Beige Book
For use at 2:00 PM EST
Wednesday
November 30, 2022
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
November 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 Boston based on information collected on or
before November 23rd, 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.
Federal Reserve Banks collect information for the Beige Book from a variety of business and nonbusi‐
ness sources. As of November 30, 2022, seven Banks now include individual community sections with
information from nonbusiness sources, while the remaining Banks will continue to include such
information within the existing structure of their District reports.
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 ■ November 2022
Overall Economic Activity
Economic activity was about flat or up slightly since the previous report, down from the modest average pace of growth
in the prior Beige Book period. Five Districts reported slight or modest gains in activity, and the rest experienced either
no change or slight-to-modest declines. Interest rates and inflation continued to weigh on activity, and many contacts
expressed greater uncertainty or increased pessimism concerning the outlook. Nonauto consumer spending was mixed
but, on balance, eked out slight gains. Inflation pushed low-to-moderate income consumers to substitute increasingly to
lower-priced goods. Travel and tourism contacts, by contrast, reported moderate gains in activity, as restaurants and
high-end hospitality venues enjoyed robust demand. Auto sales declined slightly on average, but sales increased significantly in a few Districts in response to higher inventories. Manufacturing activity was mixed across Districts but up
slightly on average. Demand for nonfinancial services was flat overall but softened in some Districts. Higher interest
rates further dented home sales, which declined at a moderate pace overall but fell steeply in some Districts; apartment
leasing started to slow, as well. Residential construction slid further at a modest pace, while nonresidential construction
was mixed but down slightly on average. Commercial leasing weakened slightly, and office vacancies edged up. Bank
lending saw modest further declines amid increasingly weak demand and tightening credit standards. Agricultural conditions were flat or up a bit, and energy sector activity increased slightly on balance.
Labor Markets
Employment grew modestly in most districts, but two Districts reported flat headcounts and labor demand weakened
overall. Hiring and retention difficulties eased further, although labor markets were still described as tight. Scattered
layoffs were reported in the technology, finance, and real estate sectors. However, some contacts expressed a
reluctance to shed workers in light of hiring difficulties, even though their labor needs were diminishing. Wages
increased at a moderate pace on average, but a few Districts experienced at least some relaxation of wage pressures.
Opinions about the outlook pointed to stable or slowing employment growth and at least modest further wage growth
moving forward.
Prices
Consumer prices rose at a moderate or strong pace in most Districts. Still, the pace of price increases slowed on
balance, reflecting a combination of improvements in supply chains and weakening demand. Retail prices faced
downward pressure as consumers increasingly sought discounts. Prices fell for some commodities, including lumber
and steel, but food prices increased further or remained elevated in some Districts. Housing rent growth started to
moderate in some Districts and home prices grew less rapidly or declined outright amid weak demand. Inflation was
expected to hold steady or moderate further moving forward.
Highlights by Federal Reserve District
Boston
New York
Business activity softened slightly amid mixed results.
Employment levels and prices were mostly unchanged.
Wage growth was steady at a moderate pace. Restaurant owners enjoyed robust demand. Real estate markets weakened further. Most contacts remained optimistic for their own results but expected some degree of
economic downturn in 2023.
Economic activity declined modestly. While job growth
picked up slightly and labor shortages eased somewhat,
hiring plans weakened. Wage growth slowed, while the
pace of input and selling price increases remained elevated and was little changed. Regional banks reported
weakening loan demand, tightening credit, and rising
delinquencies. Businesses were increasingly
pessimistic about the outlook.
1
National Summary
Philadelphia
Minneapolis
Business activity held fast during the current Beige Book
period even as it teetered on the edge of decline. Although wage and price inflation continued to subside,
their elevated levels and rising interest rates have subdued consumer spending in many sectors. Employment
continued to rise slightly, although some firms have
begun layoffs. Expectations deteriorated.
Economic activity in the region expanded modestly in
recent weeks. Employment grew slightly and job openings softened but firms generally reported maintaining
hiring plans. Price pressures were persistent despite
some isolated anecdotes about decelerating inflation.
Early reports on holiday spending were cautiously upbeat. Labor market pressures on Indian reservations
were more acute than elsewhere.
Cleveland
Kansas City
District business activity slowed modestly in recent
weeks as previously robust sectors saw some softening
while previously weak sectors remained weak. Still, firms
continued adding to their payrolls, and stiff competition
for workers kept upward pressure on wages. Input cost
increases remained widespread, but a smaller share of
contacts reported increases in selling prices.
Real economic activity in the Tenth District declined
slightly. Job growth was subdued as labor demand
cooled. Prices continued to rise at a robust pace, but
several contacts noted growth in prices of construction
materials and other manufacturing inputs slowed. Multifamily housing real estate activity declined abruptly in
recent weeks, while energy activity expanded slightly.
Farm incomes grew slightly, despite adverse drought
conditions.
Richmond
The regional economy grew slightly on balance, as retail
spending, travel, and tourism picked up and offset declines in activity in manufacturing, real estate, and nonfinancial services. Employment grew moderately and
many firms still looked to fill open positions and were
raising wages by more than in recent years. Price growth
remained strong in recent weeks.
Dallas
Modest economic growth continued, though persistent
declines were seen in retail spending, home sales, and
lending activity. Job growth was solid but there were
reports of layoffs and a slowdown in hiring. Input and
labor cost increases continued, prompting cost cutting
and downsizing for some firms. Outlooks were generally
pessimistic, with contacts again citing concerns about
inflation, labor challenges, and slowing demand.
Atlanta
Economic activity grew slightly. Labor market tightness
eased, but wage pressures continued. Most nonlabor
costs moderated. Retailers reported stable consumer
demand. Demand for new autos was robust. Leisure
travel activity was steady and business travel improved.
Housing demand declined. Transportation activity weakened. Deposit growth at financial institutions slowed.
San Francisco
Economic activity expanded modestly. Employment
levels grew at a modest pace amid tight labor market
conditions. Wages and prices rose at a slower pace
relative to the previous reporting period. Demand for
retail goods and services trended up. Manufacturing
activity strengthened, while conditions in the agriculture
sector were stable but weak. Residential real estate
activity weakened, and lending activity declined moderately.
Chicago
Economic activity was little changed. Employment increased moderately; manufacturing increased slightly;
consumer and business spending were unchanged; and
construction and real estate decreased modestly. Nonbusiness contacts saw little change in District economic
activity. Prices rose rapidly, wages were up moderately,
and financial conditions were unchanged on net. Agriculture profit expectations for 2022 were up a bit.
St. Louis
Economic conditions have remained unchanged since
our previous report. Labor shortages remained widespread, but a rising share of firms were able to find and
retain workers. Homebuying activity continued to slow,
and rental rates fell for the first time this year. Transport
demand fell, but the industry continued to struggle with
rising input costs and a shortage of drivers.
2
Federal Reserve Bank of
Boston
The Beige Book ■ November 2022
Summary of Economic Activity
Business activity in the First District softened slightly amid mixed results. Employment was stable on balance, but labor
demand weakened for some positions. Some pricing pressures eased and others intensified, but most prices were
about the same as in the last report. Wage growth was steady at a moderate pace, but competition for specialized workers remained intense in some cases. Restaurant owners in Massachusetts enjoyed robust demand despite having
raised their prices in the past year. Office vacancies ticked up slightly amid very weak demand, and rising interest rates
deterred new commercial construction and acquisitions. First District home sales declined further, and home prices
declined in Massachusetts (but were stable elsewhere). Most contacts remained optimistic for their own results but
expected some degree of economic downturn at the regional and national levels in 2023.
earlier period of steep increases. Restaurants faced a
fresh hit to profits from increases in credit card fees.
Used car prices fell rather abruptly in response to slumping consumer demand. Some auto dealers were caught
short by the change, as they had acquired stock earlier
at relatively high prices. An online retailer put renewed
emphasis on cost-containment in order to keep prices
low and improve profitability. Staffing firms complained of
cost increases for recruiting software and database
licenses. Most manufacturers held their output prices
firm, but two enacted moderate price increases in August. Contacts in both manufacturing and retail reported
that materials and other input costs remained high, but
that input price growth had moderated recently or had
even turned negative. For example, two contacts said
that vendors had removed earlier surcharges and that
energy and freight costs had declined a bit. Most contacts expected nonlabor input pricing pressures to ease
further in 2023.
Labor Markets
Employment was roughly steady, and wage growth
stabilized at a moderate pace. Although headcounts
were steady or up somewhat at most firms, one retailer
recently enacted significant layoffs in response to weaker-than-expected results so far in 2022, and some manufacturers demanded fewer hours. At the same time, one
manufacturer desired more workers but couldn’t find
them, and another hoped to raise headcounts significantly in 2023. Staffing firms reported that labor demand
continued to exceed supply for many positions, but not
across the board. They also reported that wage pressures remained intense for some positions but at least
one employer cut its wage offers. Retailers and restaurant owners said that, although turnover had declined
somewhat in recent months, hiring to offset attrition
remained highly competitive. At least in the near term,
contacts did not expect to make significant layoffs.
Planned wage increases for 2023 ranged from 2 to 5
percent, slightly lower than 2022 rates. Nonetheless,
labor costs were seen by several contacts as a bigger
source of inflationary pressure for 2023 than nonlabor
costs.
Retail and Tourism
Among First District contacts, retail and restaurant sales
were mixed in recent weeks. An online retailer experienced a slight reduction in sales volume from last quarter but said that increased promotions remained an
effective way of boosting sales. A salvage store enjoyed
a slight increase in sales and attributed a portion of the
gains to increased cross-border commerce with Canada.
A Massachusetts restaurant industry contact said that
Prices
Output prices among our contacts were about flat on
balance since last report, and input price movements
were mixed. Restaurant menu prices were up 8 percent
from a year ago but mostly unchanged since last quarter,
as contacts noted that food prices levelled off after an
A-1
Federal Reserve Bank of Boston
sales increased modestly throughout the state, including
most of Boston, but that the downtown area continued to
underperform relative to other neighborhoods. Demand
was surprisingly resilient in response to the 8 percent
average menu price increase of the past year, and restaurant meal tax collections in the state surpassed their
2019 levels, even after adjusting for inflation. A contact
representing automotive dealers in the District said that
higher borrowing costs had not yet impacted demand for
new vehicles but that used car sales (and prices) had
begun to return to more normal (pre-pandemic) levels
after an extended period in which they were historically
elevated. Contacts were optimistic on balance, especially those in the restaurant industry, but an online retailer
faced near-term pressure to cut costs and automotive
dealers faced potentially steep adjustment costs to accommodate increasing numbers of electric vehicles.
recruiters away from other firms. Contacts were neutral
to optimistic regarding their own business prospects
despite expressing concerns about the macroeconomic
outlook. Nonetheless, none perceived a high risk of a
severe recession in 2023.
