Beige Book
For use at 2:00 PM EST
Wednesday
January 18, 2023
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
January 2023
Federal Reserve Districts
Minneapolis
Boston
New York
Chicago
Cleveland
Philadelphia
San Francisco
Kansas City
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
St. Louis
Richmond
Atlanta
The System serves commonwealths and territories as follows: the New York Bank serves the
Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank serves
American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
This report was prepared at the Federal Reserve Bank of Cleveland based on information collected on
or before January 9, 2023. This document summarizes comments received from contacts outside the
Federal Reserve System and is not a commentary on the views of Federal Reserve officials.
National Summary
Boston
1
A-1
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from each District’s
sources. Reports are published eight times per year.
B-1
What is the purpose of the Beige Book?
First District
New York
Second District
Philadelphia
C-1
Third District
Cleveland
D-1
Fourth District
Richmond
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
K-1
Eleventh District
San Francisco
Twelfth District
What is the Beige Book?
L-1
The Beige Book is intended to characterize the change in economic
conditions since the last report. Outreach for the Beige Book is one of
many ways the Federal Reserve System engages with businesses and
other organizations about economic developments in their communities. Because this information is collected from a wide range of contacts through a variety of formal and informal methods, the Beige Book
can complement other forms of regional information gathering. The
Beige Book is not a commentary on the views of Federal Reserve
officials.
How is the information collected?
Each Federal Reserve Bank gathers information on current economic
conditions in its District through reports from Bank and Branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts, and other
sources. Contacts are not selected at random; rather, Banks strive to
curate a diverse set of sources that can provide accurate and objective
information about a broad range of economic activities. The Beige
Book serves as a regular summary of this information for the public.
How is the information used?
The information from contacts supplements the data and analysis used
by Federal Reserve economists and staff to assess economic conditions in the Federal Reserve Districts. The qualitative nature of the
Beige Book creates an opportunity to characterize dynamics and identify emerging trends in the economy that may not be readily apparent in
the available economic data. This information enables comparison of
economic conditions in different parts of the country, which can be
helpful for assessing the outlook for the national economy.
The Beige Book does not have the type of information I’m looking
for. What other information is available?
The Federal Reserve System conducts a wide array of recurring surveys of businesses, households, and community organizations. A list of
statistical releases compiled by the Federal Reserve Board is available
here, links to each of the Federal Reserve Banks are available here,
and a summary of the System’s community outreach is available here.
In addition, Fed Listens events have been held around the country to
hear about how monetary policy affects peoples’ daily lives and livelihoods. The System also relies on a variety of advisory councils—
whose members are drawn from a wide array of businesses, non-profit
organizations, and community groups—to hear diverse perspectives on
the economy in carrying out its responsibilities.
National Summary
The Beige Book ■ January 2023
Overall Economic Activity
Overall economic activity was relatively unchanged since the previous report. Five Districts reported slight or modest
increases in overall activity, six noted no change or slight declines, and one cited a significant decline. On balance,
contacts generally expected little growth in the months ahead. Consumer spending increased slightly, with some retailers reporting more robust sales over the holidays. Other retailers noted that high inflation continued to reduce consumers’ purchasing power, particularly among low- and moderate-income households. Auto sales were flat on average, but
some dealers noted that increased vehicle availability had boosted sales. Tourism contacts reported moderate to robust activity augmented by strong holiday travel. Manufacturers indicated that activity declined modestly on average,
and, in many Districts, reported that supply chain disruptions had eased. Housing markets continued to weaken, with
sales and construction declining across Districts. Commercial real estate activity slowed slightly, on average, with more
notable weakening in the office market. Nonfinancial services firms experienced stable demand on balance. Most bankers reported that residential mortgage demand remained weak, and some said higher borrowing costs had begun to
dampen commercial lending. Energy activity continued to increase moderately, and agriculture conditions were generally unchanged or improving.
Labor Markets
Employment continued to grow at a modest to moderate pace for most Districts. Only one District reported a slight
decline in employment, and one other reported no change in employment levels. While some Districts noted that labor
availability had increased, firms continued to report difficulty in filling open positions. Many firms hesitated to lay off
employees even as demand for their goods and services slowed and planned to reduce headcount through attrition if
needed. With persistently tight labor markets, wage pressures remained elevated across Districts, though five Reserve
Banks reported that these pressures had eased somewhat. Some employers noted they have continued to offer bonuses and enhanced benefits to attract and retain workers.
Prices
Selling prices increased at a modest or moderate pace in most Districts, though many said that the pace of increases
had slowed from that of recent reporting periods. Manufacturers in many Districts reported continued easing in freight
costs and prices for commodities, including steel and lumber, though some said input costs remained elevated. Many
retailers noted increased difficulty in passing through cost increases, suggesting greater price sensitivity on the part of
consumers. In addition, some retailers offered more discounts and promotions than they had a year ago in order to
move merchandise and clear out excess inventories. On balance, contacts across Districts said they expected future
price growth to moderate further in the year ahead.
Highlights by Federal Reserve District
Boston
New York
Business activity was roughly flat, and employment
increased moderately amid seasonal hiring. Prices increased modestly as nonlabor cost pressures eased.
Wage growth was above average despite easier hiring
conditions. Tourism activity posted strong gains, while
home sales continued to fall. The outlook was mostly
stable but worsened slightly amid real estate contacts.
Economic activity contracted, led by an especially sharp
decline in the manufacturing sector. Job growth slowed
and labor shortages eased somewhat, but hiring plans
remained fairly solid. Wage growth remained modest,
while the pace of input and selling price increases
slowed. Housing markets continued to cool, and loan
demand fell.
1
National Summary
Philadelphia
St. Louis
Business activity appeared to decline slightly during the
current Beige Book period after holding steady for six
months. Wage and price inflation continued to subside
but still grew at a moderate pace. Employment continued
to rise slightly, although hiring plans grew more cautious.
Current sentiment fell, but expectations improved.
Economic conditions have remained unchanged since
our previous report. Labor shortages remained a key
issue, though more contacts reported a slightly easier
time hiring and retaining workers. The rate of input price
increases slowed, and contacts reported improvements
in shipping costs and delivery times. Consumer spending
and travel were both mixed during the holiday season.
Cleveland
Minneapolis
The District’s economy slowed slightly as 2022 drew to a
close amid high interest rates and elevated costs and
selling prices. However, the share of contacts reporting
higher costs or selling prices declined noticeably from
the middle of 2022. Looking ahead, firms expect softer
conditions to persist in the near term but still plan to add
workers to meet existing and expected demand for their
goods and services.
Economic activity in the region expanded slightly in
recent weeks. Employment grew modestly, with labor
demand softening but still healthy. Wage and price pressures remained high but lessened slightly. Holiday shopping was good overall but stymied somewhat by severe
winter weather. Construction and real estate sectors
continued to struggle. Inflation and high labor costs were
hurting minority- and women-owned firms.
Richmond
Kansas City
The regional economy continued to grow at a slight
pace, due in large part to moderate growth in consumer
spending as manufacturing, transportation, real estate,
and lending activity slowed. Employment rose more
modestly this period compared to recent months and
some firms noted hitting limits on wage increases. Price
growth remained elevated in recent weeks.
Economic activity in the Tenth District continued to decline slightly through the end of 2022. Though labor
demand cooled further, contacts reported ongoing tightness and persistent wage pressures. Consumer spending declined recently, particularly for retailers and restaurants. Across goods and services, price growth slowed to
a moderate, yet still-brisk, pace. Energy activity slowed
modestly, facing headwinds from falling oil and gas
prices.
Atlanta
Economic activity grew at a gradual pace. Labor market
tightness eased, but wage pressures persisted. Most
nonlabor costs moderated. Retailers reported healthy
holiday sales. Auto sales rose. Leisure travel was robust.
Housing demand fell. Transportation conditions weakened. Overall loan growth was steady, but deposit
growth slowed. Agriculture remained mixed.
Dallas
Modest economic growth continued, with an acceleration
in the manufacturing sector but an abatement in the
service sector. Retail sales and home sales fell further,
while oil and gas activity expanded. Employment growth
continued and wage and price growth stayed elevated.
Outlooks were mostly pessimistic except for the energy
sector, and many contacts voiced concern about weakened demand, a potential recession, and inflation.
