Beige Book
For use at 2:00 PM EDT
Wednesday
June 1, 2022
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
May 2022
Federal Reserve Districts
Minneapolis
Boston
New York
Chicago
San Francisco
Kansas City
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
Cleveland
St. Louis
Philadelphia
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 Philadelphia based on information
collected on or before May 23, 2022. This document summarizes comments received from contacts
outside the Federal Reserve System and is not a commentary on the views of Federal Reserve
officials.
National Summary
Boston
1
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 ■ May 2022
Overall Economic Activity
All twelve Federal Reserve Districts have reported continued economic growth since the prior Beige Book period, with
a majority indicating slight or modest growth; four Districts indicated moderate growth. Four Districts explicitly noted
that the pace of growth had slowed since the prior period. Contacts in most Districts reported ongoing growth in manufacturing. Retail contacts noted some softening as consumers faced higher prices, and residential real estate contacts
observed weakness as buyers faced high prices and rising interest rates. Contacts tended to cite labor market difficulties as their greatest challenge, followed by supply chain disruptions. Rising interest rates, general inflation, the Russian invasion of Ukraine, and disruptions from COVID-19 cases (especially in the Northeast) round out the key concerns impacting household and business plans. Eight Districts reported that expectations of future growth among their
contacts had diminished; contacts in three Districts specifically expressed concerns about a recession.
Labor Markets
Most Districts reported that employment rose modestly or moderately in a labor market that all Districts described as
tight. One District explicitly reported that the pace of job growth had slowed, but some firms in most of the coastal Districts noted hiring freezes or other signs that market tightness had begun to ease. However, worker shortages continued to force many firms to operate below capacity. In response, firms continued to deploy automation, offer greater job
flexibility, and raise wages. In a majority of Districts, firms reported strong wage growth, whereas most others reported
moderate growth. However, in a few Districts, firms noted that wage rate increases were leveling off or edging down.
Moreover, while firms throughout the country generally anticipate wages to rise further over the next year, one District
indicated that its firms’ expected rate of wage growth has fallen for two consecutive quarters.
Prices
Most Districts noted that their contacts had reported strong or robust price increases – especially for input prices. Two
Districts noted that this rapid inflation was a continuation of trend; however, three Districts observed that price increases for their own goods or services had moderated somewhat – across the board (among Philadelphia firms) or for
some segments (used cars in Boston and manufacturing in Richmond). About half of the Districts observed that many
contacts maintained pricing power – passing costs on to clients and consumers, often with fuel surcharges. However,
more than half of the Districts cited some customer pushback, such as smaller volume purchases or substitution of less
expensive brands. Surveys in two Districts pegged year-ahead increases of their selling prices as ranging from 4 to 5
percent; moreover, one District noted that its firms’ price expectations have edged down for two consecutive quarters.
Highlights by Federal Reserve District
Boston
New York
Economic activity in the First District increased slightly
amid robust wage and price growth. Labor scarcity remained a widespread problem as headcounts increased
only slightly. Restaurant profits fell on steep input price
increases. The outlook for summer tourism was bright,
but many contacts’ optimism was tainted by growing
fears of recession.
Growth slowed to a modest pace, with much of the slowing attributed to supply disruptions, worker shortages,
and a COVID resurgence. Businesses added staff
amidst high turnover. Tourism strengthened, but consumer spending and manufacturing activity weakened.
Businesses continued to report widespread increases in
prices and wages. Contacts were somewhat less optimistic about the near-term outlook.
1
National Summary
Philadelphia
St. Louis
Business activity grew slightly – at a slower pace than in
the prior Beige Book period, and some sectors remained
below pre-pandemic levels. Rising prices and recession
fears have turned consumers and firms more cautious.
The labor market remained tight with modest growth.
Wage and price growth continued to expand at a moderate and strong pace, respectively, although the pace of
both eased somewhat lower.
Economic conditions have improved at a modest pace
since our previous report, although the outlook has
weakened. Prices for raw materials and fuel increased
robustly. Consumer spending showed increased signs of
price sensitivity and a shift from goods to services. Manufacturing firms reported that a backlog of orders should
sustain production even as orders slow due to higher
prices.
Cleveland
Minneapolis
Business activity decelerated and was slightly positive as
firms grappled with ongoing supply chain challenges,
tight labor market conditions, and escalating costs. Employment rose moderately. Contacts reported broad
increases in wages, costs, and prices. Overall, contacts
were less certain about the economic outlook and expected upward pressure on prices to persist.
The region’s economy grew moderately since mid-April.
Demand across sectors remained strong but higher input
and labor costs put downward pressure on profit margins. Construction and real estate contacts reported
some slowing due to interest rate increases. Demand for
credit among minority- and women-owned business
enterprises was down amid uncertainty about the economy.
Richmond
Kansas City
The regional economy grew modestly over the last several weeks. Consumer spending remained strong while
manufacturers and service providers reported modest to
moderate growth. Import activity slowed slightly, as did
trucking demand. New vehicle and home sales were
limited by low inventory levels. Employment increased
modestly and wages continued to rise moderately. Overall, price growth remained robust.
The Tenth District economy grew at a moderate pace,
but expectations for future growth softened somewhat
due to a variety of factors. Contacts noted a number of
shifts in consumer behavior as prices continued to rise at
a robust pace. Labor demand remained elevated, and
the number of hours worked increased in recent weeks.
Wage growth aimed at retaining workers was much
faster than observed in recent years.
Atlanta
Dallas
Economic activity expanded at a modest pace. Labor
markets remained tight, and wages continued to rise.
Nonlabor costs rose. Retail sales moderated somewhat.
Tourism activity remained strong. Housing demand
softened slightly. Commercial real estate conditions
remained mixed. Manufacturing activity was strong.
Banking conditions were mixed.
Economic growth in the district slowed to a moderate
pace. Growth remained largely broad-based, except for
home sales and retail activity, which dipped. Prices rose
at a rapid clip, though several firms noted diminished
ability to fully pass on cost increases. Employment and
wage gains generally remained solid. Outlooks weakened, and uncertainty increased because of rising headwinds.
Chicago
Economic activity increased modestly. Employment
increased strongly, manufacturing was up moderately,
consumer spending moved up modestly, business
spending was slightly higher, and construction and real
estate activity declined slightly. Wages and prices rose
rapidly, while financial conditions deteriorated some.
Agriculture income expectations for 2022 were little
changed.
San Francisco
Economic activity strengthened moderately over the
reporting period. Conditions in the labor market remained tight. Wages and price levels increased significantly. Retail sales continued to increase while demand
for services rose considerably. Conditions in the agriculture sector deteriorated somewhat. The residential real
estate market remained robust overall, and lending
activity was little changed.
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Federal Reserve Bank of
Boston
The Beige Book ■ May 2022
Summary of Economic Activity
Economic activity in the First District increased slightly on balance. Employment increased slightly as many firms struggled to hire and retain workers, and labor shortages contributed to above-average wage growth. Price inflation persisted
at a moderate to fast pace. Retail contacts posted flat or somewhat better sales, while restaurants saw slight revenue
gains, and tourism contacts expect record-breaking occupancy rates this summer. Manufacturers reported a wide range
of results, and some were hurt by softer demand from Europe and China. Business at staffing firms was restrained
slightly by labor scarcity and changes in demand composition. Home sales were steady at a slow pace amid a slight
seasonal uptick in inventories, and commercial real estate activity was healthy but offered some signs of a slowdown.
While many contacts remained optimistic, an increasing number expected a recession by year’s end.
rants faced steep food price increases, especially for
meats, eggs, and oils, and incomplete pass-through to
menu prices resulted in weaker profits. A salvage retailer
exposed to high freight costs raised its own prices by
moderate margins. In advance bookings, hotel room
rates on Cape Cod reached record highs. Most manufacturers enacted above-average price increases to defray
inflation in the prices of a variety of inputs, including
semiconductor chips, plastics, glass, energy, logistics,
and labor. Yet the war in Ukraine still lends uncertainty to
the pricing outlook.
Labor Markets
Employment was flat or up slightly among First District
contacts amid persistent hiring and retention difficulties,
and labor scarcity fueled above-average wage increases. Restaurants faced acute worker shortages and responded with sharp wage increases. Tourism industry
contacts face a looming shortage of seasonal workers
owing to an ongoing lack of temporary work visas, and
some are planning to cut capacity (such as restaurant
seating) as a result. In the retail sector, worker headcounts were flat, hours were down, and wages increased
moderately on average as some retail firms reportedly
poached employees away from childcare positions. In
the New Hampshire auto industry employment was flat
and wage pressures, previously muted, started to intensify. Manufacturers mostly had strong labor demand but
only a few managed to increase their staffing levels, as
all complained that hiring was difficult, and turnover was
high. Manufacturing wage increases were moderate to
strong, and some sought to compensate workers for
inflation with one-time bonuses rather than—or, in some
cases, on top of— permanent wage increases. The
hiring outlook was mixed, as some contacts expected
labor market tightness to ease, and others expected
persistent labor shortages.
Retail and Tourism
Retail and restaurant contacts reported flat to moderately
higher sales, and tourism contacts enjoyed robust summer bookings activity. An online retailer had flat recent
sales but said that supply chain pressures eased. A
salvage store enjoyed a better-than-expected increase in
recent sales but rejected some potential inventories over
high freight costs. A contact in the New Hampshire automobile industry reported a moderate increase in used
car inventories but also observed that supply chain issues in the new car industry had spread to a broader set
of auto manufacturers. A Massachusetts restaurant
industry contact reported a slight recent increase in sales
but said that cost pressures had crimped profits. Boston
restaurants, which have lagged suburban restaurants in
the recovery, were happy to see healthier sales thanks
to the ongoing return of office workers and travelers to
Prices
Prices increased at a moderate to robust pace at most
contacted firms, although pricing pressures eased for
used cars in response to increased inventories. Restau-
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Federal Reserve Bank of Boston
the urban core. Some Cape Cod restaurant owners plan
to curtail service this summer due to labor shortages, but
hotels and B&Bs on the Cape are planning for recordbreaking occupancy and room rates based on advance
summer bookings. The outlook was a mix of optimism
and concerns about ongoing inflationary pressures and
labor shortages.
Commercial Real Estate
Commercial real estate activity in the First District was
steady at a healthy level, but signs of a potential slowdown became more prominent. Investors were reportedly slower to spend, suggesting they expected deal terms
to turn in their favor. Industrial activity, while still very
strong, slowed further since last round as big players
sought less space than they did at the height of the
pandemic. Higher-end and suburban office spaces enjoyed improved leasing demand, but activity remained
limited for downtown and older office buildings, and
uncertainty concerning return-to-work plans lingered.