Commercial Real Estate
Commercial real estate activity in the First District slowed
slightly in recent weeks. In the office market, leasing was
stable at a low level, vacancies edged up as tenants
gave back space, and rents were nonetheless flat. In the
industrial market, rent growth slowed somewhat, as
leasing activity was held back by the lack of available
space. The retail market was stable, with flat rents and
vacancy rates, although demand for smaller retail spaces (such as restaurants) reportedly outpaced that for
larger units. Few investment acquisitions were reported
in any market, and large bid-ask spreads were common.
Loans for new construction looked increasingly unfavorable and existing loans faced greater stress. The outlook
turned slightly more negative on balance, and one contact perceived a recession in 2023 as a near certainty.
Contacts were relatively optimistic about the industrial
market and still quite pessimistic about the office market,
while retail leasing activity was expected to mirror consumer demand.
Manufacturing and Related Services
Contacts painted a mixed picture of the manufacturing
economy in the First District this cycle. The widest variation in experiences occurred in the semiconductor industry, as one contact in that field said that demand was
incredibly strong while another perceived that the industry had entered a recession. A furniture manufacturer
reported that sales were down substantially both monthover-month and year-over-year. Employment was either
stable or up for all our contacts. Although no contacts
reported major revisions to their capital expenditure
plans, one was considering pulling forward some capital
expenditures due to concerns about higher future interest rates. The outlook ranged from extremely optimistic
(for one semiconductor manufacturer) to very nervous
(the furniture maker)
Residential Real Estate
The First District’s residential real estate market continued to weaken in September and October, as sales
slowed further and prices fell considerably in some places. Closed sales were down over-the-year in all reporting
markets (which exclude Connecticut), representing a
moderate deceleration in sales for single-family homes
and a substantial deceleration for condos. Contacts
continued to cite sharply higher mortgage rates, inflation,
and recession fears as the key factors holding back
home demand. Massachusetts’ home prices (including
those in greater Boston specifically) declined by moderate to above-average margins in recent months. Outside
of Massachusetts, single-family prices were roughly
stable. On a year-over-year basis, condo price appreciation slowed in New Hampshire and Maine and increased
in Rhode Island. Inventories fell again on a year-overyear basis in most markets, but selected markets, such
as New Hampshire (both single-family and condos) and
Boston (condos only) saw increasingly rapid gains in
inventories. ■
Staffing Services
First District staffing contacts experienced strong demand for their services, but revenue performance was
mixed: two firms reported slight and moderate revenue
declines in the third quarter, respectively, and a third
enjoyed a moderate surge in revenues. Cases of weak
results were attributed to shortages of qualified workers.
Contacts also noted that the composition of labor demand shifted somewhat in recent months, as for example software developers were no longer in such high
demand, while other specialized roles such as mechanical and electrical engineers remained highly sought
after. Flu season has created an increasing number of
positions for nurses, and the return of convention activity
to Boston has generated more entry-level openings.
Staffing firms and their clients competed intensely to hire
and retain recruiting talent. In some cases, more flexible
work arrangements were used as inducements to lure
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ November 2022
Summary of Economic Activity
Economic activity in the Second District continued to decline modestly in the latest reporting period. Business contacts
have become increasingly pessimistic about the near-term outlook. Both selling prices and input prices have continued
to increase at a fairly brisk pace, while wage growth has moderated. Hiring picked up slightly as worker shortages eased
somewhat, though fewer businesses plan to add staff in the months ahead, and there have been some announcements
of layoffs. Manufacturing activity picked up slightly. Consumer spending was mixed but little changed overall, while
tourism has remained strong. The home sales market weakened noticeably, and the rental market also showed signs of
softening, amidst growing concerns about housing affordability as evictions and homelessness have reportedly risen.
Commercial real estate markets stabilized, and construction activity has remained sluggish. While conditions in the
broad finance sector improved slightly, regional banks reported weakening loan demand, tightening credit, and rising
delinquency rates.
Labor Markets
Prices
Employment rose moderately as hiring picked up somewhat, and there were scattered signs of further easing in
labor shortages. An upstate New York employment agency noted that hiring activity has remained fairly steady,
led by strong demand for finance and tech workers, but
indicated that the labor market has cooled. A New York
City agency reported steady demand for workers and
continued brisk hiring activity. Recent layoff announcements in New York City’s finance and tech sectors have
yet to yield any increase in job candidates.
Business contacts continued to note broad-based escalation in the prices they pay. The steepest increases
were reported from the leisure & hospitality sector. Contacts across most industries expect continued widespread escalation in costs in the months ahead.
Selling price increases remained widespread overall but
slowed noticeably in the retail and education & health
sectors. Retailers also do not plan any significant price
hikes in the months ahead, whereas firms in most other
sectors anticipate somewhat widespread increases in
their selling prices.
Wholesale and transportation & warehousing firms reported a brisk pickup in employment, while leisure &
hospitality firms reported a pullback in hiring. Information
firms continued to report widespread increases in staff,
and manufacturers reported moderate job growth. However, firms in almost all industry sectors have scaled
back hiring plans somewhat for the months ahead.
Consumer Spending
Consumer spending has been little changed in recent
weeks. Nonauto retailers reported that business has
edged down and expressed widespread pessimism
about the upcoming holiday season. Auto dealers in
upstate New York reported scattered signs of a pickup in
sales of new vehicles, as supply disruptions and chip
shortages have eased somewhat. However, many dealers continue to face inventory shortages, hampering
sales of new vehicles. Inventory levels are expected to
increase somewhat in the coming months. Used vehicle
sales also remain sluggish. Consumer confidence across
New York State edged down in October but remained
fairly high.
Business contacts across a wide range of industries
reported some slowing in wage growth, as did employment agencies in both New York City and upstate New
York. The steepest wage growth continued to be reported
in the education & health and leisure & hospitality sectors. Businesses across all sectors continue to project
widespread wage hikes in the months ahead.
B-1
Federal Reserve Bank of New York
City have declined, and concessions have edged up for
the first time in a year. Vacancy rates across New York
City, though still quite low, have risen modestly.
Manufacturing and Distribution
For the first time in a number of months, manufacturing
activity expanded slightly in recent weeks, and wholesale
trade activity edged up. However, contacts in the transportation & warehousing sector reported a slight dip in
activity. Looking ahead, manufacturers have become
increasingly pessimistic about the near-term outlook,
while transportation, warehousing, and wholesale trade
firms continued to express mild optimism.
Commercial real estate markets have shown further signs
of stabilizing. Office vacancy and availability rates continued to edge up in New York City but were little changed
elsewhere. Office rents were steady to up slightly across
the District. The industrial market has been mixed, with
rents resuming an upward trend but vacancy rates continuing to climb.
Services
On balance, activity in the service sector has weakened
since the last report. Businesses providing professional
& business and education & health services reported
modest declines in activity, and contacts in the leisure &
hospitality sector indicated more pronounced weakness.
Moreover, contacts in these sectors have become somewhat more pessimistic about the near-term outlook,
anticipating flat to declining activity in the months ahead.
Contacts in the construction sector continued to report
deteriorating business conditions but were somewhat less
pessimistic about the near-term outlook than in the last
report. New office construction starts remained exceptionally low throughout the District, though there was some
pickup in New York City and Long Island. New industrial
construction has largely dried up. In New York City, multifamily construction starts, though still quite low, have risen
modestly in the latest reporting period, and there is a moderate volume of ongoing construction.
Tourism activity in New York City remained quite strong
in October and early November. Weekend hotel occupancy rates remained high, and midweek occupancies
have risen to near typical pre-pandemic levels—
reflecting leisure visitors extending weekends with remote work and a gradual rebound in business travelers.
Bookings for meetings at the Javits Convention Center
and New York City hotels have also risen. International
visitations have also continued to increase, especially
from Europe, though the strong dollar has reportedly
reduced spending per visitor.
Contacts in the broad finance sector report that conditions,
though still poor, have improved slightly. Small to mediumsized banks reported lower loan demand across all segments and a widespread drop in refinancing activity. Credit
standards were tighter, especially on business loans and
commercial mortgages, while loan spreads remained
essentially unchanged overall. Finally, delinquency rates
increased for all categories of loans.
Real Estate and Construction
Community Perspectives
Banking and Finance
The home sales market weakened noticeably in recent
weeks, and the rental market showed signs of softening.
Real estate contacts in upstate New York reported softening demand, reduced sales activity and buyer traffic,
fewer multiple offers, and price reductions. Similarly, in
and around New York City, sales of both single-family
homes and apartments fell, especially at the high end of
the market, though prices have held steady. The inventory of available homes remains low across the District: it
has drifted up slightly in upstate New York but has remained steady in and around New York City. With
homes now taking longer to sell, many sellers have
taken their homes off the market.
Housing affordability and food insecurity remain top concerns among communities across the District. As the postpandemic evictions mortarium has expired, there has been
a rise in evictions and homelessness across the region.
Many New Yorkers in market rate housing face growing
rent burdens as leases come up for renewal. Some households are forgoing healthier and more expensive food
items to buy less costly bulk items, and the use of food
pantries continues to increase. SNAP applications have
increased due to high food prices, but staff shortages have
impeded processing of these applications. ■
Residential rental markets have weakened, except at the
high end of the market, where many potential buyers are
instead opting to rent. Overall, rents across New York
For more information about District economic conditions visit:
https://www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ November 2022
Summary of Economic Activity
On balance, business activity in the Third District appears to be teetering on the edge of a decline but managed to hold
fast since the prior Beige Book period. Inflation has driven consumers to lower-priced items and lower-priced stores.
Rising interest rates have discouraged consumers from buying big-ticket items, including homes and autos. Employment continued to grow slightly, despite the onset of some layoffs. Wage growth and inflation continued to subside but
remained at a moderate pace. Overall, firms noted less difficulty in hiring and fewer supply chain disruptions. On balance, expectations for economic growth over the next six months deteriorated for all firms; however, the index for nonmanufacturers remained positive, while the index for manufacturers remained negative. Expectations for all firms remained well below their nonrecessionary historical averages. On average, conditions and sentiment appeared more
positive in the Greater Philadelphia region than in the outlying areas of the Third District.
On a quarterly basis, firms reported a lower expectation
of the one-year-ahead change in compensation cost per
worker, with a trimmed mean of 5.1 percent in the fourth
quarter of 2022 – down from 5.8 percent in the third
quarter and the lowest rate of increase this year. One
large retail firm noted plans for 4.0 percent average
wage increases next year – a bit higher than its norm.