Chicago
Economic activity decreased slightly. Employment increased moderately; consumer and business spending
were unchanged; nonbusiness contacts saw little change
in activity; manufacturing decreased modestly; and
construction and real estate decreased moderately.
Prices and wages rose moderately, while financial conditions tightened some. Agriculture incomes were strong in
2022.
San Francisco
Economic activity expanded modestly. Employment
levels grew at a modest pace as labor supply improved.
Wages and prices remained elevated but rose at a slower pace relative to the previous reporting period. Demand for retail goods and services was stable. Manufacturing activity was mixed, while conditions in the agriculture sector remained weak. Residential real estate activity weakened, and lending activity rose slightly.
2
Federal Reserve Bank of
Boston
The Beige Book ■ January 2023
Summary of Economic Activity
Business activity in the First District was roughly flat on balance, with continued strength in tourism and further declines
in home sales. Prices increased modestly, and many contacts reported that nonlabor cost pressures had eased considerably. Employment rose moderately, spurred by seasonal hiring in retail and hospitality. Wage pressures remained
substantial. Some firms sought ways to boost productivity and profitability. Home sales fell sharply, and commercial
leasing and investment activity were flat. Software and IT services firms enjoyed mostly strong and stable demand.
Outside of real estate markets, where the outlook weakened slightly, most contacts remained optimistic for their own
prospects, even though some deemed a recession as likely for 2023. No firms planned to make significant layoffs and
most expected price increases to moderate moving forward.
markups earlier this fall but offered promotional discounts during the holiday shopping season. Retailers
and manufacturers alike commented that nonlabor cost
pressures had eased considerably in recent months, as
the price of container shipments in particular fell sharply
and supply chains improved. Prices at software and IT
firms were up modestly on average, although one contact enacted “more aggressive” price increases in the
second half of 2022. Moving forward, some contacts
expected to hold prices firm or even to offer promotions
to retain business, and others expected to face ongoing
cost pressures—linked largely to employment—that
could necessitate further price hikes. On balance, price
increases were expected to moderate, however.
Labor Markets
Employment increased moderately on balance, spurred
by a seasonal uptick in demand and easier hiring conditions. Wage growth proceeded at an above-average
pace. A clothing retailer found it easier than expected to
hire seasonal workers, especially positions involving
remote work, but had to offer hiring bonuses to attract
warehouse workers. Robust convention activity and
holiday parties gave a moderate boost to food and beverage staffing at Boston-area hotels. In contrast, airline
industry contacts found it very hard to fill positions and
some restaurants cut hours in response to persistent
staffing shortages. Firms in diverse sectors commented
that wage growth was above average (if mostly stable)
and that employment costs continued to eat into profit
margins. Many contacts planned to focus increasingly on
raising labor productivity and cutting costs. No firms
planned to undertake significant staffing reductions, not
even those that had experienced weak results recently.
Retail and Tourism
First District retail contacts reported mixed sales, while
tourism contacts saw strong increases in activity. A
clothing retailer experienced softer demand throughout
most of the fall, but sales rebounded during the holiday
season, surpassing expectations for that period. Cape
Cod retailers experienced strong fourth quarter sales,
which a contact attributed to the fact that remote work
arrangements have boosted the number of visitors to the
Cape during the post-summer months. Accordingly,
hospitality contacts on the Cape enjoyed a record-setting
fourth quarter for occupancy and room rates. Airline
passenger traffic through Boston increased steadily in
recent months, reaching 93 percent of pre-pandemic
Prices
Prices increased modestly on balance. Most contacts
said that their output prices were flat since the previous
report and that nonlabor cost pressures had retreated
substantially. However, hotel room rates in the Greater
Boston area increased sharply since the summer, in part
for seasonal reasons, and landed well above their yearearlier levels. Cape Cod lodging prices posted a modest
seasonal decline, but easily exceeded their comparable
2019 levels. A clothing retailer posted high single-digit
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Federal Reserve Bank of Boston
levels, and cruise ship activity through Boston and into
Maine accelerated during the same period. The Greater
Boston hotel occupancy rate increased further, returning
to pre-pandemic levels. Convention activity also increased sharply, and bookings into 2023 are in line to
exceed 2019 levels. Three tourism contacts expressed
concerns that inflation could crimp leisure spending in
2023, but none had seen any actual signs of a slowdown
yet.
Commercial Real Estate
The First District’s commercial real estate market was
relatively unchanged in recent weeks. The industrial
market softened slightly, as rent growth slowed a bit but
vacancy rates remained very low. The office sector
continued to experience high vacancy rates and flat
rents. Conditions were stable in the retail property market, with food and beverage establishments experiencing
the strongest demand. No significant acquisitions were
reported for any property class, and new deals were said
to be on hold until late in the first quarter of 2023. High
interest rates continued to curtail borrowing activity, and
refinancing occurred only out of absolute necessity.
Concerning the outlook, contacts expected activity to be
flat or to slow slightly on balance, but expectations differed by property type. While the industrial market was
expected to continue to perform relatively well, the prospects for the office market weakened further, as some
contacts feared that pending lease maturations would
result in added vacancies. The outlook for the retail
market was uncertain, as it was seen to depend heavily
on the extent of any economic slowdown in 2023.
Manufacturing and Related Services
Recent results were mixed across First District manufacturing contacts. A toy manufacturer reported a sharp
decline in revenues in the third quarter, citing inflation’s
impact on lower-income consumers as one cause. A
chemical manufacturer faced weaker demand from
clients in the construction and automobile industries, and
as competitor firms sought to shed excess inventories.
Two consumer goods manufacturers had flat and moderately stronger sales in December, respectively, after
each had seen slumping sales earlier in the fall; recent
sales beat seasonal expectations in both cases. A frozen
food producer experienced steady demand despite the
fact that it had posted three large price increases in the
last 18 months. One contact made a significant downward revision to its capital spending plans, and others
held plans steady. Most contacts were more optimistic
for 2023 than they had been earlier in the year. The toy
manufacturer, however, expected a recession in 2023
and accordingly weaker sales.
Residential Real Estate
Home sales posted substantial further declines in November, and closed sales were down by 20 to 30 percent on a year-over-year basis. For single-family homes,
recent results represented a sharp slowdown in sales
from the previous report, whereas for condos the recent
sales declines were slight-to-moderate. A Boston contact
attributed weak demand for homes as a response to
persistent inflation and higher mortgage rates. The same
contact added that some would-be buyers have left the
market entirely and that the buyers who remain are
searching for homes at a more careful pace, as the
bidding wars and waived inspections that characterized
the market in recent years have become quite rare.
Inventories remained down on an over-the-year basis in
Rhode Island, Massachusetts, and Vermont, but by a
much smaller margin than in the previous report. In other
markets, inventory growth accelerated substantially from
the previous report. Prices increased slightly over-theyear, at about the same pace as reported last time.
Contacts expected home prices to continue to level off in
the near term, and stressed that, despite cooling demand, further inventory growth was still needed in order
to achieve a more balanced market.■
IT and Software Services
Demand was strong and stable in the fourth quarter
among most contacts. However, one firm experienced a
moderate decline in bookings that was not unexpected,
and that was attributed to a weakening macroeconomic
environment. Contacts reported year-over-year revenue
increases that ranged from moderate to very large.
Where recent demand was strong, contacts attributed
their results to the post-pandemic rebound of client firms
and to the essential nature of certain IT services. Two
firms said that higher employee-related expenditures had
pinched their profit margins somewhat. Capital and
technology spending was flat or, in one case, experienced a modest decline that was attributed to the rise of
cloud-based computing. Contacts expected to see
steady or slightly softer demand in the near term, but
cited a variety of downside risks to activity, such as a
seasonal spike in respiratory illnesses, ongoing inflation,
and stock market volatility. Nonetheless, contacts expressed a high degree of confidence in their firms’ prospects for longer-term success.
For more information about District economic conditions visit:
https://www.bostonfed.org/in-the-region.aspx
A-2
Federal Reserve Bank of
New York
The Beige Book ■ January 2023
Summary of Economic Activity
Economic activity in the Second District declined significantly in the latest reporting period and most business contacts
do not expect activity to increase in the coming months. Input prices continued to increase but have decelerated noticeably, and selling price increases have moderated somewhat. Hiring has slowed, wage growth has remained modest,
and businesses reported that they plan to add staff, on balance, in the months ahead. Manufacturing activity weakened
substantially in the final weeks of 2022. Consumer spending was mixed but somewhat weaker overall, while tourism has
remained strong. The home sales and rental markets showed further signs of cooling, though concerns about housing
affordability remain widespread. Commercial real estate markets stabilized, and construction activity has remained
sluggish. Conditions in the broad finance sector were generally steady, but regional banks reported widespread declines
in loan demand, ongoing tightening in credit, and rising delinquency rates.
