previous years.
reported passing slight nonlabor cost savings to consumers, while refraining from passing the moderate incremental labor costs to consumers. A contact from the
home-furniture industry reported that only a small portion
of cost increases are being passed to consumers. A
contact in the restaurant industry reported varying levels
of cost increases depending on the size of the establishment. The cost pressures are due to increased demand
for inputs and a lagging supply chain. Restaurants with
more purchasing power have been able to keep prices
steady, but smaller and newer venues are experiencing
robust cost increases—which are being passed to consumers. A contact reported that costs for some food
items, gloves, paper products, and to-go drink trays
remain elevated. Contacts from the travel and hospitality
industry reported higher costs due to robust increases in
food, beverage, and labor costs. The contacts attributed
the ability to pass price increases to consumers to
strengthening demand for travel and hospitality services.
One contact from a jewelry store reported passing all the
moderate cost pressures resulting from both higher
wages and higher prices for precious metals and diamonds to customers. Prices for raw materials have been
down moderately overall since the previous report, with
the exceptions of steel, shredded scrap, and coal.
Employment and Wages
Employment has increased modestly since our previous
report. Despite the increase in headcounts, contacts
across the District continued to face worker shortages
and high turnover rates for recent hires. Firms reported
increasing benefits, introducing greater flexibility, and
lowering job requirements in order to attract workers.
Business contacts have so far reported mixed trends in
the wake of several states cutting or planning to cut
federal unemployment aid; some reported seeing a clear
increase in applicants, while others reported no change.
Wages have grown moderately; however, wage growth
has been strong for low-wage positions as a consequence of the tight labor market. One Kentucky restaurant reported offering a starting wage of $16 per hour
and receiving no applicants. An amusement park increased seasonal wages by $2 per hour and a 10%
bonus if employees worked from July through Labor
Day. Many other contacts emphasized raising wages for
both new and existing employees while turnover remains
high.
Prices
Prices have increased moderately since our previous
report. The pass-through rate of cost increases varies by
industry. A contact from a regional grocery store chain
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Federal Reserve Bank of St. Louis
Consumer Spending
levels throughout the remainder of the year. In St. Louis,
the median price for a home increased by 20.5% and the
median price for a condo increased 17.5% compared
with a year earlier. Meanwhile, apartment rental prices
across the largest District metro areas have risen moderately since our previous report and sharply since this
time last year. The median number of days a house is on
the market has decreased since our previous report,
reaching as low as 10 days in Louisville. A contact reported that new construction will be needed to increase
inventory in the market and the falling lumber prices
should help to boost construction. Housing permits are
also up in the St. Louis metro area.
District general retailers, auto dealers, and hospitality
contacts continue to report strong consumer spending
activity. Consumer sentiment on the current economic
situation rose significantly in West Tennessee. General
retailers continue to report strong business activity and a
positive outlook. District auto dealers reported no change
in sales, but continued high demand and decreasing
inventory levels for both new and used vehicles. A restaurant contact reported that business activity has been
higher during the past month and expects demand to
hold steady for the next few months. A hotel industry
contact reported that leisure travel has been stronger
than expected and has made up for the lack of business
travel. A St. Louis catering company reported that company sales for May and June were very close to 2019
sales.
Commercial real estate activity continues to vary across
different sectors. Industrial real estate activity has increased strongly since our previous report, with leasing
activity increasing across all the largest District MSAs. In
Memphis, the industrial vacancy rate has fallen sharply
since our previous report. Meanwhile, office and retail
rental activity has improved slightly, with more square
footage being occupied since our previous report.
Manufacturing
Manufacturing activity has moderately increased since
our previous report. Firms in both Arkansas and Missouri
reported upticks in new orders and production, although
the rate of growth has slightly declined. Supply-chainrelated cost pressures and product shortages remain
high, and manufacturers in the area expect these difficulties to continue for several months. Contacts reported
that they are still struggling to find and retain employees,
with one manufacturer noting that they have begun
recruiting prospective high school graduates.
Banking and Finance
Banking conditions in the District have improved slightly
since our previous report. District banks reported an
increase in overall loan demand since last quarter. One
contact indicated this quarter was one of the best quarters in terms of loan volumes. Credit quality remained
unchanged and generally good. Deposit levels continued
to expand, but the growth rate has slowed significantly.