Although the firm’s wage plan is lower than the expectations reported by other firms in the survey, the firm noted
that it has managed to keep turnover rates low by maintaining a competitive wage within its sector.
Labor Markets
Employment continued to grow slightly; however, fewer
firms reported increases, while more began noting decreases. The share of firms reporting employment increases fell below 20 percent for nonmanufacturing and
manufacturing firms; firms reporting decreases rose to
nearly 10 percent.
Staffing firms noted that orders are soft across the board
and are not keeping pace with the typical year-end hiring
surge. Hiring freezes and staff layoffs have begun in the
residential real estate sector; layoffs are expected to
expand more broadly throughout the home construction
sector in the first quarter of the year. Firms from many
sectors reported preparations for a potential recession
but also remain hesitant to lay off employees, given
recent hiring difficulties.
Prices
On balance, inflation continued at a moderate pace –
comparable with the prior period, but an improvement
from a third-quarter spike. Manufacturing firms drove the
quarterly change; nonmanufacturing firms have noted
moderate increases for most of the year.
Firms continued to note that wage growth had subsided
but remained elevated at a moderate rate. One staffing
firm noted that recent year-over-year wage growth was
down to 5.75 percent. Wage inflation is also becoming
somewhat less widespread. In our monthly surveys, the
share of nonmanufacturing firms reporting higher wage
and benefit costs per employee fell to nearly 40 percent,
while just over half of the firms reported no change and a
few reported lower compensation.
Contacts reported that increases in prices received for
their own goods and services over the past year fell in
the fourth quarter of 2022. The trimmed mean for reported price changes in our quarterly survey questions fell to
6.0 percent from 7.2 percent in the third quarter of 2022
for all firms. Price increases ticked up to 4.6 percent from
4.5 percent for nonmanufacturers and fell to 7.9 percent
from 10.4 percent among manufacturers. Moreover,
C-1
Federal Reserve Bank of Philadelphia
price increases for nonmanufacturing firms were less
widespread in recent months – for both inputs and prices
received for their own goods.
justed) – comparable to growth in the prior period, but
much faster than in the same period one year ago.
Growth was pervasive across major loan segments
except auto lending. Inflationary effects on home prices
and other big-ticket items continue to boost loan volume
growth during the current year relative to past years.
Looking ahead one year, the increases that firms anticipated in prices for their own goods held steady at a
moderate rate – the trimmed mean for all firms remained
at 4.3 percent in the fourth quarter of 2022. The expected rate of growth rose to 4.2 percent from 3.5 percent for nonmanufacturers and fell to 4.5 percent from
5.4 percent for manufacturers.
District banks reported strong loan volume growth in
home mortgages and commercial and industrial lending,
moderate growth in commercial real estate, and modest
growth in home equity loans and other consumer loans.
Auto lending declined modestly. Credit card volumes
grew modestly – a pace typical of the season. Credit
counselors noted that more low- and middle-income
households are putting basic expenses onto credit cards.
Manufacturing
Manufacturing activity continued to decline modestly.
The index for new orders remained negative for a sixth
consecutive month. Nevertheless, the shipments index
remained positive at low levels, as firms continued to
work through backlogs. Delivery times and inventories
also continued to fall.
Real Estate and Construction
Homebuilders reported that contract signings for new
homes plunged after declining slightly in the prior period.
Their current backlog will carry construction through the
first quarter with only a modest decline in activity, but not
much further.
Manufacturing firms’ expectations deteriorated. The
indexes for future activity and new orders trended lower
and were negative. On net, a small portion of firms continue to expect to increase employment and capital
spending over the next six months.
Existing home sales fell steeply in most markets. Brokers
reported that sales prices have begun to ease but remain high. They noted that high prices combined with
rising interest rates have reduced housing affordability
significantly and have driven potential buyers from the
market.
Consumer Spending
On balance, retailers (nonauto) and restaurateurs continued to report modest declines in sales. Contacts described lower traffic, lower spending per customer, and a
need to offer discounts. In particular, low- and middleincome customers are spending less and shifting to
lower-priced items.
Requests for housing assistance continued to dominate
the share of 211 calls; however, the share fell to 31
percent. Of the calls for housing assistance, 42 percent
were for rental assistance as landlords continued raising
rents. With winter approaching, the share of requests
regarding utility bills rose further to 24 percent; assistance with employment or income also rose further, to 9
percent.
Auto dealers reported a slight increase in sales as more
inventory has reached their lots. However, high prices
and rising interest rates have discouraged buyers. As a
result, dealers have a few cars left on their lots at the
end of each week, and used car prices are falling.
Market participants in commercial real estate reported
steady current construction activity and a slight decline in
leasing activity. Most noted examples of delayed deals
and a significant reduction in credit availability – concluding that the current pipeline would carry construction
through much of 2023, but activity might slow thereafter.
The future demand for office space remained a major
uncertainty, while contacts described the future impacts
of the infrastructure bill as an opportunity, competition for
tight resources, or both. ■
Overall, tourism held steady – following a slight increase
last period. Leisure travel remains strong, while business
travel remains below 2019 levels. Moreover, the Philadelphia region has further to recover than the nation.
Finding workers has become easier, but firms are beginning to take a wait-and-see attitude on open positions.
Nonfinancial Services
On balance, nonmanufacturing activity appeared to
pause after growing slightly in the prior period. Firms
were almost evenly divided in reporting increases, decreases, or no change in their sales and new orders.
Financial Services
For more information about District economic conditions visit:
www.philadelphiafed.org/regional-economy
The volume of bank lending (excluding credit cards)
grew moderately during the period (not seasonally ad-
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ November 2022
Summary of Economic Activity
Fourth District business activity slowed slightly in recent weeks. For the first time since the end of the downturn in 2020,
a plurality of contacts said that demand for their goods and services had weakened over the prior two months. Demand
growth slowed in sectors that had exhibited strength recently (such as manufacturing and professional services) while
demand in previously weak sectors (such as retail, construction, and freight) remained so. Lenders captured the sentiment of many of their customers when suggesting that higher interest rates, persistent inflation, and increased economic
uncertainty were weighing on household and business spending. Contacts expected demand to decrease modestly
further in the coming few months, and their plans for capital spending were lower, as well. Labor shortages persisted,
even as worker availability increased somewhat and turnover decreased slightly. While wage and nonlabor input cost
pressures were largely unchanged, upward pressure on selling prices eased further.
Labor Markets
Prices
Employment growth in the District continued at a slight
pace. Demand for labor remained solid, though there
were more frequent reports of employers’ opting to take
down open job postings or declining to fill recently vacated positions. Reports of outright layoffs were rare and
mostly concentrated in construction and freight, where
demand has been particularly weak. Labor supply constraints appeared to ease somewhat, and there were
scattered reports of reduced turnover. Still, nearly half of
contacts indicated that finding workers with the right
skills was the primary impediment to hiring. Looking
forward, firms generally planned to add more workers to
their payrolls in coming months, but at a slower pace.
Increases in nonlabor input costs remained stubbornly
broad based. Since the second quarter of 2021, the
share of contacts reporting recent input cost increases
has consistently exceeded 60 percent, while in the year
preceding the pandemic, the share reporting higher input
costs averaged 32 percent. That said, the magnitudes of
cost increases appeared to be easing. Firms often reported that cost decreases on some inputs (such as
lumber and steel) were offsetting price increases in
others (such as transportation and petroleum-related
products). In addition, several contacts noted that while
costs were increasing, they were not rising as fast as
previously. For example, one manufacturer reported,
“[cost] increases have been tapering off and are becoming far less frequent.”
With labor demand still exceeding labor supply, wages
continued to rise. Most firms indicated that competition
for workers remained intense, forcing them to raise pay
in order to attract and retain workers. One homebuilder
said, “[even] while cutting staff. . . we will adjust all base
compensation up by 5 percent next month. This effectively negates 50 percent of the savings [from recent
layoffs].” While wage pressures remained elevated,
there were scattered signs that they were easing. For
example, the share of contacts reporting pay increases
over the prior two months fell below 50 percent for the
first time in more than a year and a half.
Reports of selling-price increases remained common,
but noticeably less so than early in the year. In some
cases, firms suggested they had paused price hikes
following increases in prior periods. In others, reduced
demand forced firms to cut prices. A manufacturer said
that “expectations [for weaker demand] have purchasers
negotiating much lower prices from suppliers,” and a
homebuilder reported that “incentives are increasing to
motivate buyers to move forward” as demand weakened
across the housing market.
D-1
Federal Reserve Bank of Cleveland
Furthermore, a real estate broker noted that many
buyers, particularly real estate investment trusts, have
left the market.
Consumer Spending
Retailers reported further softening in demand as consumers faced continued pressure from high food and
gasoline prices and increased interest rates. One general merchandiser said sales from mid-October to earlyNovember had declined noticeably from those of the
previous year, and he was unsure if activity in his stores
would rebound for the holiday shopping season. Reports
from restaurateur and tourism contacts were mostly
positive, with many citing increased activity brought on
by unusually warm weather and the upcoming holiday
season. Still, others noted that price increases as a
result of higher input costs had begun to slow customer
demand. Auto dealers reported a decrease in sales,
noting that customers remained wary of higher
payments because of increased interest rates and
higher vehicle prices.
Financial Services
Overall lending declined during the reporting period.
Bankers noted that commercial lending recently began to
weaken, and they attributed the weakening to higher
interest rates. Some lenders observed a decline in commercial real estate lending, a situation which one contact
said was related to clients’ canceling planned projects
because of higher interest rates. On the household side,
bankers reported continued weakening in mortgage and
auto lending. Lenders indicated that delinquency rates
for commercial and consumer loans remained low. Contacts reported that the level of consumer deposits decreased slightly. Bankers anticipated overall loan demand would decline further in the near term.
Manufacturing
Nonfinancial Services
Demand for manufactured goods flattened in recent
weeks following a notable increase during the prior reporting period. While some contacts attributed the softening to expected seasonal fluctuations, others cited
slowing in end markets and an increase in order cancellations. Still, a plurality of contacts said demand was
unchanged. Manufacturers generally expected demand
to hold steady in the coming months, outside of typical
seasonal slowdowns. Manufacturers suggested that
supply chain disruptions continued to ease somewhat,
though they remained far from normal.
Freight contacts reported that demand slowed further in
recent weeks. One freight contact noted that most of his
firm’s clients expect a soft fourth quarter and peak season. Another said that further declines in freight activity
are likely because he expected goods purchases, housing demand, and factory output to fall in coming months.
Professional and business services firms were also more
downbeat relative to their views in prior periods amid
growing economic uncertainty. One law firm noted that
while clients have continued to move forward with projects, they have been exhibiting more caution. Additionally, a software company noted that customers had
begun to pause spending on technology.