Labor Markets
abated most significantly in the trade, transportation, and
manufacturing sectors. Looking ahead, fewer contacts
foresee future escalation in prices paid than at any point
since early 2021.
Employment continued to expand, though at a more
subdued pace than in recent months. A number of business contacts reported that it has become somewhat
easier to attract and retain workers. A large upstate New
York employer noted that turnover has slowed noticeably
in recent weeks and that attrition rates have now fallen
below pre-pandemic levels. Still, there continues to be
strong demand for skilled workers—particularly in IT,
finance, and sales occupations. A New York City employment agency remarked that, despite recent layoff announcements, layoffs do not seem unusually high and job
postings remain plentiful. Hiring plans for the first half of
2023 remained solid.
Selling price increases were reported to be somewhat
less widespread than in the last report. Notably, retailers
reported modestly declining prices, and transportation
firms indicated that their prices were flat. Retailers and
wholesalers indicated that they planned to keep prices
mostly steady in the months ahead, while businesses in
most other sectors anticipate moderate price hikes.
Consumer Spending
Consumer spending has been little changed in recent
weeks. Nonauto retailers reported that business was
relatively sluggish over the holiday season, with some of
the weakness attributed to difficulties in procuring supplies and staff. Auto dealers in upstate New York reported that sales of new vehicles were steady to modestly
higher, helped by improvement in the supply chain.
However, sales of used vehicles have softened further.
Consumer confidence across New York State surged to
its highest level in more than three years in December.
Business contacts reported steady and modest wage
growth, though one upstate employment agency noted
some slowing. The steepest wage growth over the past
month was reported from financial services firms. Businesses across all major industry sectors plan to raise
wages in the months ahead—particularly in wholesale
trade, transportation, and leisure & hospitality.
Prices
Price pressures, both current and projected, have eased
noticeably. Business contacts reported that the prices
they pay have continued to increase but to a much lesser
degree than in recent months. Price pressures have
Manufacturing and Distribution
Manufacturers wound up 2022 on a bleak note, reporting
the most widespread decline in activity since early in the
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Federal Reserve Bank of New York
pandemic. Contacts in the transportation & warehousing
sector also noted declining activity, while wholesale
distributors indicated flat activity. On a positive note, a
number of businesses indicated that supply disruptions
had eased. Looking ahead, manufacturers do not expect
much improvement, while transportation, warehousing,
and wholesale trade firms were more optimistic.
somewhat. Elsewhere, rents have generally been steady,
though one contact in upstate New York noted that already
high rents continued to trend up. Rental vacancy rates,
though still quite low, have risen modestly.
Commercial real estate markets generally appear to have
stabilized, though at weak levels. Office vacancy and
availability rates leveled off in New York City, edged up in
northern New Jersey, but declined modestly across upstate New York. Office rents were steady to up slightly
across the District; aside from New York City, office rents
are near or above pre-pandemic levels. The industrial
market has been steady as well, with vacancy rates little
changed and rents trending up modestly.
Services
Service sector activity continued to weaken in the latest
reporting period. Providers of professional & business
services and education & health services reported ongoing declines in activity, while information firms noted a
pickup in business. Contacts in the leisure & hospitality
sector indicated some leveling off in activity, following
weakening in the prior report. Looking ahead, information sector businesses expressed increased optimism
about the outlook, but contacts in other service industries
anticipated flat to modestly declining activity.
Construction contacts reported continued weakening in
business conditions and were fairly pessimistic about the
near-term outlook. New office construction starts remained
at depressed levels throughout the District, though there
was some pickup in New York City and Long Island. New
industrial construction has largely dried up. Multi-family
residential starts weakened across most of the District but
picked up modestly in New York City, though from low
levels. A sizable volume of new apartment development is
due to be completed in 2023.
Tourism activity in New York City strengthened further in
December. Hotel occupancy rates climbed above 80
percent, versus 60 percent a year earlier, and average
room tariffs were up roughly 20 percent over the year.
Moreover, visits to major tourist attractions, such as the
Statue of Liberty, have rebounded to pre-pandemic
levels. While attendance at Broadway shows has been
mixed, high-profile musicals targeted towards visitors
have reportedly fared quite well. Despite a dearth of
visitors from Asia—especially China—the overall flow of
international visitors has been fairly strong, though visitors are spending less, on average, due in part to the
strong dollar.
Banking and Finance
Contacts in the broad finance sector reported little change
in business conditions. However, small to medium sized
banks in the District reported widespread declines in loan
demand across all segments—especially residential mortgages. Credit standards continued to tighten, and loan
spreads were little changed except on business loans,
where they widened. Almost all bankers reported higher
deposit rates. Finally, delinquency rates rose modestly,
particularly on commercial mortgages.
Real Estate and Construction
The residential sales and rental markets showed further
signs of cooling in late 2022. Real estate contacts in
upstate New York reported that prices have flattened
out, and that sales volume and buyer traffic have continued to wane—in part attributed to unusually harsh winter
weather. In and around New York City, sales of both
single-family homes and apartments fell fairly sharply,
while prices were flat to down modestly. Still, throughout
the District, the inventory of available homes remains
quite low, as many sellers have decided not to list.
Community Perspectives
With pandemic assistance no longer available, there have
been growing requests for local governments and nonprofits to provide emergency support for low-income households. Demand for mental health services also continued
to increase. These challenges have been compounded by
widespread staffing shortages. A dearth of affordable
housing also remains a major concern. Finally, to support
digital equity in the District, new infrastructure funds are
expected to expand high-speed Internet access to those
with more moderate means. ■
Residential rental markets weakened further, though the
high end of the market has shown some resilience. In
New York City, rents have trended down modestly since
peaking last summer, though they remain higher than a
year ago; landlord concessions have also increased
For more information about District economic conditions visit:
https://www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ January 2023
Summary of Economic Activity
On balance, business activity in the Third District appears to have declined slightly after holding steady since the first of
July. Inflation and higher interest rates have dampened consumer demand for big-ticket items, including homes and
autos. Employment continued to grow slightly even as labor demand eased; business contacts noted an increased
willingness to work. Wage growth and inflation continued to subside (and reported price increases were less widespread), but both continued at a moderate pace. Overall, firms continued to note less difficulty in hiring and fewer supply
chain disruptions. On balance, expectations for economic growth over the next six months improved slightly among all
firms; however, expectations remained well below their nonrecessionary historical averages.
Labor Markets
Prices
Employment continued to grow slightly, with small net
increases among nonmanufacturers outweighing small
net decreases among manufacturers. Some firms reported that they will reduce their temporary staffing first as
their own production slows. Staffing firms have also
noted some softness in demand for temporary workers.
Contacts, including staffing firms, also noted that hiring
has become easier, with some suggesting that workers
are beginning to feel the need to be employed full time.
On balance, inflation continued to rise moderately, although reported increases were less widespread. Twothirds of manufacturers reported no change in prices
paid (for factor inputs) and almost two-thirds of nonmanufacturers reported no change in prices received (often
from consumers). Moreover, the share of firms reporting
increases less the share reporting decreases was at or
below its nonrecessionary average for the difference
between these two categories. Price increases were
more commonly seen in the exchanges between firms
for intermediate goods.
Still, nearly all firms continued to describe staffing as
their primary challenge. Many firms noted a high degree
of job churn, which results in workers being hired into
new industries for which they have no prior experience.
Several contacts noted that some professional staff had
left for higher salaries but then sought to return after
experiencing their new firm’s work environment.
Most contacts noted that prices were easing overall;
however, most could also cite examples of price spikes
for one or more production inputs. On balance, contacts
also noted fewer supply chain disruptions, although
some persist.
Firms continued to report that wage growth had subsided
but remained in a moderate range. Wage inflation remained pervasive. In our monthly surveys, the share of
nonmanufacturing firms reporting higher wage and benefit costs per employee remained at a little over 40 percent, while just over half of the firms reported no change
and a few reported lower compensation levels. Most
contacts expect future wage growth to return to near prepandemic rates.