Contacts described retail activity as “chugging along” at
a steady pace thanks to the release of pent-up consumer
demand, but some wondered how long such demand
would hold up. Apartment rents climbed further at a fast
pace, but in other sectors contacts reported no significant changes in rents or vacancy rates. Most contacts
expressed greater pessimism about the outlook for commercial real estate than they did last round, and only one
remained very positive. Several perceived that the Fed’s
interest rate increases had already slowed the economy,
and a few contacts expected a recession by year’s end.
Manufacturing and Related Services
Contacts offered mixed results. Three of the seven firms
reached this round reported robust increases in sales,
one had strong but stable sales, and the others saw
slightly to moderately weaker sales. Among the firms
with the strongest results, a manufacturer of laboratory
equipment said that business was up across all product
lines except those related to COVID testing, and a semiconductor manufacturer continued to enjoy recordbreaking sales growth. At the other end, a garden hose
maker lamented that supply chain issues were driving up
prices and that retail customers increasingly balked at
paying them. Two contacts experienced recent softness
in overseas sales, which were hurt by the war in Ukraine
and lockdowns in China. Firms continued to invest despite higher interest rates. The outlook was mostly unchanged and mostly positive, but the Ukraine war presented downside risks for some contacts, and one perceived a high chance of recession in the next six
months.
Residential Real Estate
Residential real estate sales in four New England states
(Connecticut and Vermont offered no data) held roughly
steady at a slow pace in April, despite slight seasonal
improvements in inventories. Closed sales were down
over the year for single-family homes and condominiums, at about the same pace as in March. Median sales
prices increased over the year in all reporting markets, at
rates that were on par with March results for singlefamily homes and moderately higher for condos. Yearover-year, inventories were down in all reporting markets, but by slightly smaller margins than in the previous
report. All contacts mentioned that higher mortgage rates
have created affordability issues for many prospective
buyers, cooling demand. The Massachusetts contact
noted again that competition was highest for lowerpriced homes and observed that increasing numbers of
buyers are shifting to the condo market after being
priced out of the single-family market. ■
Staffing Services
Among the three staffing firms reached this round, two
experienced slight and sharp revenue declines, respectively, and another enjoyed a moderate uptick in receipts. All described the labor market as extremely tight,
yet also shifting in terms of demand composition. For
example, positions at COVID testing sites have mostly
evaporated, a shift that explained the large decline in
business at one firm. Although upward wage pressures
persisted for most positions, some employers sought to
reverse “COVID wage premiums” but faced resistance
from workers seeking compensation for inflation. Competition for scarce labor was intense, particularly in specialized roles, as workers were reportedly “besieged”
with offers. Contacts reported high rates of temp-topermanent conversions and noted that salaries for junior
level professionals increased very steeply from a year
earlier. Looking ahead, two firms predicted that their
revenues would rise as conditions continued to normalize, and one worried that the shortage of workers would
restrain their business. The state of the national economy was a point of concern, although two noted that
worsening macroeconomic conditions could alleviate the
worker shortage.
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
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Federal Reserve Bank of
New York
The Beige Book ■ May 2022
Summary of Economic Activity
Economic growth in the Second District slowed to a modest pace in recent weeks, hampered by ongoing labor shortages, supply disruptions, and an upturn in COVID cases. Contacts have also become somewhat less optimistic about the
near-term outlook. Businesses continued to report widespread increases in selling prices, input prices, and wages, as
well as ongoing difficulty obtaining necessary supplies. The job market has remained exceptionally tight, with businesses continuing to add staff amidst high turnover. Both manufacturing activity and consumer spending slowed noticeably
in recent weeks, although tourism continued to strengthen. While there were scattered signs of easing in the home sales
market, it remained quite robust, and the residential rental market continued to strengthen. Commercial real estate
markets were generally steady. Construction activity was little changed, with a good deal of multifamily residential development in progress. Finance-sector contacts reported little change in activity, while regional banks reported weaker loan
demand but steady to lower delinquency rates.
Labor Markets
Prices
Businesses continued to report widespread labor shortages, impeding both new hiring and retention—
particularly at small firms. Still, many businesses indicated that they continue to add staff—particularly in retail &
wholesale trade and in professional & business services.
A number of contacts indicated that COVID has exacerbated worker shortages, due to illness-driven absenteeism and resistance to vaccination requirements. Businesses in all major industry sectors plan to add staff, on
net, in the months ahead.
Most business contacts noted ongoing escalation in
input costs for a wide range of supplies, as well as energy and freight. Contacts in all major industry sectors
expect input prices to rise further in the months ahead.
The vast majority of businesses reported recent hikes in
their selling prices, most notably in the manufacturing,
wholesale & retail trade, and transportation sectors.
Selling price increases were not quite as widespread as
in the last report. Businesses generally expect their
selling prices to rise by about 4-5 percent over the next
year, but they expect inflation overall to run closer to 6-7
percent. However, a top concern expressed by a number
of business contacts was that price volatility and the
related uncertainty made it difficult to plan ahead—that
is, set prices, negotiate contracts, and budget. When
asked about longer-term inflation expectations, the typical firm expected inflation to be around 3 percent five
years out.
A New York City staffing agency noted that demand for
workers has remained strong across the board, despite
recent financial market turmoil. An upstate staffing agency, however, suggested that the labor market, while still
quite strong, had become less frothy. Likewise, a large
business services firm noted some pullback in hiring in its
industry.
A majority of businesses continued to indicate that they
were raising wages and anticipated further increases in
the months ahead. Wage gains have been most noteworthy in the construction, wholesale trade, transportation,
and leisure & hospitality sectors. One employment agency observed that job seekers in the finance sector have
become somewhat more negotiable on pay.
Consumer Spending
Consumer spending slowed noticeably in recent weeks.
Non-auto retailers reported a dip in sales activity, though
a few contacts attributed this more to supply constraints
than weak demand. Consumer confidence among New
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Federal Reserve Bank of New York
York State residents rose in April to its highest level in
nearly a year, exceeding pre-pandemic levels.
it is still a sellers’ market. In Manhattan, apartment sales
transactions so far this year have been the highest on
record, and sales volume in the rest of the city has also
been exceptionally high. Home prices continued to climb
across the District.
New vehicle sales remained sluggish in recent weeks,
still restrained by a dearth of inventory, reflecting the
ongoing microchip shortage. Almost all new cars delivered to dealers are still being pre-sold 6-8 weeks in
advance. Sales of used vehicles weakened, and prices
have retreated somewhat though they remain high. One
contact noted that high gas prices have shifted demand
toward more fuel-efficient vehicles.
Residential rental markets have remained strong, as reflected in rising rents, brisk leasing activity, and low inventories—particularly at the higher end of the market. In New
York City, rents rose sharply in April, reaching a new record high. Rents on smaller and lower-end apartments had
been lagging but are now catching up. Landlord concessions are no longer common, while bidding wars for both
doorman and non-doorman apartments have become
more frequent. With rents rebounding to well above prepandemic levels in New York City, affordability has been a
widespread and growing concern.
Manufacturing and Distribution
Manufacturing activity has turned down moderately in
recent weeks, while the pace of growth slowed in the
wholesale, transportation, and warehousing sectors. For
the first time in well over a year, manufacturers noted
some leveling off in unfilled orders. Contacts in these
sectors continued to report widespread disruptions in
transporting and obtaining goods. Wholesalers have
grown less optimistic about the near-term outlook.
Commercial real estate markets have been mixed since
the last report. Office markets across the District were
steady to slightly weaker, with vacancy rates edging up in
Manhattan but little changed elsewhere. In New York City,
office rents remained flat and well below pre-pandemic
levels. Elsewhere across the District, office rents are holding at or above pre-pandemic levels and are trending up in
northern New Jersey. The industrial market has remained
firm, with vacancy rates leveling off but rents continuing to
rise briskly. However, the market for retail space has remained weak.
Services
Activity in the service sector has largely leveled off in the
latest reporting period. Professional & business service
firms indicated a pause in growth, while education &
health providers and information firms reported subdued
growth in business. However, contacts in the leisure &
hospitality sector continued to see brisk growth, though
not quite as strong as in the last report.
Construction activity has remained steady overall. Nonresidential construction starts have weakened for both commercial and industrial space. Industry contacts, however,
were quick to note that much of the softness reflects widespread shortages of labor and materials, as well as escalating costs. New residential starts have also been somewhat sluggish, but a great deal of multi-family construction
activity is in progress.
Similarly, tourism activity in New York City has continued
to strengthen, despite the recent upturn in COVID cases,
financial market turmoil, and strong dollar. The first half
of May was exceptionally strong, buoyed mainly by
domestic leisure visitors. One industry expert noted that
hotel occupancy and average daily room rates, as well
as attendance at Broadway theaters, have almost fully
rebounded to pre-pandemic levels, and that there have
been more trade shows and numerous gala events.
While international tourism remains sluggish, visits from
Canada and Europe have risen noticeably. However,
visitors from Asia and countries where visas are needed
remain sparse.
Banking and Finance
Contacts in the broad finance sector continued to report
little change in activity and remained fairly optimistic about
the outlook. Small to medium sized banks in the District
reported lower loan demand overall: Demand rose for
commercial mortgages but declined for consumer loans,
business loans, and residential mortgages. Refinancing
activity also decreased. Credit standards were little
changed. Loan spreads widened across all loan segments,
and bankers reported higher deposit rates overall. Delinquency rates were lower on business loans and residential
mortgages but steady otherwise. ■
Real Estate and Construction
Housing markets have generally remained solid, though
there have been some scattered signs of slowing in the
sales market. Sales activity continues to be restrained by
low inventory, but there are also signs that declining
affordability has deterred some buyers. Still, real estate
contacts in upstate New York cite bidding wars, all-cash
deals, and homebuyers waiving inspections as signs that
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ May 2022
Summary of Economic Activity
On balance, business activity in the Third District grew slightly – at a slower pace than during the prior Beige Book
period. Activity in a few sectors remained below pre-pandemic levels. Since the prior Beige Book, the rate of COVID-19
cases has grown fourfold. Moreover, official statistics appear to be underestimating the actual incidence of COVID-19,
as more people take home tests and recover at home. Employment grew modestly, and some firms have begun reassessing their future staffing needs in fear of a recession. Wage and price inflation moderated for most firms, as have
inflation expectations; however, wages continued to rise at a moderate pace and prices at a strong rate. Firms continued to cite hiring difficulty and supply chain disruptions as their key challenges; coping with COVID-19 cases has become routine. On net, expectations for continued economic growth over the next six months fell for all firms and were
well below their nonrecessionary historical averages. Among manufacturing firms, expectations nearly turned negative.
Labor Markets
costs per employee edged higher to about three-fifths in
May; a small percentage reported lower compensation
costs.