Real Estate and Construction
Housing demand continued to decline from levels that
were already down significantly from recent peaks. Contacts noted that many potential buyers have found it
difficult to qualify for mortgages amid higher interest
rates. One homebuilder indicated that his firm’s sales in
the third quarter were worse than in three of the four
quarters of 2008. Contacts did not expect demand would
improve soon because interest rates are expected to
remain high. One real estate agent stated that “the
snowball will continue to roll down the hillside with nothing to stop it.”
Community Conditions
Several nonprofit contacts reported that rising development costs increasingly constrained the supply of affordable housing for lower-income households and are likely
to continue doing so. Both ongoing and new construction
are affected. Contacts suggested that increases in building costs (materials and labor) are less likely to be
passed on to lower-income homeowners, resulting in
increased need for gap funding for projects. One Ohio
contact summarized the situation well, stating that
“colleagues in our industry are going to produce fewer
units because they are unable to make deals work due
to the increases in costs and the unpredictability of
costs.” ■
Nonresidential construction and real estate activity also
softened further. Contacts indicated that rapidly rising
interest rates and growing economic uncertainty have
led many businesses to hold off on new projects. One
general contractor indicated that demand has slowed
considerably because firms are unsure what business
will look like over the next 12 months. The same
contrac-tor added that rising interest rates have made it
very difficult to secure financing for the speculative
construc-tion projects on which the firm heavily relies.
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 ■ November 2022
Summary of Economic Activity
The Fifth District economy expanded slightly, on balance, since our previous report. Manufacturing activity slowed mildly
as new orders and backlogs declined while shipments remained flat. District ports saw overall activity decline as loaded
exports decreased while import volumes only picked up slightly. Trucking companies reported a slight decline in volumes and in shipping rates. Retail spending grew modestly overall. New vehicle sales remained low but used vehicle
sales picked up as prices eased and inventories improved. Travel and tourism grew modestly; business travel was
notably strong for some hotels. Residential real estate activity declined as high home prices and elevated mortgage
rates put a damper on demand. Commercial real estate activity also slowed overall, although class A office leasing held
strong in some markets. Consumer and commercial lending declined moderately, and deposits increased more slowly
as customers looked to earn higher interest elsewhere. Nonfinancial services reported declining demand and rising
costs of labor, particularly for non-wage benefits. Overall, employment continued to grow moderately, and many firms
still looked to fill open positions but struggled to find qualified workers. A majority of firms reported stronger wage growth
compared to previous years. Price growth remained robust in recent weeks.
Labor Markets
Manufacturing
Employment in the Fifth District increased moderately in
recent weeks and many firms indicated that they still had
positions to fill. The supply of labor remained tight with
several contacts noting difficulties finding workers with
necessary skills. One company that was looking to hire
an experienced worker decided to hire an entry-level
worker instead and pay for their training. A staffing service noted a mismatch between candidates’ and employers’ preferences with many candidates wanting fully
remote positions and businesses looking for employees
to come to the office. A majority of firms indicated that
they were increasing wages for new and existing staff by
more than in the past few years.
Manufacturing activity in the Fifth District contracted
slightly in recent weeks. On balance, new orders declined while shipments were unchanged as producers
continued to work through their backlogs. A textile manufacturer noted that their overall decline in orders was
driven by consumer facing products as demand for their
commercial products held up. A medical supply manufacturer said that although they did see an increase in
orders recently, the volume was below expected for what
is normally a busy time of the year. Supply chain backlogs showed signs of easing as vendor lead times declined.
Prices
Respondents indicated that they were beginning to see a
decline in volumes with overall loaded freight down at
most Fifth District ports. Import volumes were flat or up
slightly this period, but loaded exports continued trending
down. Import volumes were led by furniture, sporting
goods, and heavy equipment. The volume of empty
containers leaving the ports was robust. Dwell time at
the ports declined, leading to less congestion and lower
storage fees. Spot rates from Asia to East Coast ports
decreased 33% from last period but remained above the
pre-pandemic rates. Air freight volumes remained soft,
with exports volume remaining down significantly.
Ports and Transportation
Price growth remained robust in recent weeks. According
to our most recent surveys, both manufacturers and
service sector firms reported continued strong year-overyear price growth in both prices paid for inputs and prices
received from customers. Although the majority of businesses reported flat to increasing input costs, one contact noted that softening demand led to lower prices for
their inputs, but the cost savings were not being immediately passed through to customers due to uncertainty
about future price increases.
E-1
Federal Reserve Bank of Richmond
Trucking firms in the Fifth District pointed to a slight
decrease in freight volumes this period.that were more
than the usual seasonal slow-down. There continued to
be solid demand with industrial customers, but retail
shipping volumes declined modestly this period. Spot
market rates decreased moderately due to expanded
truckload capacity. Trucking companies noted that they
were not hiring drivers as their current headcount could
manage the existing volumes. New truck tractors and
trailers were still backordered about one year. In addition, the cost of new 2023 equipment had increased
substantially. Higher diesel fuel costs impacted overall
transportation costs this period.
higher vacancy rates in retail, office, and industrial sectors. Market activity for Class A office space remained
robust, especially in suburban markets, as companies
were paying to upgrade to nicer workplaces in order to
persuade employees to return back to the office. Capital
market sales activity was down significantly due to higher interest rates. Rising interest rates and higher construction costs also had a dampening effect on new
commercial real estate projects. New construction continued to experience supply chain disruptions as well as
a shortage of skill workers.
Banking and Finance
Rising interest rates continued to drive a moderate
weakening of demand for both commercial and residential loans. Commercial loan demand was also being
impacted by higher input costs as well as higher financing costs. Residential loan demand was mainly being
impacted by higher interest rates. Demand for new auto
loans also weakened, primarily due to lack of consumer
demand. Deposit growth continued to slow as customers
search for higher yields in other instruments. Delinquency rates continued modest increases, primarily in the
consumer portfolio. Overall, institutions anticipated a
moderate decrease in growth due to seasonality and
rising rates.
Retail, Travel, and Tourism
Retailers in our region reported modest growth in sales
and revenue in recent weeks and rising inventory levels.
A hardware store said that the number of customers was
down considerably from last year, but revenue held up
as the value of the average sale had increased. New
vehicle sales remained low due to the combination of
low inventory levels, rising prices, and higher borrowing
costs. Used vehicle sales, on the other hand, increased
moderately as more inventory became available and
prices have started to come down.
Travel and tourism increased moderately, on balance. A
hotel in South Carolina reported a record month in October and a strong start to November due to strong business travel and steady leisure travel. Air travel was
unchanged in recent weeks at moderate levels and was
expected to pick up soon due to holiday travel. A winter
resort in West Virginia was concerned that labor shortages would limit their ability to provide the full range of
services for this holiday travel season.
Nonfinancial Services
Nonfinancial service providers continued to report moderate decreases in both growth and demand for their
services. Contacts were also noting continued wage
increases being necessary to maintain their workforces.
An employment firm noted that overall employee compensation costs continued to rise as benefits become a
valuable tool in both retaining and attracting employees.
Another contact noted that once their current contracted
work has been completed, they will start adjusting their
hiring, as well as current workforce, to match current,
lower demand. Inflation and rising interest rates continued to be a focus of contacts as well. ■
Real Estate and Construction
Demand for housing slowed considerably this period
with reduced buyer traffic and listings. Days on market
and inventory levels have increased but were still below
normal levels. Respondents indicated that there were
fewer closed and pending sales due to higher interest
rates and low inventory. In most markets in the Fifth
District, home prices remained unchanged, but sellers
were offering more concessions, such as temporary rate
buydowns or paying closing costs, to complete sales.
Buyers were not having any difficulty obtaining mortgages and there were no issues with appraisals. New home
construction also slowed down this period, and builders
were no longer acquiring new lots due to high building
costs and economic uncertainty.
Commercial real estate activity slowed this period in
some Fifth District markets with reduced leasing and
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ November 2022
Summary of Economic Activity
The economy of the Sixth District grew at a tepid pace from October through mid-November. Labor market pressures
eased modestly, and turnover improved somewhat. While wage pressures remained elevated, some moderation was
reported. Most nonlabor cost increases slowed, but food prices rose, and freight costs remained elevated. Pricing
power was mixed. Low-to-moderate income households experienced declines in financial well-being as the rising cost
of living strained household budgets. Retailers reported stable demand, on balance, and new auto sales were robust.
Leisure travel activity was described as healthy as compared with pre-pandemic levels, and business and convention
bookings improved. Housing demand weakened and inventory levels rose. Transportation activity weakened. Deposit
growth at financial institutions slowed. Damage from Hurricane Ian was widespread across southwest and central
Florida with agriculture and tourism being the sectors most impacted.
Labor Markets
factors, including global supply issues resulting from the
Russia/Ukraine war. Increasing labor costs were
factored into final pricing by some firms. Pricing power
was mixed, and many contacts noted reduced margins.
The Atlanta Fed’s Business Inflation Expectations
survey showed year-over-year unit cost growth
remained unchanged at 4.1 percent, on average, in
October. Firms' year-ahead inflation expectations also
remained unchanged from September at 3.3 percent, on
average.
Labor market pressures eased modestly, but attracting
and retaining talent remained a top concern for many
firms. Most employers played “catch-up” to fill open
positions while only a few indicated that they were hiring
for growth. Finding qualified candidates was reported as
nearly impossible, so firms increased investments in
training new hires. Turnover eased somewhat, but
employees continued to be drawn away by higher
wages, advancement, and greater schedule flexibility.
Labor shortages were most acute in skilled construction,
childcare, education, and healthcare.
Community Perspectives
Community organizations reported signs of declining
consumer financial health for low-to-moderate income
households in recent months. The rising cost of
groceries, fuel, and rent strained household budgets,
resulting in increasing demand for food pantries and
rental assistance programs. Competition from all-cash
buyers and low housing inventories continued to reduce
already limited housing options for low-to-moderate
income households. Access to affordable childcare and
public transportation, particularly in rural areas, has
worsened since the pandemic and remains a barrier to
labor force participation. Nonprofit service providers
noted an uptick in the number of clients relying on side
gigs to make ends meet or as pathways to financial selfsufficiency.
Most employers reported upward wage pressures,
although several indicated that pressure had eased in
recent months. Looking ahead, expectations for wage
growth were mixed; some anticipate wage growth will
moderate or level off as demand subsides, while others
anticipate inflation, combined with continued labor
market tightness, could push wage growth higher than
planned. A few contacts mentioned that they will be
discontinuing off-cycle increases and going back to an
annual cadence.