About half the manufacturing contacts expected to pay
higher prices over the next six months, and slightly less
than that expected to receive higher prices for their own
goods.
Manufacturing
Manufacturing activity declined moderately – after having
declined modestly in the prior period. The index for new
orders fell further and was negative for the seventh
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Federal Reserve Bank of Philadelphia
consecutive month. In addition, the shipments index
turned negative, suggesting that firms have begun to
work through their backlogs. Many contacts confirmed
that demand was slowing, backlogs are being fulfilled,
and companies are reducing their inventories. One firm
that reported strong sales indicated that it was gaining
market share from failing competitors, not economic
growth.
share of firms reporting decreases in sales and new
orders slightly edged out the share reporting increases.
Financial Services
The volume of bank lending (excluding credit cards)
grew moderately during the period (not seasonally adjusted) – comparable with growth in the prior period and
faster than in the same period last year. However,
growth was less widespread, especially among some
consumer segments. Inflationary effects on home prices
and other big-ticket items continued to boost loan volume
growth during the current year relative to past years.
Manufacturers expect the current slowdown to be relatively brief. The indexes for future activity and new orders trended higher and turned positive; the index for
future shipments remained positive and trended higher.
Moreover, expectations of increased employment and
capital spending over the next six months became more
widespread.
During the period, District banks reported strong loan
volume growth in home mortgages and commercial and
industrial lending and modest growth in commercial real
estate lending. Home equity lines, auto loans, and other
consumer lending were essentially flat. Credit card volumes grew robustly – typical of the holiday season.
Consumer Spending
Retailers (nonauto) and restaurateurs offered mixed
reports: A low-cost retailer reported that falling gas prices had driven stronger sales in December, but a highend retailer exclaimed that “December is not happening!”
A restaurant operator noted progressively weaker traffic
from diners (on a year-over-year basis) each month this
autumn into December.
Real Estate and Construction
Homebuilders continued to report weak demand and a
modest decline in contract signings for new homes.
Some smaller builders are able to maintain steady work
by offering price concessions or by offering new lowerpriced products with a smaller footprint and less costly
features.
Low-income households expressed challenges in
making their incomes stretch through the month. After
requests for housing and utility bills, assistance with
employment and income was the third-highest overall
request for help on 211 calls in the three-state region.
This was also true for New Jersey, individually, but in
Delaware and Pennsylvania, food assistance rose to the
third-highest request at 10 percent of all requests.
Existing home sales fell modestly in most markets –
following a steep decline in the prior period. Brokers
noted that the softer market is shifting (slowly) back
toward a balance between buyer and seller. Days on the
market are lengthening, and home inspections are becoming the norm again. However, housing affordability
worsened.
Auto dealers reported modest declines in sales – noting
that high prices, rising interest rates, and smaller yearend bonuses had dampened demand. New car prices
had begun falling as inventory levels improved; however,
a contact reported that most car manufacturers are
scaling back production again as chip shortages are
expected to continue through the first quarter, or later.
Requests for assistance with housing and utility bills
continued to dominate the share of 211 requests in the
three-state region, at 32 percent and 23 percent, respectively. In turn, 42 percent of the housing requests were
for rental assistance.
Market participants in commercial real estate continued
to report steady current construction activity, although
the pipeline is less full. Many contacts noted that higher
interest rates, tighter credit, and current market uncertainty have delayed many deals, especially for land
development. Demand remains strong for new space to
serve industrial, warehousing, and the life sciences
sector. Multifamily housing has begun to slow, and sentiment toward office space is turning increasingly dour.
Leasing activity for office space has slowed modestly,
and renewals are often seeking less space. ■
Tourism contacts reported that demand for lodging was
falling slightly in most of the region. Consumers are still
taking trips but are booking shorter stays, resulting in
softness during the week. According to one contact, the
pipeline for new hotel construction “has fallen precipitously.” With an expectation of little new supply over the
next three to five years, room rates are expected to
increase, while upward pressure on labor compensation
is expected to ease.
Nonfinancial Services
For more information about District economic conditions visit:
www.philadelphiafed.org/regional-economy
On balance, nonmanufacturing activity appeared to hold
steady for the second consecutive period; however, the
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ January 2023
Summary of Economic Activity
Business activity in the Fourth District slowed slightly since the previous report, though activity varied considerably by
industry sector. District retailers indicated that sales over the holiday shopping season did not meet their growth expectations because inflation led households to spend more on necessities and less on discretionary items. Auto dealers,
homebuilders, and residential realtors said that higher interest rates, along with persistent inventory shortages, constrained sales. Bankers reported that loan volumes declined further. By contrast, manufacturers said that demand increased slightly in recent months, particularly in goods categories with longer lead times. Looking forward, contacts are
generally more pessimistic about the near-term outlook for demand. However, contacts’ near-term hiring plans remained
little changed, which suggest they will continue to hire. Upward wage pressures appeared to ease, as did the pressure
on nonlabor input costs and selling prices.
input costs recently compared to about three-quarters of
them who reported the same this time last year. Manufacturers and nonresidential builders were most likely to
report relief from rising input costs, often citing lower
prices for steel, lumber, and freight. By contrast, costs
were said to be rising for concrete, electronics, and
electrical components. In many cases in which prices
continued to rise, contacts pointed out that the rate of
increase had declined noticeably. Looking forward, the
share of firms expecting cost increases in the months
ahead fell to 54 percent, its lowest since early 2021.
Labor Markets
Employment increased moderately in recent weeks
despite slightly softer current business activity. Firms in
manufacturing and professional and business services
were most likely to report staff increases, while those in
construction and freight were most likely to report staffing reductions. Reports of layoffs remained rare, and
most contacts preferred to reduce employment through
attrition when needed. One staffing services firm reported that demand had slowed noticeably in November and
December, though the contact was “hoping” that it was a
seasonal decline and would pick up in January. On
balance, contacts expected to add more workers at a
relatively steady pace in coming months.
The share of firms raising selling prices was unchanged
in recent weeks, at 45 percent, but well below the peak
of 73 percent in the spring of 2022. Some contacts noted
that they were not increasing prices to remain competitive, while others said they were waiting to see if input
costs increase further. However, weaker demand led
homebuilders to use more incentives and discounts to
close sales, while general merchandisers and apparel
retailers used more promotions over the holiday shopping season to move goods and reduce inventories.
Wage pressures eased over the past year, though they
did not change meaningfully in recent weeks. There
were a few new reports of increased worker availability,
but most contacts suggested that labor markets remained very competitive, keeping wage pressures from
easing further. While fewer firms raised pay compared to
those that did a year previous, some offered their employees more generous yearend bonuses or accelerated
the timeline for merit increases to help employees mitigate the impact of higher inflation.
Consumer Spending
Retailers reported further softening in demand as consumers faced continued pressure from inflation and
increased interest rates. Multiple retail contacts said that
holiday sales had fallen short of expectations, with one
large general merchandiser noting that his customers
continued to focus spending on everyday essentials
Prices
Cost and price pressures have also eased over the past
several reporting cycles, though they changed little in
recent weeks. Roughly half of contacts reported higher
D-1
Federal Reserve Bank of Cleveland
while minimizing discretionary purchases. Reports from
restauranteurs were mixed. While one fast food contact
said her sales had increased as consumers “dined
down” because of inflation, sit-down restaurants reported
unchanged or decreased sales. Auto dealers continued
to report flat or decreasing sales amid increased interest
rates and selling prices dampened activity. Bankers
indicated that delinquency rates for commercial and
consumer loans remained low. Core deposits declined,
and some lenders attributed this decline to customers’
seeking higher-yielding alternatives and to increased
deposit rate competition among banks. Looking ahead,
bankers expected that loan volumes would continue to
decline through the first quarter because of a decrease
in applications in the pipeline.
rates, higher vehicle prices, and limited inventory.
Manufacturing
Demand for manufactured goods moved slightly higher
in recent weeks. However, reports varied by industry
segment. Demand increased for firms whose products
have longer lead times, such as those producing parts
used in commercial aircraft, and for manufacturers tied
to the ongoing creation of new electric vehicle production
capacity. By contrast, softer consumer spending led to a
decline in orders for some firms as their customers rebalanced inventories. One packaging producer said that
customer destocking had reduced demand for its cardboard-related products, leading to “historically high
downtime” in production. While reports of supply chain
disruptions were less frequent than in recent reporting
periods, one HVAC producer said that her firm’s sales
had declined slightly because of customers’ inability to
secure necessary components. Manufacturers generally
expected demand to change little in the coming months.