Employment grew modestly – at a slower pace than in
the prior period. The share of firms reporting employment increases fell below one-fourth of the nonmanufacturing firms and fell to nearly one-fourth among the manufacturers. Contacts described many firms as “hunkering
down” in anticipation of a recession – hiring managers
are more carefully assessing their future needs, and
firms are deploying automation wherever possible. Also,
the share of manufacturers that expect to hire more
workers fell to one-third from over one-half in December.
Firms also expect lower wage growth in the future. On a
quarterly basis, firms reported lower expectations for the
one-year-ahead change in compensation cost per worker – the second consecutive decline. Expectations
(measured as a trimmed mean of all firms reporting) fell
to 5.2 percent from 5.5 percent in the first quarter of
2022 and from 5.8 percent in the fourth quarter of 2021.
Prices
Employers and staffing firms tended to describe hiring
and retention of employees as their biggest challenge.
Firms that can’t or won’t raise their starting wage reported few applicants and high turnover. Many employers
described losing experienced workers to firms offering
much higher salaries and to full-time remote opportunities. Firms that carefully calibrate their wage rates above
the market averages tended to report fewer difficulties.
On balance, price increases attenuated throughout the
supply chain – to a moderate pace for nonmanufacturers
and to a still-strong rate among manufacturers. Moreover, while price increases remained pervasive, they
were less widespread than during the prior period.
Contacts reported that price increases received for their
own goods and services over the past year slowed for
the first time in the past six quarters. The trimmed mean
for reported price changes in our quarterly survey questions fell to 6.3 percent from a peak of 7.3 percent in the
first quarter of 2022 for all firms. Price increases fell to
4.8 percent from 5.5 percent for nonmanufacturers and
to 8.1 percent from 9.6 percent among manufacturers.
On balance, wages continued to increase moderately.
However, most firms, including staffing firms, noted that
the pace of wage growth is slowly subsiding, as they
have reported since year-end. Wage increases remain
widespread. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit
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Federal Reserve Bank of Philadelphia
In addition, the share of firms reporting higher prices for
their own goods and services edged down, as did the
share of manufacturers that reported higher prices for
factor inputs. The share of nonmanufacturers reporting
higher prices for their inputs edged up.
while the share of firms that reported decreases rose in
both categories.
Financial Services
The volume of bank lending (excluding credit cards)
grew modestly during the period (not seasonally adjusted) – a similar pace as seen during the same period in
2019. However, inflation is contributing more to the
growth during the current year relative to past years –
overall and for the lending categories that follow.
Looking ahead one year, the price increases that firms
anticipate receiving fell for the second consecutive quarter – the trimmed mean for all firms was 5.0 percent in
the second quarter of 2022, down from 5.6 percent in the
first quarter of 2022 and 5.9 percent in the fourth quarter
of 2021. The expected rate of growth was 4.1 percent for
nonmanufacturers and 5.9 percent for manufacturers.
Loan volumes grew moderately for home mortgages,
home equity lines, and commercial real estate. Auto
lending grew modestly, as did commercial and industrial
lending. Other consumer loans fell modestly. Credit card
volumes grew moderately. Typically, credit card volumes
grow modestly during this season of the year.
Manufacturing
On average, current manufacturing activity continued to
grow modestly. The indexes for shipments and new
orders trended lower but remained above historical
averages for nonrecessionary periods.
Bankers, accountants, and attorneys noted that the
combined impacts of labor market challenges, inflation,
supply chain issues, the war in Ukraine, and lingering
COVID-19 disruptions have caused some firms to put
plans on pause and to consider their strategic options.
However, sentiment appeared to hover on the verge of
turning negative. The index of current general activity fell
to nearly zero – its lowest reading since spring 2020 as
the pandemic gripped the economy. The index of future
general activity also fell to nearly zero – its lowest reading in 13 years. Correspondingly, manufacturing firms
lowered their expectations for future capital expenditures, with that index falling to a six-year low.
Real Estate and Construction
Existing backlogs will keep homebuilders active into
2023; however, contacts reported that sales traffic and
contract signings for new homes fell moderately. If the
trend continues, contacts noted, repricing, restructuring,
and layoffs are under consideration; already, some land
deals have been halted.
Consumer Spending
Retailers (nonauto) and restaurateurs reported slight
sales growth overall – a weaker pace than in the prior
period. Contacts noted that rising prices for food and fuel
appear to have lowered the frequency of customer visits
and reduced the average spend per visit. Moreover,
sales may be weaker after adjusting for inflation.
Existing home sales fell slightly but remained near recent
high levels. Contacts reported that demand remained
strong despite some buyers – especially first-time buyers
– exiting as prices and interest rates have risen. Quick
sales featuring cash offers and waived inspections continued to outpace new listings – suppressing inventory
levels and further reducing housing affordability.
On balance, auto dealers have reported a modest decline in sales since the prior period; sales are now significantly below the levels in 2019. With demand far outpacing supply, very high prices are ensuring ample profitability.
On balance, construction activity and leasing activity for
commercial real estate held steady and were busy for
industrial/warehouse space, multifamily housing, and
institutional projects. A contact noted that the rising costs
of materials and labor are driving a wedge between
project estimates and eventual bids – often resulting in
modifications to lower the total expense. Ongoing
COVID-19 cases have further delayed return-to-office
plans for some firms. ■
Overall, tourism grew modestly, as the sector’s key
components continued their recovery. Domestic leisure
travel remains strong – despite rising gas prices – while
conventions and other group travel have been resuming
with intermittent disruptions from COVID-19 outbreaks.
Business travel is recovering more slowly, with less
certainty.
Nonfinancial Services
On balance, nonmanufacturing activity grew slightly –
slowing from the prior period’s pace to that experienced
at the height of the Omicron surge. Overall, the share of
firms reporting increases in sales and in new orders fell,
For more information about District economic conditions visit:
www.philadelphiafed.org/regional‐economy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ May 2022
Summary of Economic Activity
Business activity decelerated and was slightly positive as firms grappled with ongoing supply chain challenges, tight
labor market conditions, and escalating costs. These challenges also clouded the near-term outlook for the economy, a
situation leading firms to be conservative with their investment spending. The soft growth of demand was evident in
most sectors save for professional services, which grew strongly. In a change from recent reports, concerns about
COVID-19 were largely absent from commentaries, and contacts were mainly concerned about the uncertainty of the
economic outlook and the inflation environment. Employment rose moderately, but firms continued to report that they
were understaffed. Contacts suggested they were more focused on employee retention than in the recent past and had
broadly raised wages and bonuses. Costs rose for a wide range of items, most notably for energy and food. Firms generally had little difficulty raising prices to offset cost increases, and many contacts expected upward pressure on prices
to persist over the next 12 months.
rising living costs and were demanding more pay. One
university let employees work from home more often to
reduce the impact of rising fuel costs. Contacts generally
expected wage pressures to remain high over the next
12 months.
Labor Markets
Employment rose moderately. A few manufacturing and
hospitality firms observed a slight increase in the number
of job applicants. That said, many firms said it remained
difficult to find workers and that they were operating
below desired staff levels. One manufacturer said that
the firm’s hiring activity was maintaining its staff level
and that it was 10 percent short of its desired level. Staff
turnover was high for many firms, a fact which they
attributed to a variety of factors including retirements,
employees’ leaving for other higher-paying jobs or opportunities to work remotely, and burnout with workloads.
Several contacts observed an increase in workers’ quitting their jobs without having lined up another one. One
workforce development agency said that it had become
so difficult to find workers that the entity resorted to
essentially knocking on doors in the community to find
potential workers.
Prices
Most contacts reported that nonlabor costs rose for a
broad range of items. Higher energy costs were a particular pain point, but other inputs, including food, paper
products, building materials, and IT equipment, also
increased in cost. There were more reports that vendors
were adding fuel surcharges, even in instances in which
that was not the norm. A few contacts reported that
lumber prices declined and that steel prices plateaued.
However, these decreases were outweighed by increases in other input costs. Contacts generally expected
upward pressure on nonlabor costs to remain high over
the next 12 months. One contact at a business association noted that its members had been hopeful in the
recent past that cost pressures would abate sometime
this year, but that optimism had waned recently.
Amid tight labor market conditions, reports of wage
increases remained widespread. Many reported that they
were more focused on retaining workers and that in
addition to raising wages, they were boosting variable
pay. Some firms instituted retention bonuses, while
others shifted from giving bonuses annually to giving
them more frequently to aid retention. A few firms reported that employees had become more concerned about
Most firms raised prices as they passed through higher
costs of labor, materials, and energy to customers. Contacts generally reported that they had little difficulty passing through costs to customers. However, some consumer-facing firms observed that customers were starting to
D-1
Federal Reserve Bank of Cleveland
trim expenses because of higher food and gas prices.
One large grocery chain said that “customers have recently taken aggressive steps to save. They’ve shifted
from national brands to cheaper store brands. They are
also doing things such as purchasing half a gallon of milk
instead of a gallon.” Contacts broadly expected to continue to push up their prices over the next 12 months to
keep up with rising costs.
on demand for residential construction than it would for
other industries because of the shortage of available
homes.
Nonresidential construction activity slowed because of
rising interest rates and construction costs, although it
remained positive. One general contractor noted that
building costs have escalated to the point that prevailing
rents are no longer able to support development costs.
As a result, some clients delayed or scaled back projects. Contacts anticipated that nonresidential construction activity would diminish further as higher interest
rates and cost pressures persist in the near term.
Consumer Spending
Reports suggested that consumer spending was little
changed overall, although there was variation by segment. General merchandisers and apparel retailers
reported improved demand, while restaurateurs reported
a pickup in sales related to improved weather and the
onset of wedding and event season. By contrast, auto
dealers reported that sales declined even though demand was elevated. One contact explained that auto
dealers were selling every car they received from manufacturers, but the number of sales was lower because of
limited inventory. Retailers expressed concern that high
inflation could weaken consumer spending in the near
term, but hospitality contacts remained optimistic that
activity would continue to increase going into the summer.
Financial Services
Overall, loan demand increased modestly. Contacts
reported some improvement in commercial and industrial
loan demand. By contrast, demand for mortgages declined, a situation which bankers attributed to low housing inventory and higher mortgage rates. Demand for
auto loans also declined, and this decline was attributed
to the limited inventory of vehicles for sale. Lenders
noted that delinquency rates for commercial and consumer loans remained low but that they expected higher
borrowing costs would lead to an uptick in delinquency
rates in the months ahead. Core deposits remained
steady, although multiple bankers said they expected
deposits to decrease in the next couple of months as
households draw on their savings to cope with rising
prices. Looking ahead, bankers expected loan demand
to slow as interest rates rise.