Prices
District firms noted most nonlabor cost increases have
moderated, and some costs, like lumber and steel,
declined. While supply chains were reported as
stabilizing, domestic freight costs remained elevated
above historical norms, causing some companies to
bring materials transport in-house as a way to achieve
efficiencies. Food prices continued to rise due to many
Consumer Spending and Tourism
Retailers reported that aggregate consumer demand
had not changed materially, on balance, since the
previous report. However, low-to-moderate income
consumers continued to trade down for certain goods.
F-1
Federal Reserve Bank of Atlanta
Some contacts noted they were beginning to see some
slowing of demand by middle-income consumers.
Automobile dealerships reported strong new vehicle
sales as inventory levels improved.
Tourism contacts reported solid leisure travel activity as
compared with 2019 levels. Business and convention
travel has begun to normalize back to pre-pandemic
levels. Hurricane Ian damaged hotels along beaches in
southwest Florida, and uncertainty exists around when
these hotels will reopen due to a lack of available labor
and construction supply issues.
deposits and borrowings from the Federal Home Loan
Bank. Unrealized losses in securities prompting some
institutions to reclassify securities from available-for-sale
to held-to-maturity. Still, except for farmland loans, all
major loan portfolios grew. Asset quality metrics were
stable, although the level of nonperforming assets
increased slightly. Financial institutions increased their
provision for credit losses over concerns about a
potential economic downturn. Improved earnings were
driven by a higher net interest margin offsetting lower
noninterest fee income.
Construction and Real Estate
Energy
Oil and gas contacts reported strong demand amid
ongoing supply constraints. Crude oil production rose,
and refiners maintained high utilization rates. Contacts
noted that the region faced challenges with low supplies
of diesel fuel, as high prices in the Northeast limited
pipeline deliveries to the Southeast. Several firms
reported growing investments in energy production, as
well as increasing renewable energy project backlogs,
including investment in hydrogen, carbon capture,
renewable natural gas, and wind-energy development
projects. Utility providers reported increased power
usage across all customers.
Housing demand continued to deteriorate as mortgage
rates rose and affordability further declined. Existing
home sales dropped sharply and inventory levels rose in
most markets. Although home prices remained above
year-ago levels, monthly sales price growth continued to
moderate. The new home market decelerated at a faster
rate, with a sharp decline in new orders and a rise in
cancellations. Builders pulled back on starts but the
inventory pipeline remained elevated, with the bulk of
units to be delivered through the first quarter of 2023.
Commercial real estate (CRE) contacts reported healthy
but slowing market conditions; however, industrial real
estate appeared robust. Contacts voiced concerns over
a future slowdown that could further erode activity levels.
The slowing in activity was consistently associated with
lower-tier office, luxury multifamily, and owner-operator
retail driven by more restaurant closings. Contacts
reported concerns about declining CRE values as the
bid-ask spread widened. Contacts cited more instances
of slowing/negative rent growth, rising expenses, and
slowing/negative net operating income growth.
Agriculture
Agricultural conditions remained mixed. Cotton growers
reported further softening of demand from textile
manufacturers. Tariffs imposed on rice from India kept
demand for domestic rice strong. Demand for chicken
and cattle exceeded supply. In Florida, Hurricane Ian
destroyed several herds of livestock and numerous
crops, and citrus industry contacts expect damage to
trees from the storm will exacerbate already strained
production from disease in the coming years. ■
Transportation
Transportation activity declined since the previous
report. Inland waterway freight movements were
impeded by low water levels on the Mississippi River. Air
cargo contacts noted a dip in revenue year over year,
which was attributed to inflation curbing consumer
demand for goods. District transportation contacts noted
minimal impact to supply chains from Hurricane Ian.
Banking and Finance
Activity slowed at financial institutions, particularly
deposit growth. Banks reported increases in other types
of funding besides traditional deposits, such as brokered
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 ■ November 2022
Summary of Economic Activity
Economic activity in the Seventh District was little changed overall in October and early November. Contacts expected
slow growth in the coming months, with many expressing concerns about the potential for a recession in 2023. Employment increased moderately; manufacturing increased slightly; consumer and business spending were unchanged; and
construction and real estate decreased modestly. Nonbusiness contacts saw little change in District economic activity.
Prices rose rapidly, wages were up moderately, and financial conditions were unchanged on net. Agriculture profit expectations for 2022 were up a bit.
Labor Markets
Consumer Spending
Employment increased moderately in October and early
November, though contacts expected the pace of growth
to slow over the next 12 months. Contacts continued to
report difficulty finding workers across all sectors and
skill levels, though worker turnover slowed and hiring
was somewhat easier. Several contacts noted that despite a slowdown in sales, they were retaining workers
because of earlier difficulties in hiring staff. Overall, wage
and benefit costs increased moderately, albeit at a slower pace than the prior reporting period. Compensation
increases were aimed both at attracting new workers
and retaining existing talent.
Consumer spending was little changed on net over the
reporting period. Nonauto consumer spending increased
slightly, with contacts highlighting greater sales of movie
tickets, furniture, appliances, and pet supplies. Spending
on apparel decreased, while promotions increased.
Retailers expected holiday sales revenues to be up
some compared with last year due to higher prices, but
unit sales were expected to be lower. New and used light
vehicle sales decreased somewhat, with dealers indicating that high vehicle prices and interest rates were suppressing demand.
Prices
Business spending was little changed in October and
early November. Retail inventories were elevated overall, and contacts said retailers are planning to pare them
down to pre-pandemic levels. New light vehicle inventories improved modestly yet remained well below prepandemic levels. In manufacturing, inventories were still
elevated, as supply chain issues continued to lead firms
to hold “just in case” parts and partially finished products.
Capital expenditures remained stable on balance, with
contacts purchasing new equipment (some for automating processes) and upgrading software. Demand for
commercial, residential, and industrial energy consumption increased slightly.
Business Spending
Prices rose rapidly over the reporting period. However,
the pace of price increases had moderated from the
previous reporting period and contacts expected a further slowdown over the next 12 months. Producer prices
increased moderately, with reports of higher energy,
shipping, and raw materials costs. Consumer prices
generally moved up due to solid demand and
passthrough of higher costs. That said, there were signs
of easing cost pressures. As an example, a grocer said
suppliers continued to seek price increases, but that they
were pushing back and winning some concessions.
G-1
Federal Reserve Bank of Chicago
Construction and Real Estate
Agriculture
Construction and real estate activity decreased modestly
on balance over the reporting period. Residential construction moved down modestly, largely in the singlefamily segment. Delays and cancellations increased for
both single- and multifamily projects. One builder said
that the market to purchase land for new development
had dried up because builders are waiting for demand to
come back. Residential real estate activity decreased
moderately. Homebuyers were shocked by how quickly
mortgage rates had risen, according to a contact. Home
values were down modestly, but rents were up again.
Nonresidential construction was little changed. Construction of industrial space and remodeling of office space
held steady. That said, some projects were moving very
slowly because of increases in building costs and interest rates. Material and labor costs remained elevated.
Commercial real estate activity decreased modestly, and
prices and rents moved down slightly. Contacts noted
that some recent commercial deals were based on the
assumption that interest rates would come down from
present levels and that the borrower could refinance
when they did. Both commercial vacancy rates and the
amount of sublease space available increased slightly.
Overall, expectations for District agricultural income in
2022 rose a bit, reflecting the strong corn and soybean
harvests. Despite pockets of poor yields from drought,
District corn and soybean yields were close to the records set in 2021. Barge shipments continued to be constrained due to low water levels on the Mississippi, pushing up shipping costs, limiting exports, and reducing the
availability of chemicals and fertilizers. The costs of most
inputs remained elevated. Corn prices were lower, while
soybean prices moved higher. Dairy and hog prices were
generally down, though egg and cattle prices were up.
Community Conditions
Community development organizations and public administrators saw little change in economic activity in
October and early November. State government officials
reported healthy growth in tax revenues over the reporting period. Demand for unemployment insurance remained low, though there were reports of layoffs at order
fulfillment centers and mortgage lenders. Small businesses and nonprofit organizations continued to face
hiring difficulties at the wages they could afford to pay.
Nonprofits assisting low- and moderate-income households again noted that inflationary pressures were straining budgets, leading to food insecurity and strong demand for their services. Faced with declining revenues,
however, nonprofit leaders were making tough choices
on which services to provide and which to cut. ■
Manufacturing
Manufacturing demand was up slightly in October and
early November. Contacts reported a small decrease in
order backlogs. While production edged up, it continued
to be held back by labor and supply chain challenges.
Steel demand grew modestly and orders and production
of fabricated metals were flat, with greater demand from
the defense and energy sectors but less demand from
construction. Auto production increased slightly, and
contacts expected pent-up demand to support output
through 2023. Heavy truck production grew modestly,
and backlogs remained very large. Demand for heavy
machinery was flat.
Banking and Finance
Financial conditions were little changed on balance over
the reporting period. Participants in the equity and bond
markets reported net increases in asset values and
lower volatility. Business loan volumes were flat overall,
and contacts indicated that higher borrowing rates and
elevated uncertainty were putting a damper on demand.
Business loan quality decreased slightly, with one contact noting declines among clients in the capital goods,
retail, and consumer durables sectors. Business loan
standards tightened modestly. In consumer markets,
loan volumes slowed modestly, with continued declines
in mortgage lending in the face of higher rates. Consumer loan quality and standards remained the same.
For more information about District economic conditions visit:
chicagofed.org/cfsec
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ November 2022
Summary of Economic Activity
Economic conditions have remained unchanged since our previous report. Firms reported softening consumer demand,
but labor shortages for high-skilled jobs remained a key issue. However, a rising share of firms reported being able to
find and retain low-skilled workers. Upward pressure on wages remained strong in industries dealing with labor shortages, and contacts reported plans for continued wage increases in the upcoming year. Input prices for food and raw materials rose, but softening consumer demand led to reports of some durable goods prices leveling out. Homebuying activity continued to decline, and rental rates in major District MSAs decreased for the first time this year. Loan demand
softened slightly and delinquencies, while low by historical standards, have continued to rise.
Labor Markets
Multiple contacts stated that higher food costs were
driving higher prices for consumers. A contact in the
agriculture industry reported that high input costs have
pushed prices higher. Some industries, however, have
seen prices level out or even decrease. A contact in the
used car industry reported a “downward trend” for used
car prices. A contact in the catfish industry reported
pushback on higher prices, which led the business to
decrease prices.
Employment remains unchanged, although there were
increased reports that labor tightness has been easing
and will continue to do so. A St. Louis staffing contact
noted that uncertainty over consumer demand has led
some companies to cut seasonal workers. A contact in
Memphis saw total applications for their restaurant rise in
the last quarter, and another contact was able to
increase employment by 15 percent. However, many
companies are still reporting staffing shortages. An IT
contact in St. Louis noted that a shortage of entry-level
jobs has made it more difficult to backfill as experienced
workers leave.