Nonfinancial Services
Freight activity continued to decline. One contact attributed the softening demand to the slowdown in home purchases and a decline in shipments of consumer goods
as households shifted more of their spending to services.
Another freight contact noted that demand had been
diminished because of a reduction in imports. Demand
for professional and business services increased on
balance. One accounting firm noted that activity had
increased in recent weeks because of yearend planning
work, and another firm that provides digital authentication services noted that demand for its services remained strong as households continued to shift spending
from brick-and-mortar stores to online businesses.
Community Conditions
Nonprofit contacts suggested that job opportunities for
lower-wage workers increased in recent months. Several
noted that jobs in hospitality and retail were particularly
plentiful, likely boosted by seasonal hiring. Contacts
cited the largest barriers to lower-wage workers’ participating in the labor force continued to be a lack of affordable childcare and transportation followed by flexible
scheduling, wages, and whether those wages would
make up for any loss of government benefits (the
“benefits cliff”). Regarding affordable housing, a plurality
of contacts was concerned about rising rents and the
exhaustion of programs such as emergency rental assistance in 2022. Several contacts said these factors are
likely to exacerbate a trend toward homelessness and
overcrowding, and individuals might “double up” and
Real Estate and Construction
Residential construction and real estate activity declined
further. Contacts continued to cite elevated interest rates
as the main factor hindering demand. One real estate
agent said that the housing market was in a recession
and stated that the only reason that there had not been
significant declines in home prices was because of extremely low inventory levels.
Demand for nonresidential construction and real estate
remained weak. Real estate brokers indicated that sales
had dried up amid elevated interest rates. Despite tepid
demand for new construction, nonresidential construction contacts were slightly less pessimistic about demand going forward. One general contractor was hopeful
that funds from the Infrastructure Investment and Jobs
Act would begin to result in more projects available for
bid.
move in with family or friends. ■
Financial Services
Overall, lending continued to decline during the reporting
period, a situation which bankers attributed to higher
interest rates that are increasing borrowing costs. Bankers noted moderate slowing in commercial lending, and
some contacts reported weaker loan pipelines. On the
household side, lenders said that residential and auto
loan volumes continued to decline as higher interest
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 ■ January 2023
Summary of Economic Activity
On balance, the Fifth District economy continued to expand slightly in recent weeks as consumer spending grew modestly but activity in other sectors declined. Manufacturing activity softened slightly and new orders declined. District ports
reported a moderate decline in activity, particularly for loaded import volumes. Trucking activity also slowed, partially
due to a typical seasonal slowdown, and spot shipping rates decreased moderately. Overall, retail spending grew moderately as strong holiday sales helped lift revenues. Travel and tourism venues also reported moderate growth. Vehicle
sales, however, remained low as higher interest rates deterred purchases. Residential real estate activity also softened
due to elevated mortgage rates leading to lower sales volume with more seller concessions. Commercial real estate
activity slowed moderately across all market segments and some commercial construction projects were cancelled or
put on hold. Lending volumes reflected the pull back in borrowing demand and some banks reported increasing delinquency rates in their consumer portfolios. Nonfinancial services reported steady demand and revenues. Total employment increased only modestly with some employers noting being more cautious about hiring and others saying they
couldn’t raise wages any further. Overall, prices continued to grow strongly in recent weeks; however, some input prices
eased.
Labor Markets
Manufacturing
Employment in the Fifth District increased modestly in
recent weeks. A packaging firm reported that while they
have not started layoffs, they have gotten much more
selective in who they interview. Several contacts reported that retaining employees continued to be a major
issue. One quick service restaurant stated that their
company has great culture, but new hires don’t stick
around long enough to find out. Several contacts reported being at a breaking point on increasing wages as they
cannot pass through costs anymore to consumers. Inflation has been a major drain on margins as firms raised
wages multiple times to keep up with increased wage
expectations for current and potential employees.
Manufacturing activity in the Fifth District softened further
in recent weeks. Shipments of finished products picked
up slightly but contacts reported a modest decline in new
orders. One fabric manufacturer reported that some of
their customers are reducing inventory levels due to a
fear of decreased demand, resulting in a decline in orders. A furniture manufacturer saw a slowing of consumer purchases and expected this trend to continue in the
next few months as fewer consumers remodel their
homes. Supply chain disruptions showed signs of improvements as backlogs and vendor lead times both
declined.
Prices
Fifth District ports reported a moderate slowdown in
volume this period. Loaded imports were significantly
down led by a decline in retail inventory, but loaded
exports were flat or slightly up. The volume of empty
containers leaving the ports continued to be strong.
Dwell time at the ports shortened leading to less congestion and lower storage fees. As shipping lines had some
freed-up capacity, spot rates continued to decline back
to pre-pandemic price levels and were significantly under
current contract rates. Due in part to an earlier and longer Chinese New Year, the ports were anticipating significantly lower import volumes in the first quarter of 2023.
Ports and Transportation
Prices continue to grow strongly in recent weeks. According to our most recent surveys, manufacturing and
service sector businesses experienced robust year-overyear growth in prices received. Overall, input price
growth remained strong; however, some manufacturers
reported paying lower prices for freight and energy.
There were several reports, on the other hand, that
construction costs continued to rise reflecting higher
materials prices and borrowing costs.
E-1
Federal Reserve Bank of Richmond
Trucking firms reported a usual seasonal slowdown in
freight volume this period. Overall, retail shipping volumes declined slightly this period while commercial and
industrial loads held up as some firms were still suffering
from inventory shortages. Spot market rates decreased
moderately this period and there were few increases in
contract rates. Trucking firms indicated no difficulty
hiring drivers and a few companies actually had scaled
back hours and were not backfilling positions in response to the lower volumes. Maintenance remained an
issue, which had caused trucking companies to have to
maintain bigger fleets. Prices for new tractors and trailers have increased substantially and new equipment
orders were back ordered about six months.
Overall commercial real estate activity slowed moderately this period with reduced construction as well as lower
leasing activity, investment volume, and asset values.
Additionally, as companies consolidated their office
space there was an increase in sublease inventory and
vacancy rates. Most new commercial construction projects have been put on hold due to elevated construction
costs and higher funding rates. There was decreased
demand for office and retail space particularly in central
business districts. Property owners were offering bigger
concessions rather than lowering asking rents on new
leases for both multifamily and retail. Capital market
sales activity was down significantly due to higher interest rates.
Retail, Travel, and Tourism
Banking and Finance
Retailers reported moderate growth in sales and revenues due, in part, to the holiday shopping season. A few
contacts said that customers were still not as price
sensitive as they would have expected and were not
only interested in discounted items. One contact added
that revenues were up because sales volumes were
unchanged while their selling prices had increased. A
car dealer said that rising interest rates have slowed
vehicle sales but that was helping to get more inventory
back on the lot.
Loan demand continued to be weak across all commercial and consumer loan types. This weakness was being
attributed mainly to increasing rates and borrower apprehension about the overall economy. Some institutions
noticed an increase in existing credit card line usage as
well as home equity lines of credit. Deposit levels continue to drop although rates were increasing in line with
treasury securities. Institutions continued to see a modest increase in loan delinquencies, especially in the
consumer portfolio. Overall, institutions anticipated a
moderate decrease in both loans and deposits in 2023.
Travel and tourism increased moderately in recent
weeks. Hotels reported that strong occupancy levels
and higher room rates led to higher revenue. A hotel in
South Carolina added that bookings were up for both
leisure and business travel, particularly for small and
mid-sized corporate events. Some hotels continued to
limit services due to labor shortages, but one contact
said they were able to use contract or temporary employment agencies to fill some food service and housekeeping positions.