Manufacturing
Demand for manufactured goods softened following
strong growth in the previous period. High inflation,
supply chain disruptions, labor shortages, the war in
Ukraine, and COVID-19-related shutdowns in China
contributed to heightened uncertainty about the economic outlook and caused some manufacturers’ customers to
reduce orders. Despite softer demand, many manufacturers noted that they still could not meet demand because of shortages of workers or inputs. The unreliability
of supply chains motivated several firms to temporarily
move away from just-in-time inventory management and
to stockpile supplies where they could. Spending on
capital equipment was modestly positive, with firms
saying they were preserving cash, could not get equipment, or were cautious because of rising prices and
economic uncertainty. On balance, manufacturers expected demand to increase modestly in coming months.
Professional and Business Services
Professional and business services firms continued to
report strong activity. Demand for IT-related services
such as artificial intelligence, software services, and
authentication services, was especially strong. One
software provider indicated that labor shortages pushed
some firms to seek software and cloud-based solutions
to assist with administrative tasks. Contacts anticipated
demand for professional and business services would
remain strong in the near term.
Freight
Freight demand remained soft following a decline in the
previous period. Supply chain challenges had variable
impacts on firms. While COVID-19-related shutdowns in
China reduced the need for freight from port cities, demand for air freight was reportedly strong. One airport
contact reported a recent double-digit increase in air
cargo volume. Looking forward, contacts expected demand to improve slightly in coming months. ■
Real Estate and Construction
Demand for residential construction and real estate
softened. Contacts reported that higher home prices and
interest rates had reduced affordability and that many
potential buyers had become increasingly concerned
about the economic outlook. Although contacts expected
housing demand to soften further, they noted that demand remained strong overall. One homebuilder expected rising interest rates would have less of an impact
For more information about District economic conditions visit:
www.clevelandfed.org/en/region/regional‐analysis
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ May 2022
Summary of Economic Activity
Since our previous report, the regional economy grew at a modest rate. Manufacturing activity increased at a modest to
moderate rate as producers continued to face challenges meeting demand due to supply chain disruptions and labor
shortages. Fifth District ports reported an increase in loaded exports but a slight decline in imports, although import
volumes remained historically high. Similarly, trucking demand eased slightly but remained strong relative to prior years.
Retail sales remained strong while new vehicle sales remained low due to low inventory levels. Leisure travel held
strong with some increases noted for group travel, weddings, and small events. Residential real estate activity slowed
modestly, and some potential buyers were getting priced out of the market as interest rates and home prices rose.
Meanwhile, commercial real estate activity remained strong, particularly for Class A office and industrial space. Financial institutions reported a slight slowdown in lending across most loan types, one exception being used vehicle lending,
which continued to grow. Nonfinancial service firms saw moderate growth in sales but expressed some concerns that
inflation could hamper growth in coming months if it remains elevated. Employment increased modestly and wage
growth remained moderate, overall, as many employers continued to cite challenges finding and retaining workers.
Price growth remained robust in recent weeks.
Labor Markets
Manufacturing
Employment in the Fifth District increased modestly amid
ongoing reports of worker shortages and high turnover. A
majority of contacts continued to cite difficulties finding
and retaining workers across all skill levels. Among the
small number of contacts reporting improving worker
availability, most said that improvements came after
raising wages. Additionally, one contact said that they
recently made a change to their payroll policy that allowed hourly, part-time employees to be paid in a much
shorter amount of time and that helped increase interest
in those positions. Overall, wages increased at a moderate rate, with some reports of larger increases for highly
specialized positions and for those in very short supply.
Since our previous report, Fifth District manufacturers
reported a moderate increase in shipments and a modest increase in new orders. Several contacts noted that
supply chain issues and worker shortages limited their
productive capacity and added to their backlogs. In
response to labor challenges and continued strong demand, some companies looked to invest in automation
and technology to increase production and reduce dependence on labor. A few manufacturers, however, said
that demand softened slightly, which was attributed to
inflation and consumers shifting spending away from
durable goods.
Prices
Overall, ports experienced continued strong container
volumes, with solid growth in loaded containers and
empties for export. Meanwhile, import volumes declined
slightly, which relieved some of the congestion at the
ports. Spot shipping rates continued to decline slightly
but remained well above 2019 levels. Fifth District ports
were watching for a potential summer surge in imports
caused by Asian ports reopening after COVID disruptions and carriers potentially diverting ships to East
Coast ahead of the West Coast longshoreman union
negotiations in July. Air freight volume declined slightly
while air freight rates increased this period.
Ports and Transportation
Overall, price growth remained significantly elevated in
recent weeks. According to our surveys, service sector
firms reported that price growth picked up from an already robust rate. Manufacturers, on the other hand,
reported a slight moderation in price growth, but compared to last year, prices were still growing at a strong
rate. Firms in both manufacturing and nonmanufacturing
sectors continued to cite material shortages and rising
fuel costs as contributors to price escalation. Labor costs
also contributed to price growth as many firms continue
to increase wages and benefits to recruit and retain
workers.
E-1
Federal Reserve Bank of Richmond
Trucking companies reported that demand remained
strong, but that the number of booked orders decreased
despite businesses’ inventory levels still being low.
Capacity loosened slightly, through still tight, and spot
rates declined this period; however, fuel surcharges
offset much of the cost savings. Most trucking companies noted improvement in their ability to hire new drivers. Trucking firms were receiving deliveries of the new
equipment they ordered in 2021, though they still had to
rely on older equipment to meet demand.
despite slowing absorption rates and rising rental rates.
Commercial property sales were strong with lots of investment money reportedly chasing too few deals. New
commercial construction was hampered by escalating
costs and availability of materials, as well as shortages
of skilled labor.
Banking and Finance
There continued to be strong loan demand across most
commercial loan types, but there are signs of a slowing
due to rising rates. Residential mortgage demand continued to slow, which was observed as a byproduct of
increasing rates and rising home prices. New auto lending was still being impacted from inventory shortages,
however, used auto lending demand continuing to increase. Deposits continue to trend upward, but at a
slowing pace. Commercial credit quality remained good,
and delinquencies remain low. Some institutions noted
that consumer loan quality is beginning to weaken, and
delinquencies are starting to increase slightly, especially
from borrowers with limited discretionary income.
Retail, Travel, and Tourism
Since our last report, retail sales remained strong with
most stores able to pass on increased costs to consumers. However, labor availability continued to be a headwind for most retailers with wages increasing in order to
attract and retain workers. Rising inventory and materials costs were an issue in terms of future pricing as well.
With automotive manufacturers unable to maintain
production due to supply chain issues, automobile dealers stated that their inventory of new cars continued to
be extremely low, negatively impacting their sales revenue.
Nonfinancial Services
Nonfinancial service providers continued to report moderate growth in revenues and solid demand in recent
weeks. Although many firms were experiencing positive
growth, there was widespread concern that inflation
could hamper growth in the near-term. One professional
service firm said that their plans for hiring, and capital
spending were put on hold because they saw their clients capping or cutting budgets out of caution. Additionally, a consultant was concerned that they might lose
one of their major clients because that client was facing
a contract renewal for electricity and might need to cut
spending to offset increased costs of energy. ■
In the Fifth District, leisure travel remained strong, and
contacts reported that group travel had started to come
back. More weddings and smaller events occurred, but
conventions have not fully returned yet. Both hotel occupancy rates and average daily rates were increased in
recent weeks. Passenger counts at airports had almost
fully recovered to their pre-pandemic levels despite
ticket prices being far higher than in 2019. Overall, the
hospitality sector continued to experience strong demand, but were still grappling with staffing shortages
despite increased wages and benefits.
Real Estate and Construction
Sales and buyer traffic decreased this period compared
to the first quarter of 2022 as housing inventory levels
remained constrained and home prices continued to
rise. Since our last report, some potential homebuyers
were starting to be priced out of the market by higher
interest rates combined with elevated home prices.
Residential construction costs for both materials and
labor continued to rise, but availability of construction
materials improved. Real estate agents noted that it still
was very competitive market for buyers.
Overall, commercial real estate activity remained strong
this reporting period. Class A office leasing activity was
robust, especially in suburban markets. Supplies of
existing buildings in most commercial real estate categories were tight. Availability of industrial properties continued to be constrained due to demand outpacing supply,
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ May 2022
Summary of Economic Activity
Economic activity in the Sixth District expanded at a modest pace from April through mid-May. Labor market tightness
and wage pressures continued for some. Most nonlabor costs rose, and firms’ pricing power was sustained. Retail sales
softened somewhat, and auto sales were down from year-earlier levels. Leisure travel was robust, and business travel
and convention bookings picked up. Demand for housing slowed slightly as rates picked up, inventory levels remained
low, and home prices remained elevated. Commercial real estate activity remained mixed. Manufacturing activity was
strong. Conditions at financial institutions were mixed as lending activity strengthened and deposit levels declined.
Labor Markets
Most contacts continued to report tight labor market
conditions. Turnover rates remained elevated. Reports
on the pool of candidates for open positions were mixed.
Among professional positions, the availability of candidates improved by most accounts; however, for firms
seeking to fill skilled trades, manufacturing, and hourly
service jobs, talent remained in short supply. Businesses
continued to respond to labor constraints in a variety of
ways including increasing wages, bonuses, and benefits;
offering scheduling flexibility; curtailing capacity; offshoring jobs; and slowing growth. Many noted the speed of
hiring had increased dramatically across all position
types and wage levels to secure talent; strong salary
offers were typically in-hand at the time of the interview
to offset counteroffers from existing and other employers.
noted a slight dampening of demand or consumers
“trading down” to second tier products. The Atlanta Fed’s
Business Inflation Expectations survey showed yearover-year unit cost growth was relatively unchanged at
4.2 percent, on average, in May. Firms' year-ahead
inflation expectations also remained relatively unchanged at 3.7 percent, on average.
Consumer Spending and Tourism
District retailers reported some softening in unit sales
and a shift in discretionary spending since the previous
report. Contacts noted that some customers began
foregoing discretionary spending to cover the rising costs
of rent, food, and fuel. Though demand for luxury goods
continued to hold up, demand for items such as home
decor slowed among lower- and middle-income customers. Year-over-year automotive unit sales remained well
below 2021 levels amid persistently low inventories.
Expectations about faster wage increases remained
mixed. Some firms anticipate wage growth will increase
this year across all jobs, while others plan to be more
targeted with raises, and yet some expect growth will
slow a bit.
Demand for leisure travel remained robust and hospitality contacts reported strong advanced bookings through
the summer. Consumer spending at tourism destinations
was described as having returned to (or in some cases,
surpassed) pre-pandemic levels. Business travel and
convention bookings continued to improve.
Prices
Reports of cost increases were widespread over the
reporting period, including the cost of freight, labor,
nonlabor inputs, and food. Supply chain constraints
continued to plague firms, and some noted a shift to
shipping freight by air, though it was much more costly.