Banks remained flush with liquidity, and a contact reported trying to find ways to deploy the excess capital. Looking ahead, banking contacts expressed concern that
material supply shortages would affect the demand for
construction loans.
Nonfinancial Services
Activity in the nonfinancial services sector has increased
slightly since our previous report. Airport passenger
traffic continues to increase strongly, although it remains
below levels from the same period in 2019. Airport cargo
traffic has decreased slightly since the previous report. A
childcare contact reported that enrollment inquiries have
increased as employers continue to transition back to
working in-person. Large logistics firms continue to make
significant investments and expand hiring in the Memphis and Louisville areas. An education contact reported
that it has been difficult to secure large quantities of
school supplies such as laptops and paper for the upcoming school year. A remediation services contact
reported increased demand for their services driven by
requirements to remediate coal ash.
Agriculture and Natural Resources
District agriculture conditions declined modestly relative
to the previous reporting period but remain steady relative to the same period last year. Between the end of
May and end of June, the percentages of corn, cotton,
rice, and soybeans rated fair or better decreased modestly across the District.
Natural resource extraction conditions improved modestly from April to May, with seasonally adjusted coal production increasing 7%. May production was up strongly
compared with a year ago, increasing 34%. ■
Real Estate and Construction
Residential real estate activity remains unchanged since
our previous report. Total home sales across the largest
District metro areas remain high in spite of increasing
home prices. Despite slowing in recent months, contacts
remain optimistic that sales levels will hold at current
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ July 2021
Summary of Economic Activity
Ninth District economic activity grew at a strong pace since mid-May. Employment saw solid growth, with strong hiring
demand outpacing improved labor availability. Wage pressures were strong, with wholesale price pressures remaining
higher than those for consumer prices. 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
Unemployment insurance claims continued to decline
across all District states. Staffing and workforce contacts
in states that have ended pandemic-era unemployment
programs reported that the number of job seekers in the
labor market increased, but not as much as expected. A
recent survey showed that low pay at available jobs and
concerns over COVID-19 exposure were the top
challenges keeping some job seekers from accepting
employment. Transportation and the need for more
training or education were quoted as being moderate or
significant challenges. While government benefits may
be keeping some job seekers on the sidelines, many
expressed that they would rather work in their preferred
fields if given the opportunity. Nonprofit professionals
working with diverse youth shared that the lack of paid
internships and the narrow range of workforce
development options were major challenges for their
clients. Furthermore, some are struggling to find firsttime job opportunities because automation is
increasingly reducing the number of entry-level positions.
Employment saw moderate-to-strong growth overall
since the last report. Two separate employer surveys
showed labor demand continuing to increase in recent
weeks. Staffing firms across the District reported strong
job orders. Hiring demand was healthy across all
sectors, but noted especially in retail, hospitality,
manufacturing, construction, transportation, and health
care. Despite growth, further gains were constrained by
labor availability. A North Dakota staffing firm reported
that it typically had 300 job openings daily but was “filling
only a small percent.” A Minnesota contact said virtual
job fairs were seeing more employers than job seekers,
and another said many businesses “would eagerly
expand if they could find workers.” A Montana staffing
contact said employers often bemoaned the fact that
there was “so much [hiring] demand and no applicants.”
Wage pressures were strong. Recent surveys showed a
growing share of employers raising wages by 3 percent
or more. Numerous contacts also reported additional
incentives, including hiring and retention bonuses and
tuition reimbursement. A company in central Minnesota
reported offering on-the-spot cash for job applicants
simply showing up for job interviews. A Montana staffing
contact said that most employers were “willing to pay
what is needed to gain the people they need.”
Prices
Price pressures remained elevated since the previous
report. An overwhelming majority of respondents to a
survey of District professional services firms noted
increased nonlabor input costs over the past year,
though a much smaller proportion reported having raised
selling prices; the outlook for both over the coming year
was elevated. A separate survey of general District
Worker Experience
Labor supply increased since the last report.
I-1
Federal Reserve Bank of Minneapolis
businesses revealed similar pricing experience.