Consumer Spending
District general retailers, auto dealers, and hospitality
contacts reported mixed business activity and a mixed
outlook. Retailers in Memphis reported that consumers
have shifted to spending mainly on essentials in more
affordable price ranges. Higher-income consumers are
driving what growth exists in the retail sector. District
auto dealers noted there has been mixed business activity for the past couple of months, with one dealership
noting that consumers are starting to have a more cautious approach to buying cars.
Wages have grown moderately since our previous report. Contacts reported pay increases were needed to
retain employees. A union contact reported that members’ wages have increased about 4-5 percent over the
last year. A staffing contact reported that they expect
firms will limit entry-level wage increases in 2023, but
other contacts reported that additional wage increases
will be needed to retain high-skilled workers, especially
those with nationwide job prospects.
Restaurants in Little Rock have reported that their customer volumes are up 50 percent from last year and that
they are optimistic about the end of 2022 and the
beginning of 2023. St. Louis hospitality contacts noted
that business activity was up this past month compared
with previous months, though the outlook remains
uncertain.
Prices
Prices have increased moderately since our previous
report. Approximately two-thirds of contacts reported
modest to moderate increases in prices charged to
consumers. Approximately 85 percent of contacts
reported higher or slightly higher nonlabor costs.
H-1
Federal Reserve Bank of St. Louis
Manufacturing
Banking and Finance
Overall, manufacturing activity has slightly increased
since our previous report. Survey-based indices suggest
that production, capacity utilization, and new orders have
all slightly increased. Supply chain congestion and transportation issues continue to limit the availability of some
key inputs for production, but contacts reported improvement in this regard. New orders and general demand are
beginning to cool, but firms have maintained production
by working through their long backlog of orders. The
labor market also appears to be loosening; one construction tools manufacturer in Fayetteville increased its staff
by 40 percent and reported having no issues filling
positions. On average, firms reported they expect slight
increases in production, capacity utilization, and new
orders in the coming quarter.
Banking activity in the District has decreased slightly
since our previous report. Bankers indicated that overall
loan demand has softened compared with last quarter.
Due to the past year’s interest rate increases, mortgage
loan demand continues to decline moderately. Commercial and industrial loan demand saw only a slight decrease. Delinquency and watch-list loans remain manageable, despite a continued uptick in delinquency rates
since last quarter. Banking contacts in Louisville expect
rising interest rates to pressure banks to start increasing
their deposit rates. According to Little Rock banking
contacts, both credit and debit card usage at major retailers experienced declines in the last quarter, notably due
to increased EBT usage.
Nonfinancial Services
District agriculture conditions have remained unchanged
compared with the previous reporting period. Production
forecasts for corn and cotton have increased slightly,
while forecasts for soybeans remained unchanged and
rice declined. On a year-over-year basis, however, production levels for cotton and soybeans are expected to
be slightly higher, while corn production is expected to
slightly decline and rice production is expected to moderately decline. While production has remained relatively
steady, contacts in the District remain concerned over
rising input prices, specifically fertilizers and feed.
Agriculture and Natural Resources
Activity in the nonfinancial services sector remains unchanged since our previous report. Transportation activity, most notably air traffic and freight, has slightly decreased. Demand for trucking services has decreased
since our previous report, which has led to some declines in shipping rates. However, input costs have continued to rise, especially equipment, insurance, wages,
and diesel fuel. The trucking industry’s driver shortage
has been exacerbated by new regulations that require
accredited training for drivers in Kentucky.
A shortage of registered nurses persists across the
District. Rural healthcare services in Mississippi have
continued to shrink and rely on investment from medical
institutions in urban areas. In Northwest Arkansas, however, more primary care services are being offered due
to the opening of health clinics in elementary schools
and investment in benefits personalization firms.
District coal production declined modestly in October,
with seasonally adjusted production decreasing about 9
percent over the previous reporting period. Production
has improved modestly over the previous year,
increasing 5.4 percent over this time last year. ■
Real Estate and Construction
The residential real estate market has slowed modestly
since our previous report. Contacts reported demand
has slowed due to 7-percent mortgage rates. Pending
home sales have decreased and inventory is up.
Louisville contacts reported closings are down about 30
percent in the past few months. The rental market has
also seen a slowdown. Rental rates in October
decreased across many parts of the District. All
commercial real estate contacts reported sales falling
short of expectations. High vacancies in the office rental
market remain the same since our previous report.
Construction contacts reported the pipeline of ongoing
projects continued to be strong but demand for new
projects has decreased since the previous report.
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ November 2022
Summary of Economic Activity
The Ninth District economy grew modestly overall since the previous report. Employment grew slightly since the last
report, with some moderation in job openings. Wage pressures remained high. Price pressures remained strong amid
signs of deceleration. Business survey respondents reported decreased sales in October on balance from a month
earlier. Activity increased in consumer spending, tourism, commercial real estate, energy, and manufacturing. Commercial and residential construction decreased, and residential real estate activity continued to decline. District agricultural
conditions generally remained strong through harvest season. American Indian-owned business enterprises reported
disproportionately acute challenges with labor availability and input costs.
Labor Markets
Prices
Employment grew slightly since the last report. Total job
openings have softened, but labor demand continued to
be healthy overall. Significantly more firms reported
plans to hire more workers compared with those cutting
staff. Among those holding back on hiring, some pointed
to lower sales, but a far greater share said lack of
available labor was a bigger factor. Fewer than 20
percent of businesses reported that they would lay off
workers in the face of a moderate revenue decline. Half
reported that total headcount would remain steady or
rise if revenues dropped, and the remainder would
reduce headcount by attrition. Construction firms
reported that recent and future activity was slowing, yet
one-third reported that they have been looking to hire
more full-time, year-round employees, and a negligible
share had cut workers.
Price pressures were persistently strong since the
previous report amid some signs of deceleration. Most
firms responding to a business conditions poll reported
raising final prices in October from a month earlier, but
there was a slight increase in the share who reported
dropping their prices. Two-thirds of respondents said
their nonlabor input prices increased in the past month.
While lumber prices continued to decrease over the
reporting period, construction firms reported that prices
for most other building materials remained high in recent
months; most contractors identified input costs as one of
their top challenges. Manufacturing contacts noted that
while certain raw materials prices were decreasing,
prices for most electrical components and other parts
increased further. Survey respondents and other
contacts reported sharp increases in employee health
insurance rates for 2023. Home heating costs were
forecasted to increase sharply in the region this winter,
largely due to a significant spike in natural gas prices
over the last year. Retail fuel prices in District states
decreased moderately since the last report.
Wage pressures remained high. A majority of
businesses across different sectors said they were
increasing wages and salaries for most job categories,
and increases were larger than in the past. Separate
polls of construction and professional services firms
found high shares reporting average wage increases of
more than 5 percent, though expectations for future
increases were modestly lower. A staffing contact said
that holiday hiring has pushed seasonal wages notably
higher, with entry-level shelf-stocking positions reaching
$25 an hour. “This is craziness.”
Worker Experience
Participants in a roundtable discussion shared that
American Indian workers and households had seen their
budgets tighten, as prices that were already
disproportionately higher on reservations continued to
climb. Childcare, transportation difficulties, and COVID-
I-1
Federal Reserve Bank of Minneapolis
19-related disruptions were reasons why many
reservation residents could not find or maintain
employment. Some graduates of tribal police training
were reportedly taking off-reservation jobs because the
pay was much higher. Many workers leaned on their
elders and social networks to curb reservation
challenges and scarcities. “We take care of each other
here; we find a way to get what we need," shared a
participant. "We’re lucky.”
and often by sizable amounts, including 31 percent
across Minnesota. Contacts in Montana reported that
banks were laying off several dozen staff related to
slowing mortgage activity.
Manufacturing
District manufacturing activity increased moderately
since the last report. A regional index of manufacturing
conditions indicated increased activity in Minnesota,
North Dakota, and South Dakota in October from a
month earlier. Contacts mostly reported solid recent
sales and/or strong backlogs, but some noted softening
new orders, and a few reported steep recent declines.
Printing industry contacts generally reported solid recent
demand; one contact noted that the inflationary
environment has allowed them to widen their profit
margins by increasing their prices more than their input
costs. A producer of semiconductor manufacturing
equipment noted that overseas sales dropped
precipitously following new restrictions on sales of such
equipment to China, a major export market.
Consumer Spending
Consumer spending grew slightly since the last report,
remaining at high levels. Early reports on holiday
spending were cautiously upbeat, with consumer
sentiment expected to be solid despite budget pressures
from inflation and rising interest rates. Sales in retail and
other consumer segments in Minnesota and South
Dakota remained robust. Montana lodging and
accommodation tax collections in October were strong,
and hotel occupancy in most Minnesota markets was at
very healthy levels. Vehicle sales were slow, with some
signs of falling demand compounded by low inventories.
A Minnesota import-auto franchisee noted that “daily
traffic of customers has decreased significantly.” Recent
passenger activity at District airports remained healthy
because of strong leisure demand.
Agriculture, Energy, and Natural Resources
District agricultural conditions remained strong through
harvest season. According to the Minneapolis Fed’s
October agricultural credit conditions survey, nearly
three-quarters of lenders reported farm incomes
increased from July through September compared with
the same period a year earlier. Farm household
spending, capital spending, and loan repayment rates
also increased on balance, while demand for loans fell.
However, cattle ranchers in Montana reported culling
herds due to high feed costs and lack of available hay in
the drought-stricken state, and were reportedly reducing
their planned capital expenditures for 2023. District oil
and gas exploration activity increased slightly since the
last report, while output increased moderately.
Construction and Real Estate
Commercial construction fell slightly since the last report
and showed signs of future slowing. Industry data
suggested that construction spending and overall activity
held up relatively well, but firms reported that backlogs
had shrunk compared with the same period last year.
Firms also reported a notable decline in new projects out
for bid. Industrial and multifamily segments reported
steadier activity and outlooks, and government contract
work was also reportedly more active. Labor demand
remained healthy overall. Residential construction was
widely lower and more pessimistic in its outlook. Singlefamily permitting levels were notably below year-ago
levels in most parts of the District.
Minority- and Women-Owned Business Enterprises
American Indian businesses reported being impacted by
widespread hiring and retention challenges but faced
disproportionate struggles with offering competitive
wages and benefits. A tribal leader shared that despite
offering wages above $30 an hour, casinos were having
difficulties attracting blackjack dealers and were paying
for the few inexperienced applicants to take classes. The
CEO of a food-processing firm on a District reservation
shared that the price of essential packaging inputs had
increased threefold and shipping costs for them
increased fivefold, in the last two years. "It has been a
struggle," they commented. "If prices keep going up, I
will go out of business.” ■
Commercial real estate rose slightly overall since the last
report, with continued divergence in different segments.