For some businesses, the volatility of the current pricing
environment has impacted the variety of products available and reduced contract negotiations to shorter terms
with more “cost plus” conditions. Margins largely remained at record highs for many firms as price increases
were met with little resistance; however, several contacts
Construction and Real Estate
Home sales throughout the District slowed somewhat as
housing prices and mortgage interest rates rose. Inventory levels remained low in most areas, and homes new
to the market continued to sell quickly. On balance,
home price acceleration continued, as markets like
Nashville, Tampa, and Atlanta experienced very strong
growth over the past year. Declining homeowner affordability remained a major concern among market partici-
F-1
Federal Reserve Bank of Atlanta
its, and a shift in the interest rate environment. Consumer, commercial, and industrial lending strengthened, but
construction loans fell. Residential mortgage lending
moderated due to a combination of low housing inventory and a move toward higher interest rates. Deposits
declined further, leading to increased short-term borrowings among financial institutions. Provisions for credit
losses increased as delinquencies rose slightly but remained below historical norms.
pants. Contacts indicated that, although buyer interest
remained robust in many markets, higher prices and
rising interest rates resulted in a shrinking pool of eligible
buyers, and contract cancelations slightly increased as
fewer buyers qualified for mortgage loans. Although
housing starts rose, builders indicated that supply chain
disruptions remained a challenge.
District commercial real estate (CRE) conditions remained mixed. Contacts reported continued robust activity in the multifamily and industrial sectors. Lower-tier
office demand was identified as cooling somewhat.
Employers’ return-to-office stances appeared to be mitigating some of the downward trend in the office sector;
however, heightened levels of sublease space remained
an impediment to recovery. While overall transaction
levels were healthy, CRE contacts reported shrinking
pools of buyers, more instances of buyers seeking greater concessions, and price declines in some property
sectors.
Energy
Energy contacts reported that demand for crude oil fell
over the reporting period. At the same time, oil production picked up, helping global crude markets withstand
the loss of Russian supplies. Still, for many producers,
increasing production remained a challenge as labor
shortages and supply chain bottlenecks inhibited access
to equipment and raw materials for drilling. Refinery
utilization remained strong. Demand for some chemical
and petrochemical products declined. Utility contacts
reported that rising natural gas prices are expected to
result in higher utility bills for consumers. Across utility
segments, commercial and industrial activity were up,
while residential activity was flat, the latter attributed to
customer growth being offset by falling residential usage
as customers returned to work in offices space. Investment in renewables remained robust, particularly in solar
and offshore wind.
Manufacturing
Manufacturing activity in the District remained strong.
However, some contacts noted an inability to meet demand due to staffing constraints and shortfalls of supplies, notably steel sourced from Ukraine. Several manufacturers reported spreading supply purchases across
multiple sources to alleviate supply chain constraints and
implementing advance supply ordering to avoid depletion
of parts inventories. Half of manufacturing respondents
participating in the Atlanta Fed’s Business Inflation Expectations Survey reported increasing capacity by adding staff or shifts to meet demand, while others simply
turned away customers.
Agriculture
Agricultural conditions remained mixed. Most of the
District remained drought free. On a month-over-month
basis, the May production forecast for Florida's orange
and grapefruit crops were below last year's production.
The USDA reported year-over-year prices paid to farmers were up for cattle, corn, cotton, eggs, milk, soybeans, rice, and broilers. On a month-over-month basis,
prices increased slightly for cattle, corn, cotton, boilers,
milk, and soybeans, but decreased for eggs; rice was
unchanged. ■
Transportation
Transportation activity remained mixed. Inland barge
companies reported increased shipments of refined
petroleum products, chemicals, and aggregates. District
ports experienced further growth in container volumes. In
the spot market, freight brokers reported a slight pullback
in the van sector, which was attributed partially to a shift
from the purchasing of goods to services by consumers;
demand for flatbeds was steady as housing and construction activity remained high. Despite continued yearover-year declines in freight volumes, railroad contacts
reported double-digit increases in revenue due to pricing
gains. While most transportation contacts expect activity
to remain steady over the next 6-12 months, some
voiced concerns that elevated inflation and higher fuel
prices could slow activity in the sector.
Banking and Finance
Conditions at District financial institutions were mixed.
Bankers reported higher loan growth, a decline in depos-
For more information about District economic conditions visit:
www.atlantafed.org/economy‐matters/regional‐economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ May 2022
Summary of Economic Activity
Economic activity in the Seventh District increased modestly overall in April and early May, though contacts expected a
slower pace of growth over the coming months. Labor and materials supply constraints continued to weigh on the expansion. Employment increased strongly, manufacturing was up moderately, consumer spending moved up modestly,
business spending was slightly higher, and construction and real estate activity declined slightly. Wages and prices rose
rapidly, while financial conditions deteriorated some. Agriculture income expectations for 2022 were little changed.
Labor Markets
other materials. That said, some contacts reported that
the pace of growth in raw materials and energy prices
had slowed. Consumer prices generally moved up robustly due to solid demand, limited inventories, and
passthrough of higher costs. Most contacts indicated that
they were experiencing only limited pushback on price
increases from customers, but some said they were
seeing more resistance to higher prices than in previous
reporting periods.
Employment increased at a strong pace over the reporting period, and contacts expected moderate growth over
the next 12 months. Despite robust hiring, there were
reports of difficulty in finding workers across sectors and
at all skill levels, and a number of firms indicated that a
lack of staffing prevented them from operating at desired
capacity. High turnover rates continued to be an issue
for some contacts, and there were multiple reports of
new hires never showing up for work. One contact noted
that they were able to hire but had to settle for lessqualified candidates. A contact in manufacturing reported
investing in robotics to substitute for labor in some of
their production processes. Overall, wage and benefit
costs increased rapidly, both to attract new workers and
to retain existing talent. In addition to labor market tightness, contacts cited high inflation as an impetus for
workers requesting higher wages. Many contacts indicated that they were offering workers more flexibility in
terms of hours and work-at-home arrangements.
Consumer Spending
Consumer spending increased modestly over the reporting period. Nonauto retail sales were up moderately,
though much of the increase reflected higher prices
rather than greater volumes. There were reports of a
shift in the mix of purchases from discretionary items
toward essential goods. Moreover, a growing number of
consumers were picking less expensive options when
purchasing products. In addition, a regional food bank
reported a considerable increase in demand. Among
product lines, grocery sales increased modestly, but
spending was flat on appliances and electronics and at
discount stores. Spending on furniture and home furnishings fell. Leisure and hospitality results were mixed
overall, though future bookings indicated that demand for
summer travel was strong. Light vehicle sales were flat
and still constrained by low inventory levels. Elevated
Prices
Overall, prices rose rapidly in April and early May, and
contacts expected price increases to continue at a strong
pace over the next 12 months. There were large increases in producer prices, spurred by passthrough of higher
costs for labor, transportation, energy, some metals, and
G-1
Federal Reserve Bank of Chicago
prices continued to support high dealer profit margins.
heavy machinery was strong, outstripping availability
because of manufacturers’ capacity constraints. Steel
production increased a bit, and demand moved up, with
contacts highlighting greater sales to the energy industry. Sales of fabricated metals decreased slightly overall.
Business Spending
Business spending increased slightly in April and early
May. Retail inventories were up a bit overall but remained at low levels in many sectors as supply chain
bottlenecks persisted. Only spotty improvement was
expected by the end of the year. Manufacturing inventories were comfortable overall, though some contacts said
lead times lengthened. A wide range of inputs remained
difficult to find. Manufacturing and retail contacts expressed concern that the COVID-19 outbreak in China
would result in further supply disruptions. Demand for
transportation services was little changed as the industry
continued to operate full out. Capital expenditures grew
slightly, with many contacts reporting purchases of new
equipment and technology for hybrid work environments.
Lead times remained lengthy for some types of capital
equipment. Commercial and industrial energy consumption increased slightly, led by manufacturing, while residential energy consumption decreased slightly.
Banking and Finance
Financial conditions deteriorated on balance over the
reporting period. Participants in the equity and bond
markets reported rising interest rates, greater volatility,
and net declines in asset values. Business loan demand
increased slightly, with contacts reporting growth in
lending for commercial vehicles, restaurants, and construction. Business loan quality and standards remained
unchanged on net. In consumer markets, loan demand
decreased modestly, with contacts noting large declines
in mortgage refinancing. Loan quality was unchanged on
balance, while credit standards tightened slightly over
the reporting period.
Agriculture
Farm net income expectations for 2022 were little
changed overall during the reporting period, as prices
and costs increased by similar amounts. Corn, soybean,
and wheat prices were all up, as were prices for diesel
and propane. Cool, wet weather slowed spring planting
for corn and soybeans. In addition, concerns lingered
about whether fertilizer would arrive at farms on time.
Strong dairy exports helped boost milk prices. Bird flu
continued to ravage poultry farms, pushing up egg prices. Hog prices moved sideways, while cattle prices were
lower. As with crop farmers, livestock producers also
faced higher input costs. Agricultural land prices continued to rise strongly. ■
Construction and Real Estate
Construction and real estate activity decreased slightly
on net over the reporting period. Contacts in both residential and nonresidential construction noted that higher
labor and material costs continued to encumber activity,
and that rising interest rates had also begun to weigh on
demand. Multiple contacts mentioned that it was more
cost effective to buy materials in advance of a project
start than to purchase materials as needed once building
began. Residential construction decreased slightly.
While demand remained strong on the multifamily side,
activity levels in the single-family segment fell, including
for remodeling. Residential real estate activity decreased
modestly as rising prices and mortgage rates hurt affordability. Low inventory levels continued to put upward
pressure on home prices. Rents increased moderately.
Nonresidential construction activity rose slightly. Demand for industrial projects, specifically for warehousing
and infrastructure, remained robust. Overall, commercial
real estate demand was unchanged, as were prices and
rents. However, contacts noted that demand for smaller
spaces, particularly in freestanding buildings, had increased.
Manufacturing
Manufacturing production increased moderately in April
and early May despite challenges with supply chain
shortages and securing labor. Auto output increased
some, though contacts were still reporting shortages of
microchips and other materials. Heavy truck demand
rose slightly; production was also up a bit, but high prices persisted amid very low inventories. Demand for
For more information about District economic conditions visit:
chicagofed.org/cfsec
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ May 2022
Summary of Economic Activity
Economic conditions have improved at a modest pace since our previous report. The outlook for the remainder of the
year weakened due to concerns about continued price increases and softening demand. Competition for workers continued to place upward pressure on wages. Prices for raw materials and fuel increased at a robust pace; firms passed on
prices to consumers and adjusted behavior to try to mitigate the impact of price volatility. Consumer spending shifted
from goods to services and became more sensitive to prices; retailers reported that credit card usage rose. Manufacturing firms reported that a backlog of orders should sustain production even as the rate of new orders declines due to
higher prices. Residential real estate demand has cooled slightly due to rising mortgage rates, but inventory remains low
due to supply constraints that have limited construction projects. Banking contacts reported that consumer lending
demand has softened.