Manufacturing contacts noted continued steep input cost
pressure across the board for raw materials and
transportation, with one contact describing metals
markets as “out of control.” Retail fuel prices in District
states increased moderately since the previous report.
Prices received by farmers in May increased from a year
earlier for most important District commodities but
decreased for lentils and chickpeas.
Commercial real estate improved modestly. Office and
retail markets continued to improve, though return-tooffice occupancy in some core markets like downtown
Minneapolis remained sluggish. Residential real estate
improved slightly; demand remained strong, according to
contacts, but very low inventories of homes for sale has
dampened total sales in many markets.
Manufacturing
District manufacturing activity remained strong since the
previous report, despite continued challenges with input
costs and availability. A regional manufacturing index
indicated broadly increased activity in Minnesota, North
Dakota, and South Dakota in May relative to the
previous month. District manufacturing contacts
generally reported solid new orders. However, a few
contacts reported that raising final prices due to
constraints on raw material and input availability was
hampering demand. Due to substantial backlogs in
maritime shipping, noted one contact, “anything made
overseas takes longer and is more expensive.”
Consumer Spending
Consumer spending was moderately higher since the
last report and remained high overall. A Minnesota
shopping mall contact reported that more stores were
opening, and customer traffic and spending were
improving. Hospitality and tourism firms reported
improving activity in recent weeks; a central Minnesota
contact said there was “pent-up demand for any
entertainment.” But many operations remained
constrained by lack of workers and low inventories of
vehicles, recreational equipment, and other products.
Airline travel increased significantly in June compared
with a month earlier, most of it coming from higher
leisure travel. A Montana contact reported that rental car
and lodging shortages were hampering otherwise-strong
tourism activity there. Tourism traffic also improved in
Michigan’s Upper Peninsula in May and June.
Agriculture, Energy, and Natural Resources
District agricultural conditions continued to benefit from
strong commodity prices. However, severe drought
conditions across most of the District had many crop
producers concerned about yields, as most corn,
soybean, and wheat acres in the District were rated in
fair or poor condition. Oil and gas exploration activity
increased slightly since the previous report.
Services
Activity in the services sector increased moderately.
Preliminary results from an annual survey of professional
services firms indicated that sales, profits, and
productivity had all increased, and expectations called
for continued growth over the coming year. Several
providers of broadband and network management
services noted that demand remained brisk. Accounting
contacts reported that they remained busy due to
supporting pandemic aid documentation requirements.
Minority- and Women-Owned Business Enterprises
Minority- and women-owned business enterprises
(MWBEs) in the region continued to report moderate
improvements in business activity and had an overall
optimistic outlook on the economy. Personnel
recruitment remained a challenge, but some were seeing
more applicants for available jobs compared with
previous months. MWBEs across several industries
expected wage and input cost increases to continue
putting pressure on their operations, and some planned
to increase prices for their products within the next
quarter. A nonprofit financial contact said that the
pandemic hit many MWBEs earlier and harder than
businesses overall and, given limited support
infrastructure and access to credit, their recovery will
also take longer. ■
Construction and Real Estate
Commercial construction grew slightly since the last
report, with some variation among contacts. There was
widespread concern over cost increases, but materials
supply contacts said demand has remained healthy in
most market segments. An industry tracker showed that
total active projects in May and June remained slightly
below last year, but the gap has been shrinking. An
asphalt contact said that work has been “a little low” in
Minnesota and the Dakotas, especially for public
projects. Residential construction saw modest growth
and remained at healthy levels. But contacts said some
buyers were backing away from projects due to higher
costs, and contractors were also less willing to start
speculative building projects, fearful of taking losses.
For more information about District economic conditions
visit: www.minneapolisfed.org/region-and-community
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ July 2021
Summary of Economic Activity
The Tenth District economy expanded moderately in June, with broad-based growth across most sectors. Consumer
spending increased moderately, driven by strong gains in retail sales and moderate growth in restaurant and tourism
activity. Manufacturing activity expanded robustly, and the majority of manufacturers indicated that capital expenditures
this year would be similar to or higher than pre-pandemic levels. Sales increased slightly in the professional and high-tech
services and transportation sectors, but declined slightly in wholesale trade. Residential real estate activity rose moderately as home sales increased despite low inventories and robust home price growth. Commercial real estate activity
improved modestly, with lower vacancy rates and higher sales. The energy sector continued to expand, and most firms
reported higher production levels, revenues, and profits. The farm economy remained strong, with relatively high profit
margins for most major commodities. Employment increased, and wage growth accelerated as the majority of contacts
continued to report labor shortages. Respondents noted robust increases in input and selling prices, and additional strong
price gains were anticipated.