Nonfinancial Services
Nonfinancial service providers reported stable demand
for their services as well as revenue growth. Contacts
expected to moderately increase wages in the coming
year to maintain and grow their workforces. One professional services firm was budgeting for technology upgrades to remain efficient during this time of workforce
uncertainty. Supply chain issues were improving, but this
improvement was being offset by a decrease in demand
from clients. Inflation and rising interest rates were still a
concern for firms’ customers, which added uncertainty to
making business decisions. ■
Real Estate and Construction
There was reduced market activity this period, partially
due to usual seasonality, with a decline in the number of
listings, decreased buyer traffic, and increased days on
market. Respondents indicated that there were fewer
closed and pending home sales as elevated mortgage
rates and low housing inventory impacted volume. Sales
prices have decreased modestly from their peak in the
spring; however, sellers were offering more concessions
to complete transactions. New home builders also were
doing more discounting and/or providing incentives to
sell their remaining housing inventory. New home construction costs were lower than their recent peak but still
above pre-pandemic levels. There also was a significant
pullback in investor activity in the single home market.
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ January 2023
Summary of Economic Activity
Sixth District economic activity grew at a gradual pace from mid-November through December. Labor market
pressures eased somewhat, but wage pressures persisted. Most nonlabor cost increases moderated; however, food
prices climbed, and freight costs remained elevated. Some firms’ pricing power diminished. Holiday sales at District
retailers were strong, and auto sales rose. Leisure travel activity was robust, and bookings for the first half of 2023
were strong. Housing inventory levels rose as home sales declined. Commercial real estate conditions weakened.
Transportation activity continued to decline. Manufacturing demand remained steady. Deposit growth at financial
institutions slowed, but loan growth was steady. Energy production remained strong, but winter weather caused
storm-related outages and damage to powerlines. Agricultural conditions were mixed.
Labor Markets
over-year unit cost growth decreased in December to
3.8 percent, on average, down from 4 percent in
November. Firms' year-ahead inflation expectations
also decreased from 3.3 percent in November to 3.1
percent in December, on average.
Labor market pressures eased further since the
previous report, but firms continued to describe labor
markets as tight. Several contacts noted that entry-level
roles were easier to fill; hiring for skilled positions
remained challenging. Staffing was still a top concern
and firms were largely intent on keeping talent even if
demand slows; most indicated that they would strongly
resist layoffs and would instead right size via attrition.
Several employers required employees to return to the
office and have become less flexible with remote work
arrangements.
Consumer Spending and Tourism
Retailers reported solid and healthier-than-expected
holiday sales; however, many offered heavy discounts
as consumers looked for deals. Some contacts noted
that lower-income consumers continued to trade down
and shifted to non-discretionary spending. Those stores
catering to higher-income customers noted ongoing
strength in demand. Auto dealers saw an increase in
sales volumes compared to the last report as new and
used car inventories improved.
Most employers reported persistent upward wage
pressures. Many anticipate wage growth will remain
elevated in 2023 but will ease somewhat. Several noted
that they would be creating more equitable pay across
their organization based on market survey results.
Some contacts indicated that overall pay raises would
be modest, but bonuses would be used to retain and
recruit specific talent.
Tourism and hospitality contacts reported strong
demand for leisure travel throughout the holiday
season. Hotel occupancy and attendance at tourism
venues were greater than 2019 levels. Although
bookings were strong through the second quarter of
2023, contacts expressed uncertainty over the second
half of the year.
Prices
Sixth District contacts noted most nonlabor input cost
increases moderated over the reporting period, though
price levels remained historically elevated. While
domestic freight cost increases persisted, largely due to
higher energy and labor costs, shipping container rates
returned to near-“normal” pricing. Food prices rose
significantly. Many firms described diminished pricing
power due to elevated inventories and/or increased
price sensitivity from customers. The Atlanta Fed’s
Business Inflation Expectations survey showed year-
Construction and Real Estate
F-1
Despite more moderate price growth and a recent drop
in mortgage interest rates, housing demand in the Sixth
District continued to deteriorate. Sales fell sharply
across the region and inventory levels rose. Most
homes sold for below the asking price and the number
of days on market reached near pre-pandemic levels.
Builders continued to reduce new home construction in
response to declining demand. According to builder
Federal Reserve Bank of Atlanta
contacts, demand in the entry-level and second home
markets was the weakest and cancellation rates
remained high. A significant share of builders cut prices
and increased incentives to attract buyers.
mer loan growth remained positive. Yet, institutions cut
investments in mortgage-backed securities as
unrealized losses in securities portfolios increased.
Deposit growth shifted primarily to time deposits as
growth in all other deposits declined in recent weeks
and institutions increased short-term borrowing to fund
ongoing loan growth. Asset quality metrics showed a
steady increase in the level of nonperforming assets.
Commercial real estate (CRE) contacts reported
weakening market conditions in lower-tier office, luxury
multifamily and owner-operator retail segments. The
industrial sector was robust; however, contacts voiced
concerns over future activity levels. The downward trend
in the office sector has eased some as more employers
require their staff to return to the office; however,
heightened levels of sublease space remained an
impediment to market recovery. A greater number of
contacts shared concerns over declining CRE values as
the bid-ask spread remained wide. More instances were
noted of slowing or negative net operating income and
rent growth. Contacts continued to report occurrences of
declining asset prices and buyers seeking greater
concessions.
Energy
Oil and gas contacts continued to report strong activity
and increased production, although the pace of growth
slowed over the reporting period. Gulf Coast refining
was impacted by the winter storm that swept across the
U.S. in late December, causing regional utilization to fall
approximately 20 percent, though long-term damage to
infrastructure was minimal. Utility providers across Sixth
District states reported winter storm-related outages
from damage to powerlines and surging demand.
Energy contacts continued to describe ongoing
investments in renewable projects, particularly
hydrogen, carbon capture and storage, and offshore
wind-energy development projects.
Transportation
Transportation activity continued to slow from
unsustainable pandemic levels. While some
southeastern ports reported that breakbulk cargo
volumes rose as shippers sought alternative ways to
move cargo amid supply chain disruptions, container
traffic decreased and was characterized as a return to
more sustainable growth. Trucking tonnage also fell, and
housing-related freight was noted as particularly weak.
Railroads experienced declines in intermodal shipments
of packaging materials, chemicals, and metals. Logistics
firms involved in moving and relocation, “big and bulky”
delivery services, and warehousing saw year-over-year
volume declines as consumer and housing demand
softened and firms reduced inventory levels. Most
transportation contacts expect additional weakening of
demand in 2023.
Agriculture
Agricultural conditions were little changed from the
previous report. Demand for poultry dropped slightly but
remained strong; demand for cattle and timber, as well
as for some row crops, such as corn and soybeans,
held steady. Florida citrus yields were down notably due
to damage from Hurricane Ian. The cotton market
continued to soften amid decreased demand from textile
mills. Supply chain disruptions persisted, with several
contacts reporting delays in receiving machinery and
parts.■
Manufacturing
District manufacturers noted steady demand and
positive revenue growth, driven primarily by the ability to
raise prices to offset higher input costs; however,
margins were described as remaining pressured or even
declining. Some firms reported plans to right size
inventory levels, reverting back to “just-in-time” inventory
management compared to pandemic-era “just-in-case”
inventory approaches. Several manufacturers cited
inflation and a strong dollar as headwinds in the coming
year.
Banking and Finance
Banking contacts reported steady loan growth for a
majority of portfolios, except for farmland and consu-
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 ■ January 2023
Summary of Economic Activity
Economic activity in the Seventh District decreased slightly overall in late November and December. Contacts generally
expected slow growth in the coming months, though many expressed concerns about the potential for a recession this
year. Employment increased moderately; consumer and business spending were unchanged; nonbusiness contacts
saw little change in activity; manufacturing decreased modestly; and construction and real estate decreased moderately.
Many contacts indicated they were no longer facing supply chain disruptions. Prices and wages rose moderately,
though at a slower pace than last report, while financial conditions tightened some. Agriculture incomes were strong in
2022.
Labor Markets
Consumer Spending
Employment increased moderately in late November and
December, and contacts expected a modest increase in
employment over the next 12 months. Many contacts
continued to report difficulty finding workers, though
others said they were able to meet their hiring needs.
One contact noted that worker attrition had slowed.
Another said that offering longer but fewer shifts had
attracted workers and helped those with childcare needs.
Wage and benefit costs continued to increase, though at
a slower pace than in the prior reporting period. Compensation increases were aimed both at attracting new
workers and retaining existing talent.
Consumer spending was little changed on balance.