Labor Markets
Prices
Employment has increased modestly since our previous
report. Labor shortages remain widespread, with firms
noting difficulty hiring and retaining workers. Contacts in
industries with predominantly in-person roles noted
particular difficulty hiring. Some contacts remarked that
remote work was allowing coastal firms to hire workers in
the District for higher wages than local employers were
willing to pay, causing an in-place “brain drain.” Firms
expanded benefits, increased outreach, turned to automation, and considered offshoring to handle the scarcity;
one healthcare contact reported that he had to start his
hiring process two to three months earlier than usual to
find sufficient workers.
Prices have increased robustly since our previous report.
Contacts in the construction industry reported high price
volatility for plumbing materials, roofing materials, and
asphalt. One such contact reported that prices for those
items are, in some cases, increasing every 10 days.
Contacts reported a decline in lumber prices. Contacts
are hopeful the price of steel will decline in the near
future. Contacts in the manufacturing industry have
started announcing price increases to customers several
months in advance. A Missouri manufacturer noted that
industry attitudes toward price increases have shifted,
with sales staff and customers “numb” to continued
increases.
Wages have continued to grow strongly. One transportation contact reported that wages had increased for both
low-skilled, hourly workers and skilled employees by
20% or more in the past six months. Some healthcare
contacts reported that raising wages was more difficult
due to the industry’s contract and payment structure, but
nevertheless reported that labor costs had increased
substantially in the past year.
Consumer Spending
General retailers, auto dealers, and hospitality contacts
reported slightly higher business activity and a mixed
outlook. April real sales tax collections decreased in
Missouri and Arkansas relative to March and increased
in Kentucky and west Tennessee. St. Louis retailers
noted that business activity has been consistent over the
past month, but reported a negative outlook for the upcoming months, citing inflation and stronger demand for
travel. One luxury car dealership in Northern Mississippi
said that they are starting to sell fewer large cars and
more small, fuel-efficient cars as demand shifts due to
H-1
Federal Reserve Bank of St. Louis
rising gas prices. Restaurants in Louisville saw a return
to normal business activity during the Kentucky Derby,
which was greatly affected by the pandemic in previous
years. Hospitality contacts noted higher business activity
compared with last month and last year, citing pent-up
demand for travel. They also had a mixed outlook for the
upcoming months, citing higher prices.
Construction activity remains strong despite continued
supply chain issues and increased input costs. Contacts
reported that banks are hesitant to agree on rates for
any projects not beginning immediately, given the uncertain outlook. One contact complained that paint is the
only input available at a normal price.
Manufacturing
Banking conditions have weakened slightly since our
previous report. Although commercial lending has remained relatively strong, consumer lending has softened. Borrowing rates and secondary-market rates have
begun increasing. Several large retailers reported that
credit card usage increased. Mortgage and other lending
rates increased significantly. Liquidity and deposits remain very high within the banking system, causing little
pressure on banks to increase deposit interest rates. The
combination of rising lending rates and stagnant deposit
rates has allowed many banks to increase margins
slightly from what have been persistent all-time lows.
Banking and Finance
Manufacturing activity has increased moderately since
our previous report. Survey-based indices suggest that
production, capacity utilization, and new orders have all
moderately increased, and firms expect slight increases
in the coming quarter. The primary concerns within the
manufacturing industry continue to be the availability of
labor and inputs. Firms continue to explore automated
processes, though substantial lead times on robotics
mean they are not a short-term solution. There is cautious optimism about future sales due to high order backlogs from pent-up demand and high inventory from the
limited availability of key inputs.
Agriculture and Natural Resources
Nonfinancial Services
Agriculture conditions have improved slightly since our
previous report. Contacts reported thin margins despite
increased commodity prices due to rising input and labor
costs, but remain optimistic due to persistent high demand. Contacts noted that rising energy prices have
created an unprecedented opportunity for alternative
energy products and other new technologies in the sector. The percentage of row crops planted has increased
since the previous reporting period, but is down from this
time in 2021. Progress of acres planted is down this year
for every crop and all states in the District, which reflects
production issues due to staffing and supply chain concerns. ■
Activity in the nonfinancial services sector has increased
since our previous report. Airport traffic increased in
April, with seaport bottlenecks increasing demand for air
freight in Missouri. While business travel is rebounding,
rising ticket prices are expected to cause slower growth
in leisure travel across Northwest Arkansas and Tennessee. Transportation has seen a push toward automation,
but contacts report struggling to train workers to maintain
and repair the required technology. The nurse shortage
has increased wages across the District, but nursing
school enrollments are still down in Eastern Missouri.
Real Estate and Construction
The industrial and warehouse market has remained
strong since our previous report. Rents have increased
faster than input costs due to high demand. Multiple
contacts reported optimism that input costs would come
down after Amazon announced slowing their expansion
of distribution centers.
The residential real estate market has seen demand
begin to cool now that mortgage rates are increasing.
However, with inventory still low, it remains a seller’s
market. One contact reported that many prospective
homeowners are favoring new builds despite elevated
input costs, because they can buy the house at asking
price without competing against other buyers. According
to multiple contacts in Louisville, first-time home buyers
are dipping into their 401(k)s or drawing from their parents’ retirement savings to enable cash offers.
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ May 2022
Summary of Economic Activity
Ninth District economic activity grew moderately since mid-April. Labor demand remained strong since the last report,
but overall hiring was restrained by tight labor supply. Wage and price pressures remained elevated, and added costs
were being passed on to consumers through higher selling prices. Consumer spending grew slightly, remaining at high
levels; tourism and hospitality activity increased slightly from a year ago despite unfavorable weather. Commercial
construction grew slightly, commercial real estate was mixed, and residential construction and real estate slowed, with
rising interest rates a factor in each of these sectors. Agricultural conditions remained strong. Reports from minority- and
women-owned business enterprises were mixed, as demand for services improved but margins narrowed.
Labor Markets
Prices
Employment grew strongly since the last report. Demand
for labor was even higher, but hiring was restrained by
tight labor supply. Several surveys found continued
strong hiring demand by employers. Among more than
200 Minnesota hospitality and tourism firms, three of four
were hiring in some capacity, and close to half were
hiring more year-round staff. In the construction sector,
40 percent of firms were hiring to increase headcount,
and a majority were hiring to replace turnover. Labor
demand in the sector was also expected to accelerate in
coming months. In a cross-sectoral pulse survey,
significantly more firms saw an increase in labor needs
over the previous month compared with those that saw a
decrease. However, employee headcounts have grown
more slowly than labor demand, as firms continued to
report significant difficulty in hiring workers for open
positions.
Inflationary pressures remained elevated since the
previous report. About 70 percent of respondents to a
District-wide business survey reported that their nonlabor
input prices increased in April from a month earlier.
More than half said they increased their selling prices
over the previous month; a slightly lower proportion
expected to increase prices in May. About three-quarters
of manufacturers at a recent event indicated that their
input prices have risen faster since the beginning of this
year than last year, compared with fewer than 10 percent
who reported that prices increased at a slower pace.
Retail fuel prices in District states increased swiftly since
the previous report. Agriculture contacts continued to
report significant increases in prices for both agricultural
commodities and agricultural inputs.
Worker Experience
Individuals moving through the labor market were mainly
looking for better pay. Some workers were considering
taking second jobs to meet the higher cost of living but
faced constraints with balancing existing responsibilities.
Preliminary results from a survey of workers in South
Dakota indicated that rising prices have significantly
strained family budgets. Most said they were mainly
experiencing pressure from fuel, grocery, and electricity
prices. Several reported forgoing activities like eating out
or traveling for leisure to reduce expenses. Overall,
workers saw their cost of living increase. A worker in the
Wage pressures remained strong. A large majority of
manufacturing firms reported increases of at least 5
percent. More than half of hospitality and tourism firms
reported wage hikes of 5 percent or more. In the
construction sector, roughly one-third said wages have
risen by more than 5 percent, which was notably higher
than a similar poll six months earlier. A large Minnesota
manufacturer said turnover in low-skilled “is very high.
They keep chasing wages and don't show up for their
job. It’s hard to keep a low-skilled job filled for one year.”
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Federal Reserve Bank of Minneapolis
inventories, rising prices, and higher mortgage rates.
Several contacts said that they expected some demand
to get pulled forward to get ahead of rate increases.
Contacts reported an increase in the use of adjustablerate mortgages.
finance sector said that “a 3 percent raise is not keeping
up with the cost-of-living.…We are definitely living more
of a paycheck-to-paycheck lifestyle than a year ago.” A
construction industry job seeker shared that gas prices
were further reducing his mobility and employment
options.
Manufacturing
Consumer Spending
Manufacturing activity was strong since the last report. A
regional manufacturing index indicated increased activity
in Minnesota, North Dakota, and South Dakota in April
relative to the previous month. Manufacturers generally
reported robust demand; however, a greater share of
firms noted decreased new orders in April than in recent
months. Industry contacts continued to report long
delivery times and difficulty securing inputs, such as
aluminum, stainless steel, and packaging.
Consumer spending grew slightly since the last report,
remaining at high levels. Retail contacts reported
modestly higher revenues compared with the previous
month, but somewhat lower profits. Tourism and
hospitality firms said that recent activity was slightly
improved compared with the same period last year, but
an unseasonably cool spring dampened what might have
otherwise been stronger activity. The summer outlook
was quite positive, contacts said, though travelers were
booking later than normal, and COVID-19 surges and
gas prices created some uncertainty. Airports also
reported rising passenger levels, including rebounding
business travel. Consumer and business contacts said it
was still too early to gauge the net effects of interest rate
increases on consumer spending. A vehicle dealership
said new car sales were more affected by inventory
shortages than interest rates.
Agriculture, Energy, and Natural Resources
District agricultural conditions remained strong.
According to the first-quarter (April) survey of agricultural
credit conditions, 87 percent of respondents reported
increased farm incomes relative to the same period a
year earlier. Farmland values increased briskly.
However, due to an exceptionally cold and wet spring,
crop planting and progress were well behind schedule in
much of the District, except for Montana and western
portions of the Dakotas, where drought conditions were
rampant. District oil and gas activity increased modestly
since the last report, as drilling and production gradually
responded to surging crude prices.
Construction and Real Estate
Commercial construction grew slightly since the last
report. Marginally more firms reported higher recent
revenue than those reporting a decrease. However, the
general pace of activity appeared to be slowing due to
persistent supply chain problems, high input costs,
higher interest rates, and lack of labor. Contacts reported
a noticeable increase in project cancellations, and delays
continued to worsen. New projects out for bid held
mostly steady with some increase in public projects; in
general, contacts were optimistic heading into the
summer season. Residential construction was flat. The
sector reported higher levels of project cancellations and
delays; however, new permitting activity remained
healthy, particularly for multifamily units.