Employment and Wages
robustly in the services and manufacturing sectors,
although contacts continued to report that hikes in selling
prices were not keeping pace with higher input costs.
Within services, input prices rose robustly across all
sectors. Transportation and restaurant contacts reported
a sizable gap between the pace of growth in input and
selling prices. In contrast, retailers were better able to
pass along higher input costs onto consumers. Several
contacts noted that rising input prices were a primary
factor restraining business investment and capital spending. Selling prices for construction supplies increased
modestly since the last survey after rising a faster pace
earlier this year. Both services and manufacturing contacts expected robust growth in input and selling prices
over the next six months.
District employment increased slightly in the services
sector and modestly in the manufacturing sector in June.
Within services, gains were concentrated in retail, wholesale trade, and tourism, while employment declined
slightly in health services and real estate. Transportation
and restaurant contacts noted declines in the number of
employees, but gains in the number of hours worked.
Looking ahead, respondents from all sectors except
health services anticipated employment gains over the
next six months.
The majority of contacts continued to report labor shortages, with many noting demand for all positions and
others noting a particular need for technicians and hourly
labor. In response to labor shortages, half of services
contacts and two-thirds of manufacturing contacts reported investing in labor-saving automation strategies, with
about a third of all contacts indicating a faster pace of
investment than in the past. In addition, two District
states implemented return-to-work cash incentives, and
four states have opted out of enhanced federal unemployment benefits. Wages increased robustly since the
last survey and even stronger gains were expected in
the coming months.
Consumer Spending
Consumer spending continued to increase moderately in
June. Retailers reported robust sales, while tourism and
restaurant sales increased moderately. Auto sales increased slightly, but all auto contacts reported that inventories fell further from already low levels. Sales in
health services fell slightly since the last survey, but
contacts expected a strong rebound in the coming
months. Tourism and retail respondents expected sales
to continue to rise moderately, while contacts from the
auto and restaurant industries anticipated slight gains.
Many contacts noted that stronger demand was a prima-
Prices
Over the survey period, input and selling prices rose
J-1
Federal Reserve Bank of Kansas City
ry factor supporting business investment and capital
spending for the remainder of 2021.
Banking
District banking contacts reported moderate growth in
overall loan demand in recent weeks. The increase in
demand was concentrated in two categories, commercial
real estate and commercial and industrial lending. Loan
demand edged down slightly in other categories, including residential real estate, consumer lending, and agricultural lending. Credit standards remained stable across
all lending categories as loan quality strongly improved
in comparison to one year ago. Bankers expected loan
quality to improve moderately over the next six months.
Finally, overall deposit levels rose at a modest pace, with
comments suggesting that deposit growth was concentrated in liquid accounts such as checking and demand
deposit accounts.
Manufacturing and Other Business Activity
Manufacturing activity continued to increase robustly in
June, with growth in durable goods manufacturing outpacing that of nondurables. New orders increased modestly for nondurable goods and moderately for durable
goods. Similarly, production levels increased moderately
at nondurable goods plants and robustly at durable good
plants. The majority of manufacturers noted that their
capital expenditure plans this year were similar to or
higher than pre-pandemic levels, with a quarter indicating significantly higher levels. Many contacts attributed
this pick-up in investment to strong demand. When
asked about 2022, the majority of contacts expected
capital spending levels similar to or moderately higher
than 2021 levels. Both nondurable and durable goods
manufacturers expected robust gains in production and
new orders in the coming months, although slightly
stronger levels of activity were anticipated for durable
goods manufacturing.