Vacancy rates in industrial and multifamily sectors
remained low despite significant new construction. Retail
vacancy rates have declined in some markets thanks to
comparatively little new construction. Office vacancy
continued to increase. A Bozeman, Montana, contact
said professional employees were not returning to the
office, putting downward pressure on demand and
increasing subleasing activity. Residential real estate
continued to decline. Closed sales in October were
widely lower across the District compared with last year,
I-2
For more information about District economic conditions
visit: minneapolisfed.org/region-and-community
Federal Reserve Bank of
Kansas City
The Beige Book ■ November 2022
Summary of Economic Activity
Real economic activity in the Tenth District declined slightly in recent months. The pace of job growth slowed due to the
combination of lower demand from employers and ongoing labor supply constraints. Though growth in labor demand
reportedly cooled, employers still indicated they are using higher compensation and additional training to build their workforce over the next several months. Consumer demand fell slightly in recent weeks, both for lower-priced goods and for
personal services. The volume of consumer purchases fell broadly, but higher prices led to modest increases in total
consumer expenditures. Activity among services businesses grew slowly, with the exception of advertising activity, which
fell sharply over the past month. Manufacturing production declined modestly. Although selling prices continued to rise at
a robust pace, several contacts noted growth in the prices of construction materials and other manufacturing inputs
slowed. Also, growth in rent prices moderated from recent highs. Commodity prices declined by a small amount. Despite
lower crop prices and worse-than-anticipated consequences of drought in the region, farm incomes and ag credit conditions improved modestly.
Labor Markets
Prices
Tenth District contacts reported employment growth was
mostly unchanged, as many employers slowed their
hiring efforts in recent weeks. Contacts reported the
reduction in the pace of hiring is partially due to cooling
labor demand coinciding with lower expectations for
growth in sales. Businesses also pointed to ongoing
difficulties finding employees with requisite skills amid
still-elevated labor demand. To fill open positions, most
contacts noted they continued to raise compensation
levels and increased the level of on-the-job training they
offered to underqualified hires. A few contacts alternatively noted they accelerated their planned investments
in automation to alleviate labor supply constraints. Despite recent slowing in hiring, most contacts reported
expectations for modest employment growth over the
next 12 months, citing expectations for growth, overworked staff, and demand for more skilled workers.
Most District contacts reported that selling prices continued to increase at a robust pace. However, input price
growth slowed to a moderate pace, primarily due to
easing growth in costs of manufacturing inputs. Although
expectations that prices will continue to rise over the
next six months were prevalent, a larger number of
manufacturing businesses expected price pressures to
ease somewhat over the medium-term. The cost of
housing remained a significant source of inflationary
pressure for households in the District. Rent prices continued to increase at a moderate pace, though the pace
of rent price growth eased from its historic high over the
past few months.
Consumer Spending
Several contacts indicated that consumer demand declined slightly in recent weeks. For example, hair salons
and studios reported giving fewer haircuts, and restaurant owners indicated patronage fell modestly in recent
weeks. Demand for consumer goods, particularly lowerto-middle priced items, also fell modestly. Yet, high-end
entertainment venues and travel resorts reported ongoing strength. Although the total volume of purchases
across goods and services fell, total spending increased
slightly due to higher prices.
Wages rose at a moderate pace, with most contacts
noting ongoing efforts to raise starting wages across job
categories to attract new hires. Firms also reported they
have been adjusting wages and salaries more frequently
than in previous years to retain existing employees, as
the cost of bringing on new hires is becoming burdensome.
J-1
Federal Reserve Bank of Kansas City
Community Conditions
Community and Regional Banking
Small and micro enterprises reported tighter cash flows
resulting from increased costs and slowing demand amid
rising economic uncertainty. Small business contacts
suggested banks demonstrated more risk aversion in
their lending, exacerbating funding challenges for small
businesses. When possible, business owners have been
funding investments with cash as opposed to acquiring
new debt. Also, contacts from community development
financial institutions reported more business owners are
utilizing non-traditional financing methods such as unsecured lines of credit and online finance firms that require
higher interest rates, shorter terms, and more onerous
repayment terms. Additionally, lender contacts reported
that small business owners are exhibiting caution in their
investment decisions, holding off on financing projects
through the first half of 2023.
Loan demand weakened modestly in the past month.
Bankers noted rising interest rates reduced demand for
credit and pressured residential real estate valuations.
Contacts expected further weakness in loan demand
during the first quarter of 2023 amidst rising borrowing
costs and economic uncertainty. Credit quality remained
stable, but bankers cited concerns around performance
of consumer loan segments in the coming months. Deposit levels were mostly stable, although rate-sensitive
customers sought additional yield for their excess funds.
Some contacts noted that deposit relationships are now
being factored into loan pricing decisions as banks seek
to generate and maintain liquidity. Finally, rising interest
rates continued to pressure bond portfolio valuations,
resulting in reduced tangible book value and impacting
potential merger activity.
Manufacturing and Other Business Activity
Energy
Overall activity among service providers rose modestly in
recent months. Yet, several District contacts noted that
demand for advertising services declined sharply in
recent months. The decline was reported broadly across
media types and across the types of goods and services
being promoted. Though use of data storage and processing remained elevated, several businesses reported
additional investments in software to diminish their use
of data server services due to rising costs associated
with high electricity prices. Manufacturing activity declined modestly in recent months as both revenues and
total volumes of shipments fell. Several contacts noted
that the availability of transportation services improved
recently. Although growth slowed broadly, contacts
across services and manufacturing reported favorable
expectations for modest growth over the next 6 months.
Tenth District energy activity expanded slightly compared to recent months. Although overall activity increased slightly, significantly lower natural gas prices,
driven by higher production and export disruptions, resulted in a meaningful reduction in active natural gas rigs
within the District. Higher oil prices over the last month
provided a boost to oil drilling activity. The number of
newly drilled wells rose faster in Colorado, Wyoming,
and Oklahoma compared to growth in drilling activity in
New Mexico. Well completion activity was up slightly
across all major drilling basins within the District, bringing additional supply online. Business contacts continued
to report high costs, with oil field services firms indicating
a moderate increase in costs over the last month, albeit
at a slower pace than earlier this year.
Agriculture
Real Estate and Construction
The Tenth District farm economy generally remained
strong despite slightly lower commodity prices and intensifying adverse effects of drought in certain areas of the
District. Overall, farm income and credit conditions continued to improve modestly. However, contacts in areas
most impacted by drought reported that farm income and
liquidity were slightly lower than a year ago. As harvest
neared completion, crop yields were generally expected
to be less than average across all states and were particularly poor in Kansas and Oklahoma. Dry conditions
also reduced hay production throughout the region and
is likely to push feed expenses higher for many livestock
producers. ■
Multifamily housing real estate activity declined abruptly
in recent weeks. This decline arose despite a backdrop
of elevated demand for housing across the District and
declining prices for construction materials. The downshift
was attributed solely to higher interest rates and the
outlook for higher rates over the near term. Debt financing for multifamily projects became less available over
the last several months, but brokers and builders indicated that private equity and other sources of capital diminished sharply in recent weeks. Although the number of
new multifamily housing deals declined sharply, construction activity was mostly unchanged due to the backlog of projects already underway.
For more information about District economic conditions visit:
www.KansasCityFed.org/research/regional-research
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ November 2022
Summary of Economic Activity
Modest growth continued in the Eleventh District economy. Expansion in manufacturing eased slightly while service
sector growth ticked up. Retail sales and home sales fell further. Rising interest rates dampened loan demand, with loan
volumes declining for the second consecutive reporting period. Activity in the energy sector continued to expand, though
growth remained constrained by equipment and labor shortages. Local nonprofits cited higher demand for assistance
amid rising household costs. Widespread rains improved drought conditions. While employment expanded at a solid
rate and wage growth was generally high, there were reports of a slowdown in hiring and layoffs. Price pressures remained elevated but eased notably in retail. Outlooks were mostly pessimistic except for the energy sector, and uncertainty increased, with contacts voicing concern about inflationary pressures, weakening demand, and labor challenges.
Labor Markets
Prices
While employment growth stayed solid, it eased from the
more robust pace seen in the summer. Among business
executives responding to a Dallas Fed survey, 56 percent cited hiring or recalling workers in October, down
from 62 percent in July. In the same October survey, 31
percent of firms said they were understaffed and looking
to hire for new positions and another 20 percent noted
being understaffed and looking to hire for replacement
only. Labor markets remained tight, with numerous
reports of hiring difficulties. A fabricated metal manufacturer noted that the firm was operating by prayer these
days. Healthcare workers were in short supply, as were
commercial truck drivers, auto technicians, restaurant,
and oil field workers. In contrast, some contacts said that
weakening demand, economic uncertainty, and rising
costs were restraining hiring activity. Mortgage banking
firms were under a hiring freeze, builders noted improvement in the availability of labor in certain trades, and
there were reports of layoffs in the tech industry.
While input costs continued to climb, the pace of increases eased in the construction, manufacturing, and retail
sectors. Growth in selling prices generally remained
high, although some firms still commented that inflation
was affecting their bottom line, prompting cost cutting.
Manufacturers reported higher raw materials prices, and
services firms said inflation and higher operating costs
were a challenge. A restaurant commented changing
their menu offerings due to higher costs and limited
passthrough. Home prices fell, while airlines noted elevated ticket prices due to solid demand.
Manufacturing
Texas factory output increased modestly in October.
Growth was led by durable goods manufacturing. However, new orders for manufactured goods continued to
weaken due to higher inventories and concerns surrounding a potential recession. A machinery manufacturer said that companies were being more careful about
their spending, and a computer electronics manufacturer
commented that demand for personal electronics had
deteriorated, with weakness spilling over into other markets. Manufacturing tied to the upstream energy sector
continued to experience rising demand and extended
lead times for components and machinery over the past
six weeks. Refineries and petrochemical manufacturers
meanwhile reported softening demand, although the
Wage growth remained high. A few service firms cited
downsizing to reduce costs, but many contacts noted
struggling to find qualified workers and offering higher
pay to attract them. A staffing firm said that candidates
were using job offers to negotiate pay increases with
their current employers.
K-1
Federal Reserve Bank of Dallas
European energy crisis is expected to continue to boost
Texas’ refined and petrochemical product exports.