Minority- and Women-Owned Business Enterprises
Reports from minority- and women-owned business
enterprises (MWBEs) in the District remained mixed.
Warmer weather brought increased traffic to many
service industry businesses, but input costs continued to
put downward pressure on their margins. A
restauranteur in the Minneapolis–St. Paul region
expressed concerns about their ability to continue raising
menu prices, as customers faced higher inflation. A
restaurant equipment distributor noted healthy demand
from their MWBE clients and highlighted a slight
loosening of supply chain bottlenecks. A media company
executive said that finding competent talent was a barrier
to their growth, highlighting the persistent hiring
challenges faced by many. Nonprofit finance contacts
shared that demand for loans was down overall because
entrepreneurs were feeling uncertain about the
economy. ■
Commercial real estate activity was mixed. Several
industry contacts said rate increases have started to
negatively affect deal pricing by as much as 10 percent.
Industrial space has seen less impact due to the current
strength of that market. Contacts also expected more
sales to come into the market over the next month or two
in order to beat expected future rate hikes. At the same
time, some sales have been pulled off the market due to
a decrease in the number of bids and active buyers.
Residential real estate fell moderately. Closed sales in
April fell across most markets, the result of low
For more information about District economic conditions visit:
minneapolisfed.org/region‐and‐community
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ May 2022
Summary of Economic Activity
The Tenth District economy grew at a moderate pace, but expectations for future growth softened somewhat due to rising
costs, worsening supply chain disruptions and heightened uncertainty. Several contacts reported shifts in consumer
spending. Demand for goods slowed while demand for services grew steadily, particularly in leisure and hospitality. Businesses also reported lower expected spending on more expensive discretionary items as prices continued to rise. Although expected growth softened generally, construction activity grew at a robust pace and backlogs for future projects
extended further. Labor activity expanded moderately with solid job growth and increases in the average number of hours
worked. Above average wage gains aimed at retaining workers were reported widely. Prices rose at a robust pace. Contacts in food manufacturing indicated that consumer prices for food are likely to increase further over coming months.
Large retailers and grocers are reportedly accepting planned cost increases from food distributors that will be passed on
to consumers through the summer and fall. Restaurant owners also indicated they are raising prices frequently, but with
limited ability to fully offset rising costs.
Labor Markets
Prices
Job growth continued at a moderate pace, led by hiring
in services sectors. Employment at leisure and hospitality businesses expanded to near pre-pandemic levels
across the District. Hiring in manufacturing and other
goods-producing sectors grew slightly, though contacts
reported that labor demand and the number of jobs open
in these sectors remains elevated. Employers noted that
the average hours worked by employees each week
grew moderately and is higher than pre-pandemic
norms. The higher average number of hours worked was
reportedly due to both strong labor demand conditions
as well as fewer workers being employed on a part-time
basis.
Prices rose at a robust pace. Recent increases in commodity prices are leading to price pressures for food that
have not fully passed through to consumers. Large retailers and grocers are reportedly taking price increases
from food manufacturers with 90-day lags, so that additional increases in consumer food prices are likely. Some
restaurants reported taking advantage of digital menus
to implement “real time pricing” on most items, but noted
that customers have been unwilling to fully accept higher
prices when dining out. Contacts at craft breweries noted
that higher wheat costs may lead to losses as consumers substitute to lower cost options.
Most contacts reported solid wage growth. Businesses
indicated that wage increases were being used more
frequently to retain workers in recent weeks, as compared to previously offering bonuses, enhanced benefits
or more flexible schedules to attract and retain workers.
Moreover, the majority of contacts characterized the size
of wage gains aimed at retention as larger than typical
increases from recent years.
Consumer spending continued to grow at a moderate
pace in recent weeks, but several contacts noted shifts
in spending habits. Sales of food in grocery stores grew
faster than at restaurants, but contacts were uncertain if
this was due to labor shortages at restaurants continuing
to restrict operating hours or because higher food prices
led consumers to limit how often they frequent restaurants. Other contacts noted that spending on clothing
and appliances declined slightly. Though demand for
some goods softened, spending on leisure travel and
other services continued to expand at a robust pace.
Consumer Spending
J-1
Federal Reserve Bank of Kansas City
Manufacturing and Other Business Activity
Community and Regional Banking
Manufacturing production grew modestly and new orders
for products continued to rise. Overall demand for trucking and transportation remained elevated, even as logistics businesses reported raising shipping rates in recent
weeks. Transportation parts and services businesses
faced ongoing difficulties sourcing needed parts, challenges that worsened following Russia’s invasion of
Ukraine. Contacts indicated that lockdowns in China
would increase input prices and worsen supply chain
issues, leading some importers of consumer products to
slightly reduce their orders for products to be delivered
later in the year. Businesses indicated expectations that
difficulties in procuring parts and materials will persist for
the next 6-12 months, or longer. Facing ongoing labor
shortages and raw material shortages, most manufacturing contacts indicated they expect production levels to
remain at their current high levels over the next six
months.
Loan demand remained stable over the past month,
although customer appetite for residential mortgage
loans weakened as interest rates increased. Contacts
noted that commercial and industrial loan demand held
steady, despite a reported increase in interest rates.
Credit quality remained sound and problem loan levels
were low amidst stable cash flow positions. Deposit
growth moderated this month as customers pursued
higher rates and utilized excess cash. Despite sound
credit conditions, a moderate share of contacts’ outlooks
for loan quality over the next 6 months deteriorated
modestly due to inflation concerns and supply chain
pressures on consumer and small business loan segments.
Energy
Tenth District energy activity expanded at a moderate
pace in recent weeks. Active rig counts increased across
District states in April and early May. Drilled-butuncompleted wells declined across the Anadarko and
Niobrara regions as additional wells came online. With
more active rigs, regional oil production increased slightly over the past month, though new well productivity fell
modestly. Oil prices are slightly higher from a month ago
and drilling remains profitable for most District firms,
despite rising costs. Natural gas prices continued to rise
swiftly over the last month. District energy firms reported
higher revenues in early 2022 along with higher materials and labor costs. Mining jobs, including the oil and gas
sector, picked up across most District states in recent
months, but continued to lag pre-pandemic levels. Expectations for future production, employment, and capital
expenditures remained positive.
Several businesses reported slowing growth in their
planned capital expenditures on equipment and less
buildup in their inventories. Retailers highlighted shifting
consumption patterns as a key reason they will undertake less inventory buildup over the summer. Prices for
transportation vehicles and other production equipment
on secondary markets increased rapidly over the past
several months. Several contacts indicated that, although overall demand remains elevated, they see a
heightened risk that demand could fall and cause their
businesses to take losses on equipment purchases
given their current high prices. These headwinds to
business investment emerged recently alongside standing concerns about rising material costs and rising interest rates. On average, businesses in the District expected no changes in investment in inventory buildup
over the next six months.
Agriculture
Agricultural commodity prices remained at multi-year
highs, providing ongoing tailwinds to the Tenth District
farm economy. Market conditions remained favorable for
prices of all major commodities in the region and prices
of wheat, corn, soybeans, cotton and cattle increased
modestly from the previous month. Farm income and
credit conditions also improved further during the most
recent survey period. However, contacts expected conditions to soften slightly in the coming months and many
cited concerns about rising input costs, broad inflationary
pressures and severe drought. The western and southern portions of the region have been most exposed to
drought, affecting wheat, hay and grazing conditions that
could reduce profit opportunities for both crop and livestock producers in those areas. ■
Real Estate and Construction
Non-residential construction activity expanded at a robust pace in recent months. Expectations for future
growth in non-residential construction remained elevated
as backlogs of orders were widespread and longer than
seen in recent history. Contacts noted strong demand
conditions are likely to maintain wage pressures over the
medium term because companies are more willing to
pay premiums to retain workers amid long backlogs.
Also, several contacts noted their clients are more willing
to accept price increases due to wage pressures than
due to materials costs or overhead costs, leading some
companies to be more likely to increase wages recently.
For more information about District economic conditions visit:
www.KansasCityFed.org/research/regional‐research
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ May 2022
Summary of Economic Activity
Expansion in the Eleventh District economy slowed to a moderate pace during the reporting period. Most notably, home
sales slowed, retail sales fell, and growth in manufacturing and nonfinancial services decreased from a solid to a moderate pace. Growth in loan volumes remained strong across most loan types, except for residential real estate, which saw
no change in loan volumes over the last six weeks. Activity in the energy sector expanded further, while worsening
drought further hampered agricultural conditions. Employment rose robustly, and wage growth continued to be elevated
amid labor market tightness. Supply-chain issues and high energy prices continued to drive up costs. Optimism in outlooks waned, and uncertainty stayed elevated amid concerns about inflation, rising interest rates, resolution of supplychain issues, and expectations of weakening demand.
Labor Markets
Prices
Demand for labor continued to be strong, though supply
remained tight. Several firms noted that staffing shortages were a drag on growth. Three-fourths of the 230
Texas business executives responding to a Dallas Fed
April survey cited a lack of applicants as an impediment
to hiring workers, and 30 percent within that group noted
the availability of applicants had worsened over the past
month. Staffing firms reported increased interest in direct
hires over temporary workers in recent weeks. One
contact mentioned that a large e-commerce firm intends
to automate half of the jobs at a new facility in Shreveport, Louisiana, due to difficulty hiring, and there were
multiple reports indicating that firms were beginning to
consider outsourcing work overseas due to local labor
market tightness.
Selling prices climbed further at a rapid clip. Growth in
non-labor input costs remained elevated, with contacts
mainly citing material shortages, supply-chain issues,
and/or high fuel prices as driving the rising costs. Energy
firms said that day rates for rigs had climbed by 60 percent in six months, and many were revising up their
expectations for overall cost increases from 10-15 percent to 15-20 percent for the year. Transportation costs
remained high, and airlines said average fares rose
above pre-pandemic levels. There were multiple reports
of elevated or rising prices for feedstocks, metals, and
construction materials. In contrast, prices for lumber and
used vehicles declined. Pricing power generally remained solid, though several contacts, particularly in the
service sector, noted diminished ability to fully pass
along costs to end users and pushback from customers
on the rapid pace of price increases.
Wage growth remained robust amid labor shortages.
Oilfield services firms cited intensifying wage pressures,
and a large energy firm noted raising wages for oilfield
workers by 10 percent. Over half of the firms in the
above-mentioned April survey said job applicants were
looking for higher pay than what was being offered.
Multiple firms reported offering referral or hiring bonuses,
and a nondurable goods manufacturer noted difficulty
finding nightshift workers at an average hourly wage of
$27. Staffing firms reported pressure to decrease markups on bill rates in response to rapidly rising wages.