Nonauto retail sales for the holiday season edged up,
slightly exceeding expectations. Categories that registered growth included consumer electronics, grocery,
discount stores, cell phone plans, and specialized goods
such as formal apparel and small kitchen appliances.
Weaker spending categories included furniture and toys.
Retailers increased promotions prior to Christmas and
boosted them further after Christmas to sell off excess
inventories. New vehicle sales were little changed, and
dealers were concerned that rising inventories and financing rates would hurt profitability. Used vehicle sales
decreased slightly, and prices continued their fall from
peak levels earlier in 2022. Overall, leisure and hospitality spending was up a bit, while some airlines and cruise
lines noted that the level of spending was well above last
year’s. Movie ticket sales were also up.
Prices
Prices rose moderately in late November and December,
which was a slower pace of increase than in the last
report. Contacts expected a similar rate of price increases over the next 12 months. Producer prices rose moderately, with reports of higher overall energy and raw
materials costs. One contact noted that shipping costs
had largely stabilized, and another reported that declining fuel prices were lowering production costs. Consumer prices generally moved up due to solid demand and
passthrough of higher costs, though there was growing
consumer resistance to paying higher prices.
Business Spending
Business spending was little changed overall in late
November and December. Capital expenditures remained stable on balance, with contacts highlighting
purchases aimed at greater automation. Demand for
commercial and industrial energy decreased slightly
while residential energy consumption rose. Retail inventories remained elevated overall, and contacts said
G-1
Federal Reserve Bank of Chicago
retailers were reducing orders and ramping up promotions to help pare them down. Vehicle inventory levels
continued their slow and steady climb. In manufacturing,
inventories were somewhat elevated, as supply issues
continued to lead firms to hold unfinished products. That
said, many contacts indicated they were no longer experiencing supply chain disruptions.
Agriculture
After a strong year for District agricultural income, contacts expected lower but still solid returns in 2023. A
contact suggested that many farmers will spend their
gains on equipment and trucks, especially as availability
at dealers had improved. With rivers rising, barge shipments returned closer to normal levels, easing shipping
costs some. Furthermore, prices for inputs such as fertilizers, chemicals, and energy all moved down during the
reporting period, and there was less concern about the
availability of inputs. However, some contacts expressed
worries about higher interest rates on farm loans. Soybean prices were higher, whereas corn prices were little
changed. Egg and cattle prices continued moving up,
while dairy and hog prices generally continued to move
down. Most major agricultural prices ended 2022 higher
than they were at the end of 2021.
Construction and Real Estate
Construction and real estate activity decreased moderately over the reporting period. Residential construction
activity declined modestly overall, led by a pullback in
single family homebuilding. Contacts reported that multifamily construction and remodeling activity were stable.
Residential real estate activity fell moderately. Home
prices moved down modestly, but rents were up modestly. Nonresidential construction declined slightly. One
contact said that while there is still work in the pipeline
for the next 6 to 12 months, high interest rates were
weighing on new projects, leading to worries that work
will dry up later in 2023. Commercial real estate activity
decreased moderately, with contacts reporting that obtaining financing for deals was very difficult. Prices were
down moderately, while rents decreased modestly. Both
vacancy rates and the availability of sublease space
increased modestly.
Community Conditions
Community development organizations and public administrators reported little change in overall economic
activity in late November and December. State government officials saw healthy growth in tax revenues over
the reporting period. Demand for unemployment insurance remained low. Small business support organizations said clients continued to face margin pressures due
to rising input costs, leading to increased loan delinquencies. In addition, higher interest rates were making small
businesses reluctant to take on working capital loans.
Nonprofit organizations said that uncertainty about the
employment outlook was complicating low- and moderate-income households’ long-term financial decisions,
such as whether to pursue homeownership. Philanthropic organizations continued to face the challenge of balancing increased requests to address basic needs—
such as food insecurity—with lower revenues. ■
Manufacturing
Manufacturing demand decreased modestly in late November and December. Contacts reported improvements
in the availability of inputs, which helped them further
reduce order backlogs. Steel production declined slightly
in November as demand slowed. Fabricated metals
demand was flat on balance, with contacts highlighting
growth in defense industry sales but declining orders
from the housing and automotive sectors. Several fabricated metals contacts noted long lead times for copper.
Auto production decreased slightly, while heavy truck
demand increased slightly. Heavy machinery orders
were steady.
Banking and Finance
Financial conditions tightened some over the reporting
period. Participants in the equity and bond markets
reported lower asset values and increased volatility.
Business loan demand fell moderately, with contacts
pointing to declines in commercial real estate lending.
Business loan quality decreased slightly, though one
contact noted that loan quality remained strong in multifamily housing as rents stayed high. Business loan
standards tightened slightly. Consumer loan volumes fell
modestly, with contacts continuing to note 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 ■ January 2023
Summary of Economic Activity
Economic conditions have remained unchanged since our previous report. Contacts reported tight labor markets but
continued improvement in their ability to hire and retain workers of all skill levels. Firms continued to report input price
increases, but the rate of increases has slowed as supply chain bottlenecks have eased slightly; manufacturing and
healthcare firms reported that lead times for key inputs have improved over the past month. Consumer spending was
mixed during the holiday season; some retail and hospitality contacts noted that activity was hampered by winter storms
across most of the region during the holidays. Homebuying activity has slowed even beyond normal seasonal trends,
and banks reported that loan demand slowed moderately.
Additionally, some manufacturing contacts reported
lower nonlabor input costs, stemming from increased
inventory availability. A contact in the auto industry reported lower prices for used and new vehicles as inventories grow. Multiple contacts cited higher interest rates
as a driver for weaker demand, which in turn caused
them to maintain or lower their prices. For businesses
that reported increasing prices, the rate at which they
were able to do so varied widely, with some contacts
passing on only 5% of their costs increases and others
passing on 75%. A contact in the home building industry
cited labor costs as placing upward pressure on prices.
Labor Markets
Employment has remained unchanged since our previous report. The unemployment rate in the region has
remained low, and many companies still reported being
understaffed. Organized labor and staffing contacts
reported high demand for workers who could fill positions
immediately. A retail contact in Memphis noted difficulty
in filling open positions and retaining employees. However, several firms reported slightly higher staffing levels
and more applicants for open positions.
Wages have grown slightly since our previous report.
Staffing shortages persist, and companies are continuing
to raise wages to attract and retain new workers. One
Arkansas brewery offered loans to employees to help
with housing costs and considered buying property to
rent apartments to employees. Other firms reported
slowing the rate of wage increases. An education contact
in Tennessee reported having to find other ways of
retaining employees since salaries could be raised only
minimally.
Consumer Spending
District general retailers, auto dealers, and hospitality
contacts reported generally lower business activity and a
mixed outlook. A Louisville retail contact reported that
Black Friday sales were spread out over a longer time
period, which caused buyers to delay purchasing and
wait for further discounts. In Memphis, consumer spending on holiday gifts lagged compared with other MSAs
throughout the country. Memphis retailers reported
weaker than expected sales.
Prices
Prices have increased modestly since our previous
report. Despite continued increases in nonlabor input
costs for businesses, multiple contacts reported an
inability to fully pass these higher costs on to consumers.
Auto dealers in Little Rock noted that inventories remain
too low to meet demand at current prices, especially in
used cars, and that they had a surprising surge in foot
traffic shortly after Thanksgiving. The winter storm at the
H-1
Federal Reserve Bank of St. Louis
end of December forced restaurants in Memphis to close
fully or partially, which negatively affected sales on one
of the busiest days of the year. St. Louis hospitality
contacts noted that business activity was lower in December compared with November, although banquet
business exceeded expectations. Hospitality contacts
have lower expectations for the upcoming months due to
the increase in sicknesses, higher-than-average inflation,
and staff shortages.
have continued to fall sharply since our previous report,
even after accounting for seasonal factors. However,
construction contacts continue to work through backlogs.
Across the District, total home sales have dropped 4.2%
since our previous report, and inventory has slowly started to increase—up 2.75%—during that time. Average
time on the market for residential housing has also increased during the fourth quarter.
Manufacturing
Banking conditions and lending activities in the District
continued to soften but remained strong. Total loan
growth saw only an uptick since our previous report,
showing signs of slowing down from its steady and relatively fast increase between late 2021 and mid-2022.
This is in line with the cooldown in loan demand that
banking contacts observed toward the end of 2022.