Energy
District energy activity continued to increase since the
last survey period. The number of active oil and natural
gas rigs picked up, with the addition of active oil rigs in
New Mexico, Oklahoma, and Wyoming. Along with increased rig counts and production, most firms reported
higher revenues and profits in June. Moving forward,
most firms raised their expectations for the pace of price
increases over the next year. However, the average
prices firms reported needing for a substantial increase
in drilling to occur also rose considerably. Nearly a third
of firms reported that uncertainty about future oil and gas
prices was the main constraint limiting near-term growth
in activity. Over half of District energy contacts indicated
their firms have continued to invest in labor-saving automation strategies because of labor shortages.
Outside of manufacturing, sales rose at a slight pace in
the transportation and professional and high-tech services sectors, but fell slightly in the wholesale trade
sector. Respondents from all three sectors expected
moderate sales gains in the coming months. Contacts in
all three sectors reported moderate increases in capital
spending over the past month. Looking ahead, transportation and wholesale trade contacts expected additional
moderate gains in capital expenditures, while professional and high-tech services contacts expected capital
spending to hold steady .
Agriculture
Agricultural economic conditions in the Tenth District
were strong through June, with profit margins for most
major commodities relatively high. Prices of most crops
were still near multi-year highs, although had declined
slightly since the previous reporting period. Hog prices
also remained strong. The winter wheat harvest was
delayed slightly in parts of the District, but crop quality
was not expected to be hindered and higher production
was anticipated throughout the region. In addition, the
District’s corn and soybean crop was in slightly better
condition than the nation in all states except Missouri. In
contrast to other commodities, profitability for cattle
producers continued to be limited. Drought also persisted in some portions of the District and remained a concern for both crop and livestock producers. ■
Real Estate and Construction
Residential real estate activity continued to expand
moderately since the previous survey, while commercial
real estate activity rose modestly. Home sales increased
moderately despite a moderate decline in inventories
from already low levels. Home prices experienced robust
growth, and contacts expected this trend to continue
over the next few months. Construction supply sales
were unchanged over the survey period, but contacts
expected moderate declines in the coming months.
Commercial real estate conditions continued to improve,
with modestly lower vacancies and moderately higher
sales, prices, and construction. Absorption rates rose
modestly, but contacts also noted that developers’ access to credit became modestly more difficult. Looking
ahead, contacts expected further gains in commercial
real estate activity in the months ahead.
For more information about District economic conditions visit:
www.KansasCityFed.org/research/regional-research
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ July 2021
Summary of Economic Activity
Solid expansion continued in the Eleventh District economy. Growth in the manufacturing and nonfinancial services
sectors was strong, though activity remained somewhat below pre-pandemic levels. Retail sales dipped as supply chain
issues hampered activity. Home sales remained elevated, but buyer traffic and interest cooled off slightly. Apartment
demand surged, pushing up rents. Retail leasing picked up, while office demand stayed weak. Overall loan volumes
rose broadly. Energy activity and agricultural conditions saw moderate improvement. Employment growth was moderate, and upward wage pressures increased with labor shortages being a significant issue for many firms. Ongoing supply chain disruptions intensified price pressures. Outlooks improved, though uncertainty increased, and a much larger
share of respondents was experiencing supply chain challenges compared with earlier in the year.
Employment and Wages
experiencing supply chain challenges, and among them
60 percent noted conditions had worsened over the past
month. Input costs surged, with contacts in the construction, manufacturing, and retail sectors citing the steepest
increases. There was continued concern among respondents regarding higher prices of fuel, agricultural
commodities, building materials, metals, and motor
vehicles. Several contacts, particularly manufacturing
firms, noted that they were passing on higher costs with
more ease than in the past, though some cannot pass
them through which is negatively impacting margins.
Selling prices rose at a fast clip in many sectors, and
even airlines reported raising fares. Housing contacts
noted continued difficulty obtaining appraisals reflective
of the final sales price.
Payrolls expanded moderately outside of the retail sector, where employment was flat. Lack of labor availability, particularly for low and mid-skill positions, was a
mounting concern among companies looking to hire, and
many noted that this was slowing activity and/or expansion plans. Staffing firms noted stiff competition for recruiters and reported having many more positions to fill
than qualified candidates to match. One staffing contact
noted candidates were filling in applications with little or
no intention of showing up for an interview. A few respondents expect some relief in labor challenges given
the recent expiration of federal supplemental unemployment benefits in Texas.