Manufacturing
Texas manufacturing activity increased moderately
during the reporting period. Output growth was led by
nondurable goods such as food and chemical manufacturing. Gulf Coast refinery utilization rates eased in April,
while chemical production increased, buoyed by strong
domestic and export demand. Among durables, strength
was seen in transportation equipment and constructionrelated manufacturing. Enduring supply-chain backlogs
K-1
Federal Reserve Bank of Dallas
and logistical constraints were impeding the ability of
several manufacturers to meet demand. Manufacturing
outlooks were negative with contacts citing geopolitical
tensions, COVID lockdowns in China, inflation, and
supply-chain delays as headwinds.
higher home prices on affordability and future sales.
The multifamily market continued to tighten, with occupancy ticking up further. Apartment rent growth remained
elevated, though there were reports of slowing at the
lower end. Commercial real estate markets were steady
to stronger. Office leasing continued to improve, and
activity in the industrial sector remained elevated. One
contact noted that underwriting standards for multifamily
deals were gradually tightening, which may impact sales
and valuations going forward.
Retail Sales
Retailers and wholesalers reported sustained weakness
in overall sales, with tight inventories and ongoing supply
chain challenges continuing to hamper growth. Auto
dealers cited continued declines in sales stemming from
low inventories of new vehicles; however, demand for
auto servicing and parts sales was characterized as
normal. A few contacts noted that the opening of the
border with Mexico has greatly benefited retailers in the
area. Overall outlooks were pessimistic, however, with
continued concern regarding supply side stresses.
Financial Services
Loan demand rose over the past six weeks despite
broad increases in loan pricing. Loan volume growth
spanned loan types except for residential real estate,
where lending was flat. Nonperforming loans continued
to decrease, and credit standards and terms tightened
further. Looking six months ahead, contacts expect a
decline in loan demand and general business activity
and an increase in nonperforming loans. Contacts note
rising interest rates, inflation, and expectations of slower
growth ahead as headwinds.
Nonfinancial Services
The service sector expanded moderately during the
reporting period. Revenue growth was mostly broadbased, with continued solid increases seen in the leisure
and hospitality and transportation and warehousing
sectors. Staffing firms continued to report strong demand, particularly for healthcare, IT, and construction
workers, and added that filling low-skilled positions was
more challenging than finding high-skilled workers. Demand for air travel rose during the reporting period.
Leisure travel continued to dominate airline bookings,
and contacts said that strong momentum heading into
the summer travel season was boosting outlooks. Vessel
traffic at Texas seaports fell slightly in April but was up
strongly year to date relative to 2021. Vessel dwell times
remained elevated in part due to truck driver shortages.
Air cargo volumes also rose, though shipments to and
from China slowed. Service-sector outlooks were subdued due to expectations of weaker demand going forward and uncertainty surrounding the global economic
outlook and inflation.
Energy
Oilfield activity increased, with the Eleventh District rig
count climbing further during the reporting period. Labor
and supply chain constraints continued to worsen and
were becoming binding in many cases, slowing the pace
of drilling and well completion. Lead times for many
critical parts and components were well over a year.
Contacts said that raising capital was becoming slightly
easier due to an improved outlook for returns. Industry
sentiment was cautiously optimistic, with contacts increasingly concerned about further lengthening of lead
times for materials and the probability of a recession.
Agriculture
Drought intensified over the past six weeks, particularly
in the western part of the district. Crop conditions generally declined, with increased risk of reduced yields for
this year’s row crops. Forage conditions suffered from
the lack of moisture, putting additional strain on livestock
grazing amid highly elevated supplemental feed costs.
This has led to increased culling of herds and lower calf
prices. Agricultural product prices showed mixed movements over the reporting period but generally remained
high. Despite high prices, contacts noted increased
financial risk this year due to drought and higher input
costs. ■
Construction and Real Estate
Activity in the housing market softened. The slowing was
particularly pronounced at the entry price level, though
rising rates were beginning to hit the move-up market as
well. Builders said cancellations were up, traffic was
disappointing, conversions were taking longer, and waitlists were shrinking. Offers were coming in closer to
asking prices, a departure from the large premiums seen
earlier, and incentives, particularly in the form of rate
buydowns, rate locks or closing costs, were being reintroduced. Some builders were releasing homes earlier in
the building cycle to enable clients to lock in rates. Uncertainty in outlooks increased, with contacts voicing
concern about the impact of rising mortgage rates and
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ May 2022
Summary of Economic Activity
Economic activity in the Twelfth District expanded moderately during the April through mid-May reporting period. Overall
labor market conditions remained tight, accompanied by wage increases that showed some signs of leveling off. Price
levels increased briskly, driven by food and energy price increases. Retail sales continued to increase, while conditions
in the consumer and business services sector improved significantly due to pent-up demand for leisure travel and other
services. Activity in the manufacturing sector remained strong, while conditions in the agriculture and resource-related
sectors deteriorated a bit. The residential real estate market remained robust overall, while conditions in commercial real
estate improved somewhat. Lending activity was little changed over the reporting period.
Labor Markets
period, most notably for food and energy products. Price
increases were noted across many industries, including
manufacturing, construction, food services, and health
care. Cost pressures associated with energy price increases were expected to be passed on to consumers
relatively quickly. Prices for agricultural products, such
as seafood and tree fruits, also continued to rise, partly
due to elevated shipping and fertilizer costs. On the
other hand, price levels for steel and other manufactured
metals were noted to have edged down in the past few
weeks compared to their highs following the onset of the
Russia-Ukraine war.
Conditions in labor markets were little changed and
remained tight across all sectors. Many employers mentioned difficulty attracting skilled workers, such as IT and
finance professionals, data scientists, mechanics, pilots,
underwriters, and loan officers. Hourly workers, especially in the leisure and hospitality sector, have also been
hard to find, which has led to rising burnout among existing workers. A few contacts noted a slight decrease in
employee turnover, although levels remain higher than
before the pandemic. In addition, recent hiring freezes at
a few large tech firms combined with the tightening
financial conditions have led a few employers to expect
the labor market to cool down in the near future. Several
contacts also mentioned a resurgence of unionization
efforts in the health-care, retail, and distribution sectors.
Retail Trade and Services
Retail sales continued to increase, although with some
moderation. Consumer demand for food and energy
products slowed down somewhat due to pricing pressures, and a few contacts observed that consumers are
curbing their spending and focusing more on necessities,
especially in lower-income households. However, spending of higher-income households has not yet been affected as much, and auto sales were noted to have increased. Going forward, contacts across the District
expected further pullback in demand due to increased
uncertainty and concerns over high inflation.
Wages continued to rise, although with some slight signs
of leveling off. Contacts in the health-care, agriculture,
food services, and financial services sectors reported the
highest wage increases. Some contacts mentioned
budgeting several more wage increases in the middle of
the year to keep pace with price inflation, while others
mentioned having no such plans. A few small companies
reported difficulty competing for talent with larger companies able to absorb more costs. A retailer in the Mountain West recently stopped increasing wages after noticing no significant impact in the number of applicants from
previous wage increases.
Prices
Prices continued to increase briskly over the reporting
L-1
Conditions in the consumer and business services sector
improved considerably thanks to low reported numbers
of new COVID-19 cases, warmer weather, and pent-up
demand for services. Demand for domestic air travel is
now above pre-pandemic levels and international travel
is also on an upward trend. Despite increasing airfares,
Federal Reserve Bank of San Francisco
Real Estate and Construction
the strong recovery in leisure travel has also increased
activity at hotels, restaurants, and entertainment venues.
Business travel was also noted to have ramped up.
Demand for food services was generally strong, although
one contact in the Pacific Northwest noted a recent
decrease in restaurant diners after the rapid increase in
fuel prices. Demand for health-care services remained
stable but showed signs of normalizing away from
COVID-related services.
Residential real estate activity remained robust overall
despite some signs of easing. Demand for existing and
new single-family homes, while still strong, has slowed
down somewhat as higher prices, rising mortgage rates,
and low inventories thwarted some potential buyers,
especially those at the entry level. In addition, supply
chain disruptions and rising labor and construction costs
contributed to further price increases. As a result, several contacts noted a significant increase in demand for
multi-family properties as they tend to be more affordable than single-family homes. In fact, a contact in the
Pacific Northwest observed an increase in repurposing
commercial downtown real estate into high-density residential units. Both single- and multi-family rental markets
continued to be strong, with increases in rental prices
and low vacancy rates.
Manufacturing
Activity in the manufacturing sector remained strong.
New orders continued to increase, and manufacturers’
capacity utilizations rates were either at or above prepandemic levels. However, supply chain disruptions and
limited availability of raw materials as well as shipping
issues continue to have a significant impact on production and delivery times. Several contacts expressed
concern that recent COVID-19 lockdowns of major cities
in China could exacerbate these issues further. To combat these disruptions, one contact mentioned maintaining approximately three months of additional inventory of
supplies, while another manufacturer noted a modest
inventory reduction in the past few months. A large
equipment manufacturer in the Pacific Northwest observed that higher labor costs have led some businesses
to look into automation.
Conditions in the commercial real estate market improved slightly. Demand for industrial and warehousing
space continued to be strong, and a few contacts noted
a pickup in construction of commercial real estate. However, a contact in the Pacific Northwest observed that
some potential commercial projects are being reevaluated due to rising interest rates. Furthermore, a few others
expressed uncertainty over demand for office space
going forward as leases expire and hybrid work leads
companies to downsize their footprint.
Agriculture and Resource-Related Industries
Financial Institutions
Conditions in the agriculture and resource-related sectors deteriorated a bit. Exporters of agricultural products
faced more challenges due to further shipping bottlenecks and container shortages stemming from an appreciating dollar, the war in Ukraine, and the lockdowns in
China. Growers throughout the District noted rising costs
for labor, fertilizer, and transportation, and one contact
expected costs to continue accelerating in the near
future. Another contact in the Pacific Northwest mentioned that these export challenges have led them to
look at markets within the United States or Canada and
Mexico. While demand for energy remained stable over
the reporting period, a public utility contact noted that
price increases in natural gas have not yet been passed
on to consumers due to regulatory lags—once they do,
demand is expected to decrease.
Lending activity was little changed on balance. Several
contacts observed a slowdown in deposits and refinancing activity, most of which was driven by fixed-rate mortgages due to rising interest rates. On the other hand,
commercial, construction and auto loans were noted to
have increased over the reporting period. Several contacts in California also mentioned a notable increase in
home equity line of credit activity as homeowners take
advantage of higher home values. Many banks continued to experience strong competition for new loans,
although asset quality and liquidity remained high. One
contact in the venture capital space noted that cleantech
public company valuations have decreased notably in
the past few months, although private company valuations remained strong. ■
L-2
Cite this document
Federal Reserve (2022, June 14). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20220615
@misc{wtfs_beige_book_20220615,
author = {Federal Reserve},
title = {Beige Book},
year = {2022},
month = {Jun},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20220615},
note = {Retrieved via When the Fed Speaks corpus}
}