Chemical manufacturers noted that increased production
capacity and slowing demand for construction-related
materials have squeezed polymer margins. Overall
manufacturing outlooks were generally weak.
and terms continued to tighten. Business activity experienced a greater decline over the past six weeks, and
expectations for the next six months are for loan demand
and business activity to decline further and loan performance to worsen.
Retail Sales
Energy activity expanded slightly during the reporting
period. The Eleventh District rig count was fairly flat,
while well completions ticked up. Demand for oilfield
services was high and the industry remained constrained
by equipment and labor shortages. Outlooks were positive, with contacts expecting oil and natural gas prices to
remain elevated enough to drive steady increases in
energy activity for the foreseeable future, though concern about a slowdown in future economic growth increased.
Energy
Retail sales declined over the past six weeks. Auto sales
weakened, hampered in part by high interest rates. A
few building materials suppliers commented that they
were surprised by the rapid slowdown in demand. Inventories continued to build, and outlooks worsened, with
some concern about inflation, rising interest rates, compressed profit margins, and a weaker business climate.
Nonfinancial Services
Service sector activity expanded modestly during the
reporting period, but outlooks were pessimistic. Revenue
growth was mostly broad based, though some contacts
noted slowing demand due to higher interest rates and
inflation, among other factors. Transportation services
firms reported mixed activity in sea and air cargo shipments and ridership. Airlines noted unseasonably strong
demand for leisure travel and an uptick in business
travel. Staffing services firms saw continued strong
demand for their services.
Agriculture
Widespread rainfall somewhat improved pasture and soil
moisture conditions, though a majority of the district
remains in drought. Agricultural commodity prices remained strong, though contacts said unprecedented
volatility in cotton markets as well as a relatively low
cotton price compared with grain prices may prompt a
significant drop in cotton acreage next year. Beef demand remained strong, and prices were up from six
weeks ago but down from a year ago because of increased beef supply due to more animals moving to
slaughter amid the drought this year.
Construction and Real Estate
Activity in the housing market weakened further. Sales
slipped again and contract cancellations stayed elevated
as high mortgage rates priced buyers out of the market.
Among the major Texas metros, Austin appeared to be
the roughest market and was experiencing larger price
declines to generate sales. Buyer incentives increased
notably, putting downward pressure on home prices and
builders’ margins. Outlooks worsened, with contacts
expecting further erosion in sales and home starts in the
near term. Apartment leasing slowed and rents were flat
to down during the reporting period. Office leasing remained soft and ample sublease space a concern, while
fundamentals in the industrial market stayed solid. Contacts said that the higher cost of capital was pushing up
cap rates and slowing investment sales activity.
Community Perspectives
Nonprofits reported higher demand for their services
during the reporting period. Contacts said that low- and
moderate-income individuals were struggling to afford
basic needs, such as rent and food, and that these struggles have recently worsened. Utilization of housing assistance has increased notably, and a school district
executive mentioned that high home prices were a barrier to recruitment and retention of kitchen and custodial
staff. Demand for food assistance rose, particularly
among students, and food banks in some areas were
unable to keep pace with the increased need. Childcare
assistance needs rose as more families returned to the
workforce due to depleted savings or decreased concerns surrounding COVID-19. Amid high demand for
services, some nonprofit leaders noted challenges with
soliciting donations and retaining talent. ■
Financial Services
Loan volumes declined broadly for a second period in a
row due to a steep decline in loan demand. Commercial
real estate and commercial and industrial loan volume
continued to contract, though at slower rates than over
the prior six weeks, while residential real estate and
consumer loan volumes declined notably faster. Loan
nonperformance rose slightly. Contacts still overwhelmingly reported loan price increases, and credit standards
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ November 2022
Summary of Economic Activity
Economic activity in the Twelfth District expanded modestly during the October through mid-November reporting period.
Labor market conditions remained tight, and employment levels grew at a modest pace. Wages and prices rose at a
slower pace relative to the previous reporting period. Demand for retail goods was robust, and activity in the consumer
and business services sectors trended up. Demand for manufactured products strengthened on net, while conditions in
the agriculture and resource-related sectors were stable but weak. Activity in residential real estate markets weakened
moderately, while commercial real estate activity was unchanged overall. Lending activity declined moderately over the
reporting period. Communities across the Twelfth District, and lower-income households in particular, were challenged
by elevated living costs. Contacts expressed concern over a weaker outlook for the economy and increased overall
uncertainty.
Labor Markets
Employment levels grew at a modest pace during the
reporting period. The labor market remained tight despite
some signs of easing. Employers generally mentioned
ongoing difficulties in filling vacancies despite rising
employee head counts. Labor supply was particularly
constrained in agriculture, hospitality, health care, retail,
food services, transportation, and skilled trades. Hotels
and restaurants, in particular, continued to operate below
capacity due to labor shortages, causing reduced hours
of operation and restricted availability of add-on services.
Contacts in Alaska, Hawaii, and Utah highlighted especially tight labor markets across most sectors. Conversely, contacts in other sectors observed some easing in
hiring conditions with manufacturing, finance, and professional services reporting lower turnover and voluntary
quits, as well as more applications per open position.
Hiring freezes and layoffs have spread widely across the
technology and entertainment sectors, and some contacts observed similar developments in the real estate
sector. Contacts also highlighted a slowdown in hiring
activity due to continued investment in automation and
growing uncertainty for the economic outlook. A few
contacts mentioned increased efforts in employee training.
Wages grew further but at a slower rate, especially for
lower-paid positions. Reports indicated that workers
continued to ask for higher wages primarily because of
elevated costs of living, and employers continued to offer
hiring incentives, retention bonuses, and comprehensive
benefits packages. Workers’ preference for flexible work
arrangements remained, but employers observed more
room to push back against such requests. A few con-
tacts highlighted upward wage pressures from the increases in minimum wages regionally and ongoing discussions with labor unions.
Prices
Prices rose at a slower pace relative to the previous
reporting period, but overall levels remained elevated.
Ongoing rises in the costs of labor, raw materials, and
input services led to higher final prices in several sectors, including hospitality, food services, business services, electronics, health care, pet care, insurance, and
financial services. Conversely, gradually improving supply chain constraints, cooling overall demand, and high
uncertainty for domestic and global economic outlooks
have resulted in flat or lower prices for many products,
including metals, lumber, wood products, some food
(fish, bacon, and potatoes), and apparel.
Community Conditions
L-1
Communities across the District continued to report high
inflation, food insecurity, and lack of affordable housing
as well as the heavy toll of overall economic uncertainty
as key challenges for lower-income households. Nonprofit organizations reported a sharp drop in donations
from both individuals and corporations in recent weeks
and highlighted that these declines in funds have constrained them from meeting the elevated demand for
behavioral health and substance use services as well as
basic shelter needs. Contacts also noted that elevated
operational costs and a limited ability to compete with
larger corporations for labor led a number of small businesses and community service providers to close their
operations.
Federal Reserve Bank of San Francisco
especially leafy greens. Contacts reported meaningful
relief in supply bottlenecks in recent weeks, although
one producer noted persistent disruptions and delays at
some ports in Asia stemming from pandemic containment measures. Utilities providers reported challenges
meeting demand as labor and materials shortages persisted.
Retail Trade and Services
Demand for retail products, although softening somewhat, continued to be robust. Contacts in the Pacific
Northwest and Intermountain West reported strong retail
sales that were backed by population and employment
growth. At the same time, reports in the Mountain West
noted inflationary pressures slowing down the demand
for food at grocery stores. Labor shortages continued to
hinder the retail sector despite higher wages. The outlook by retailers for the holiday season was generally
positive, though holiday sales were expected to fall short
of those observed last year.
Real Estate and Construction
Activity in residential real estate markets weakened
moderately compared to the prior reporting period. Demand for single-family homes fell overall due to elevated
prices and rising mortgage rates, while demand for multifamily rental units remained strong. One contact in
Southern California noted that potential homebuyers
have opted to rent instead, and a Northern California
contact reported a change in scope for some singlefamily construction projects, now built to rent rather than
to sell. Selling prices across the District remained high
but began to stabilize, with price reductions in some
markets. Across the District, inventories remained limited
but increased somewhat in recent weeks as homes took
longer to sell. Residential construction activity declined
notably across the District. Contacts largely attributed
the decline to the rising cost of capital due to rising interest rates.
Activity in the consumer and business services sectors
trended up. Stronger tourism supported higher demand
for food and beverage services, hospitality, and air travel. A pickup in business travel and related events further
boosted demand for leisure and hospitality services.
Demand for insurance, legal, and banking services remained unchanged. One contact reporting shifting towards more online services partly due to higher costs
and labor shortages. Laboratory testing and medical
services ran at or near full capacity due to medical worker shortages.
Manufacturing
Demand for manufactured products strengthened on net.
Softer residential construction dampened demand for
metals and lumber, although the impact was partially
offset by home improvement investments by existing
homeowners. Operational backlogs in food manufacturing have eased substantially as COVID-19 disruptions
have ameliorated, allowing production to move to near
capacity. A contact in the capital equipment industry
noted continued supply disruptions in high-tech electrical
components stemming from pandemic containment
measures in Asia. Overall, the demand for capital equipment remained strong, driven by an overall increased
push by businesses toward automation.
Commercial real estate activity was unchanged overall.
Demand for industrial space remained strong, and in
some regions demand for retail space strengthened,
while office space demand was subdued. One contact in
Utah noted particularly weaker demand outside of the
premium office space market. A contact in Northern
California reported the pace of new commercial space
construction continued overall but noted some slowing in
warehouse construction.
Financial Institutions
Lending activity declined moderately in recent weeks.
Contacts reported that higher interest rates and overall
economic uncertainty led to a drop in demand for most
commercial and personal loans, with notable softness in
residential and commercial real estate lending. Conversely, credit card debt picked up recently. Credit quality remained high, although some contacts observed a
slight deterioration. Deposits moderated, and in some
cases fell, but liquidity remained elevated overall. Contacts reported tighter lending standards in response to
increased economic uncertainty and noted signs of
weakness in capital markets, investment banking, and
asset management services. ■
Agriculture and Resource-Related Industries
Conditions in the agriculture and resource-related sectors were stable, albeit weak, during the reporting period.
Farmers reported solid domestic and international demand for both fresh and processed foods, especially for
dairy products and nuts, but noted that global economic
uncertainty and a strong dollar continued to weigh down
international demand for most domestic agricultural
products. Limited rainfall throughout California has reportedly impacted summer crops, such as tomatoes, and
is threatening expectations for various winter crops,
L-2
Cite this document
Federal Reserve (2022, December 13). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20221214
@misc{wtfs_beige_book_20221214,
author = {Federal Reserve},
title = {Beige Book},
year = {2022},
month = {Dec},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20221214},
note = {Retrieved via When the Fed Speaks corpus}
}