Wage growth accelerated, and there were widespread
reports of upward wage pressures across industries,
including airlines and energy. A manufacturer said that
even with a $500 signing bonus and $15 per hour starting pay for untrained workers, they were not getting
applicants. An education services firm reported increasing entry-level labor compensation by 20 percent. A
small coffeeshop owner cited offering signing bonuses
and a $1,000 referral for a barista willing to stay on for
three months.
Manufacturing
Texas factory activity gained momentum in June, with
output growth accelerating broadly. Several manufacturers noted increasing demand and growing backlogs.
Those citing slower activity mostly said supply chain and
labor availability issues hampered their ability to meet
orders. Refining operations improved further, though
utilization rates remained below 2019 levels. Refiners
cited strong seasonal demand but noted that margins
were still weak. Contacts expect significant improvement
in margins in 2022. Petrochemical production has mostly
recovered from Winter Storm Uri, though some basic
chemical production was still hampered by a combina-
Prices
Price pressures accelerated further due to growing supply chain issues. A Dallas Fed survey of 382 Texas
business illustrated that a majority of respondents were
K-1
Federal Reserve Bank of Dallas
tion of maintenance and outages. Supply chain disruptions were likely to take longer to clear up than anticipated at the time of the previous report. Manufacturing
outlooks were optimistic but labor shortages, inflationary
pressures, and uncertainty regarding when supply disruptions would be resolved weighed on sentiment.
Apartment demand soared, raising occupancy and rents.
Absorption in suburban locations remained robust but
activity in the urban core has improved as well. Contacts
expect rent growth to remain generally solid through
2022. One contact noted that given the recent price
inflation in construction costs, it is becoming difficult to
profitably begin new multifamily deals. Industrial construction and leasing remained exceptionally strong.
Demand for office space continued to be sluggish and
vacancies ticked up further. Retail leasing has picked up,
though activity remains below normal.
Retail Sales
Retail sales fell during the reporting period as supply
chain issues and tight inventories continued to constrain
sales activity, particularly auto sales. A Dallas Fed survey of 47 Texas retailers showed that 87 percent of
respondents were experiencing supply chain challenges,
and among them 61 percent noted that conditions had
worsened over the past month. Multiple auto dealers
said that vehicle inventories were at all-time lows, negatively impacting their bottom line. Outlooks were mildly
positive, though uncertainty increased due to long lead
times, inventory shortages, and shipping challenges.
Financial Services
Loan demand continued to expand at a robust pace,
pushing up overall loan volumes. Strength in commercial
real estate activity led growth, but residential real estate,
commercial and industrial, and consumer lending also
increased. Nonperforming loans continued to dip, and
credit standards remained largely unchanged. Loan
pricing remained competitive, with multiple respondents
citing concerns regarding too much liquidity chasing
deals and/or margin compression. Sentiment regarding
general business activity improved markedly, with eighty
percent of respondents reporting an improvement. Outlooks stayed optimistic.
Nonfinancial Services
Broad-based, solid expansion continued in nonfinancial
services, though the pace of growth eased since the last
report. Most accommodation and food services firms
saw flat to higher revenues, and several contacts noted
that the inability to fill open positions was holding back
growth. Airlines said passenger demand and bookings
surged, exceeding expectations. The acceleration was
largely driven by domestic leisure travel and travel to
nearby international tourist destinations, however, corporate demand ticked up as well. Most staffing firms reported broad-based increases in demand, ranging from
healthcare to construction and hospitality workers, and a
continued recovery in business. In transportation services, small parcel shipments rose, and air cargo volumes were flat to down, with demand largely domestic.
Container cargo coming through the Port of Houston saw
double-digit increases in May. Outlooks were positive,
though uncertainty surrounding inflation, supply shortages, labor constraints, and the general business climate
slightly increased.
Energy
Drilling and completion activity expanded moderately,
and oilfield services firms noted difficulty hiring to support increased oil field activity. Exploration and production firms expect the market to support a West Texas
Intermediate price near $70 in the second half of the
year, and reiterated that, at this price, capital spending
plans would likely be little changed among large U.S.
producers. E&P firms have slightly revised up their production outlook for this and next year due to strong yearto-date results and a higher oil price forecast for 2022.
Sentiment in the oil and gas industry continued to improve, though contacts remained cautious about tax
policy changes and rising materials and labor costs.
Agriculture
Construction and Real Estate
Drought conditions eased in much of the District, though
severe drought persisted in West Texas and Southern
New Mexico. In areas with sufficient soil moisture, producers were optimistic for robust crops this year. Crop
prices were slightly higher overall, supported by concern
over U.S. and global drought conditions. For crops like
corn and sorghum, cash prices are at an eight-year high.
Recent rainfall benefitted pasture conditions, which is a
positive for livestock producers amid high feed costs. ■
Activity in the single-family housing market remained hot
but cooled off slightly during the reporting period. Sales
continued to be robust because of a deep buyer pool,
though traffic was off a bit and customers were slower to
make buying decisions due to elevated prices. Contacts
also noted a slight reduction in waitlists and some push
back from buyers on pricing. Builders continued to limit
sales due to production challenges, tight lot supply, and
escalating costs. Outlooks were mixed, with contacts
voicing concern about constrained lot supply, appraisal
issues, rising costs, and labor and material shortages.
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ July 2021
Summary of Economic Activity
Economic activity in the Twelfth District expanded notably during the reporting period of mid-May through June. Employment levels expanded moderately, accompanied by further upward wage pressures resulting chiefly from labor shortages in many sectors. Prices rose considerably, driven by low availability of raw materials and supply chain disruptions.
Retail sales increased at a solid pace due to pent-up demand, whereas further easing of social-distancing restrictions
led to a notable increase in demand for services. Manufacturing continued to expand at a modest pace, while activity in
the agriculture and resources sectors increased somewhat. Conditions in the residential real estate market remained
very strong, while activity in the commercial real estate sector was generally subdued. Lending activity grew slightly,
bolstered by demand for residential and auto loans.
Employment and Wages
more generous offers including sign-on bonuses, reduced or flexible hours, childcare-related benefits, and
even vaccination cash incentives. Wage pressures were
more subdued in the entertainment and higher education
sectors, as well as for some positions in financial services and local government.
Overall employment levels expanded moderately, although labor market conditions varied. Employment
accelerated more notably in sectors that benefitted from
recently eased business restrictions, such as food services, travel, and hospitality. At the same time, employers reported difficulties in hiring and retaining workers for
lower-wage positions and increased competition for
higher-wage jobs. Contacts noted a widespread shortage of truck drivers and other workers in the transportation and logistics sector, which exacerbated supply chain
disruptions and delays. Worker shortages were also
noted in construction, manufacturing, agriculture, and
consumer services. Labor supply was more steady in the
technology, financial, higher education, and entertainment sectors. Most employers reported improved worker
productivity. A few contacts noted a persistent lack of
affordable childcare options and an increase in retirements as factors holding back labor force growth. Employers in the agriculture sector highlighted a lack of
support for immigrant labor and difficulties in obtaining
work visas for transient workers.
Prices
Prices rose considerably in recent weeks. Continued
supply chain disruptions, low availability of raw materials,
and increasing labor costs all contributed to upward
pricing pressures. Contacts observed pronounced price
increases in agricultural goods, fuel and transportation
costs, and certain building materials such as asphalt,
concrete, and metals. Surging demand for dining and
lodging services resulted in some increase in prices at
restaurants and hotels. Fees for legal and professional
services remained generally stable.
Retail Trade and Services
Retail sales increased at a solid pace. Sales growth was
supported by elevated household savings, pent-up demand, and favorable credit conditions. Demand was
particularly strong for clothing, personal care products,
and gasoline. A number of contacts reported increased
foot traffic in retail stores, while e-commerce sales continued to be strong. Retail trade in Hawaii as well as
other tourist destinations also improved over the reporting period. Retailers across the District noted that back
orders and logistical delays resulted in reduced inventories and shortages for some products.
Wage pressures increased further, chiefly due to labor
shortages and increased competition for workers in
many sectors. Many employers reported having to increase wages to attract and retain workers for both lowand high-paying jobs, including those in the construction,
manufacturing, utilities, technology, retail, logistics,
aerospace, health-care, food services, and hospitality
sectors. Employers additionally mentioned extending
L-1
Federal Reserve Bank of San Francisco
Contacts observed a continued shift in consumer spending from goods back to services. This resulted in slightly
lower sales of certain products such as electronics and
furniture but increased activity in the consumer and
business services sector. Further unwinding of pandemic
-related restrictions led to improved conditions in the
travel, leisure, entertainment, food service, and hospitality industries. However, demand for business travel and
hospitality services remained weak. Despite some materials shortages, health-care spending picked up owing to
increased overall capacity. Demand for technology and
logistic services remained elevated, although sales
volumes were somewhat restrained by capacity constraints.
Real Estate and Construction
Conditions in the residential real estate market remained
very strong. Strong demand for single-family homes
outpaced existing home supply, driving sales prices up
further. The lack of available homes was further exacerbated by increasing labor and raw materials costs, which
somewhat reduced the rates for project completions and
sales over the reporting period. Contacts commented on
the recent drop in lumber prices, noting that it boded well
for construction activity in the near future. Homebuilders
also reported an elevated backlog of orders, especially in
the suburbs, as well as robust permit issuance. Additionally, contacts highlighted a persistent shortage of affordable housing throughout the District. Demand for multifamily homes also increased, with one contact in California mentioning increased multifamily construction around
entertainment, media, and gaming locations. A housing
developer in Alaska observed that builders are reluctant
to commit to final pricing due to volatility in materials and
supply chain costs.
Manufacturing
Manufacturing activity continued to expand at a modest
pace. New orders grew further over the reporting period,
especially for fabricated metals, aerospace and transportation equipment, renewable energy equipment, and
manufactured food products. Contacts reported low
inventories and increased capacity utilization. Continued
logistical bottlenecks and shortages of raw materials
caused additional delays in order fulfilment. Contacts
also noted reduced productivity at factories due to inclement weather and higher temperatures. Wood product manufacturers observed that demand for lumber may
have already peaked in recent weeks, given dropping
prices and excess inventory at lumberyards. One manufacturer in the Pacific Northwest noted lower demand for
certain wood products from large home improvement
retailers and housing job sites.
Demand for commercial real estate remains subdued.
Although sales of commercial spaces picked up somewhat over the reporting period, general activity in this
sector remained lackluster, and commercial permit issuance decreased in some areas. Demand for new retail
and hospitality spaces stayed muted with reports highlighting the use of existing capacity as mobility restrictions eased. Demand for industrial, warehouse, and
distribution spaces remained robust but generally unchanged. Demand for office space increased slightly due
to many businesses’ initialization of return-to-work plans.
Agriculture and Resource-Related Industries
Financial Institutions
Activity in the agriculture and resources sectors increased somewhat. Eased local restrictions led to generally increased domestic demand for agricultural and
resource-related products. International demand for logs,
fruits, vegetables, seafood, and other products increased
over the reporting period despite an appreciating dollar.
Producers noted reduced but still adequate supply and
inventory levels of fruits, raisins, and nuts. Supply chain
disruptions continued to cause costly delays with trade
from Asian markets in particular. Growers in California
reported drought conditions and increased costs associated with irrigation. This led some farmers to leave a
portion of their acreage fallow, prioritizing water usage
on more profitable crops.
Lending activity grew slightly over the reporting period.
Loan demand remained relatively strong and stable
across the district, with new loan originations focusing on
residential mortgage and refinancing, auto financing, and
credit card activity. Reports from across the District
noted increased deposits, high liquidity levels, and
healthy consumer balance sheets. Contacts mentioned
offering lower lending rates due to increased competition
for loans but observed small credit quality deterioration.
In investment markets, valuations for firms dedicated to
intellectual property, environmental, and energy transition grew notably, showing continued investor interest
around innovation and sustainability investment opportunities. ■
L-2
Cite this document
Federal Reserve (2021, July 27). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20210728
@misc{wtfs_beige_book_20210728,
author = {Federal Reserve},
title = {Beige Book},
year = {2021},
month = {Jul},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20210728},
note = {Retrieved via When the Fed Speaks corpus}
}