Commercial and industrial loan growth increased slightly,
while consumer loan growth decreased moderately.
Commercial real estate loans, however, still showed
moderate growth compared with our previous report.
Total deposits growth decreased moderately, but a
Memphis contact noted that deposit rate competition has
picked up among banks. Credit quality remains strong
despite interest rate hikes, and the number of past-due
loans is still low.
Banking and Finance
Manufacturing activity has slightly decreased since our
previous report. Firms have reported small increases in
production but moderate decreases in new orders. A
survey of manufacturing supply managers conducted by
Creighton University hints at the early signs of a recession, with 60% expecting such an outcome. Manufacturing indicators have exhibited below-neutral growth in
seven of the past nine months. Supply chain congestion
has also started to improve for some companies, which
is beginning to lower the price growth of manufacturing
inputs and return inventories to normal levels. Firms
remain optimistic that input prices and delivery times will
continue to revert toward pre-pandemic levels in the
coming year.
Nonfinancial Services
Agriculture and Natural Resources
Activity in the nonfinancial services sector remains stable
since our previous report. Air freight and passenger
traffic has slightly increased, while public transportation
services continued to experience driver shortages and,
consequently, route cancellations. A job-matching service in the St. Louis area is expanding services that
match disabled job candidates with employers, and a
housing-insecurity nonprofit built new homes and secured contracts to expand services.
District agriculture conditions are favorable and have
remained largely unchanged since our previous report.
The percentage of winter wheat in the District rated fair
or better decreased slightly from the end of November to
the end of December. Rising commodity prices have
pushed inflation-adjusted farm incomes to a near 50year high, leading to an optimistic outlook for the upcoming year. However, input costs are on the rise as well,
raising uncertainty on the overall effect on farmers’ margins for 2023. ■
Public sector reports were mixed. Public safety services
are expected to decrease with the elimination of vacant
positions in response to budget deficits in the St. Louis
area, and water distribution services struggled to provide
necessary maintenance and repairs due to revenue
concerns. In northern Arkansas, parks and recreation
services are expected to increase with staffing additions
and a new proposal for expanded services.
Real Estate and Construction
Activity in the residential real estate market has continued to slow since our previous report. In November,
month-over-month median rental rates on new leases fell
in all four major District MSAs for both one- and twobedroom apartments. Rates continued to slow or remained the same in all four major District MSAs during
December. Building permits in the Midwest and South
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ January 2023
Summary of Economic Activity
The Ninth District economy grew slightly overall since the previous report. Employment grew modestly and the labor
market remained healthy, although there were some signs that labor demand was softening. Wage pressures remained
high but also appeared to lessen slightly. Prices increased modestly overall, and high food prices were negatively affecting low-wage workers. Activity increased in consumer spending, manufacturing, and energy. District agricultural conditions remained strong. Commercial and residential construction and real estate sectors were either flat or declined.
Activity among minority- and women-owned businesses slowed slightly.
Labor Markets
Prices
Employment grew modestly since the last report, with
most District states seeing increasing payrolls. A
December survey found that 44 percent of hospitality
and tourism firms in Minnesota reported that they were
hiring in some capacity, with more than half looking to
increase year-round head count; 14 percent cut
seasonal staff, but almost no one cut year-round staff.
However, other smaller surveys of businesses across
the District showed softer hiring sentiment in both
November and December, and future hiring expectations
were similarly flat. Job postings and other signs of hiring
demand also continued to soften somewhat but
remained healthy overall. Contacts reported small
improvements in labor availability, but continued difficulty
in hiring. Many businesses continued to adapt as a
result. Said one contact, “Retail and manufacturing are
getting good at operating with less than a full crew.”
Prices increased modestly overall since the previous
report. Two-thirds of respondents to a District business
conditions poll reported no change to the prices they
charged for their products and services in December
from a month earlier; about half of firms said their
nonlabor input prices were unchanged. The wholesale
prices component of a regional manufacturing index
decreased to a level just above neutral in December, its
lowest reading since the early months of the pandemic.
A producer of home furnishing products noted that raw
materials prices have come down less than 10 percent,
but “we have had to reduce pricing by around 20 percent
to get additional business.” Despite reductions in many
construction materials costs, a road construction
contractor expected a 13 percent increase in concrete
prices in 2023. Retail fuel prices in District states
declined rapidly since the last report. Prices received by
farmers in November increased from a year earlier for
corn, wheat, soybeans, sugar beets, potatoes, hay,
hogs, cattle, turkeys, chickens, and eggs; prices for
chickpeas and canola decreased from a year ago.
Wage pressures fell slightly but remained at high levels.
Firms reported minor softening in the pace of wage
growth, more so for salaried than hourly workers. But
overall pressure was still well above average. Nearly half
of hospitality and tourism firms reported wage increases
of 5 percent or more, but future wage expectations were
notably lower. A Minnesota contact said that more
employers were offering sign-up or retention bonuses
rather than higher wages.
Worker Experience
Low-wage workers in the Minneapolis–St. Paul area
reported continued pressures from higher food prices.
Some said they found it increasingly difficult to pay their
bills and were therefore accumulating credit card debt. A
Minnesota labor contact said that the number of traveling
I-1
Federal Reserve Bank of Minneapolis
nurses had declined but remained high. Many nursing
program graduates were reportedly rethinking their
choice to pursue a career in health care, as shortages
have resulted in higher stress for existing workers. A
workforce development contact reported that some
former housekeepers had decided to start their own
businesses rather than getting paid $5 per cleaned room
by a hotel chain. Other workers were said to have left
their jobs to start businesses in food, landscaping, and
snow removal.
unfavorable in office space despite little new
construction. Property sales were subdued due to higher
interest rates and economic uncertainty. Residential real
estate continued to decline for similar reasons. Closed
sales in November and December were widely lower
compared with last year. In Sioux Falls, South Dakota,
December sales dropped by 48 percent year over year.
In some markets, new listings declined as sellers waited
for better market conditions, yet inventories of homes for
sale increased with the large drop in sales.
Consumer Spending
Manufacturing
Consumer spending grew modestly since the last report,
remaining at high levels. Retailers overall reported a
decent holiday shopping season, with good initial traffic
interrupted by severe winter weather. A South Dakota
contact said that the shopping season started strong but
ended “somewhat weaker than many businesses
anticipated” because of poor weather that impacted not
only customer traffic but also product inventories. A
Minnesota mall reported December foot traffic was up
over last year despite weather events, and anecdotal
evidence indicated that shoppers spent more. Another
mall contact reported that sales were up 8 percent over
last year and that new leasing activity was encouraging.
A suburban Minnesota mall estimated that sales rose by
5 to 10 percent, with high traffic volumes even during the
week. “Restaurants continue to knock it out of the park,
with waiting periods from the time they open.” A vehicle
dealership with multiple locations saw sales of both new
and used vehicles rise in December, year over year.
District manufacturing activity decreased slightly since
the last report. Results from the Minneapolis Fed’s
annual survey of manufacturers indicated that firms
overall saw increased orders, production, capital
expenditures, and employment in 2022, with stable
expectations for their firms in the year ahead. However,
a regional index of manufacturing conditions indicated a
mild contraction in activity in Minnesota and North
Dakota in December from a month earlier, while activity
expanded in South Dakota. Manufacturing contacts
generally reported no change or a slight decrease in new
orders. However, a producer of homebuilding inputs
reported a drastic decline in new orders, and a custom
manufacturer in Minnesota reported they have canceled
all capital expenditures for the first quarter of 2023.
Agriculture, Energy, and Natural Resources
District agricultural conditions were stable at high levels.
Sector contacts reported that farm incomes and working
capital remained strong heading into 2023. District oil
and gas exploration activity increased slightly since the
last report.
Construction and Real Estate
Commercial construction fell slightly since the last report.
Industry data suggested that revenue levels across the
sector have not declined significantly. But firms reported
slowing activity and that high project costs were propping
up revenues. A contact in southeast Minnesota said that
companies and their clients were “choosing between
delaying projects at normal prices or getting done on
time at inflated prices.” Sources also suggested that the
pipeline of new projects out for bid was shrinking, though
industrial and multifamily construction was still healthy.
Single-family residential construction continued to
decline. December permitting activity was much lower
than a year ago in most of the District’s larger markets.
For example, single-family permits in the Minneapolis–
St. Paul region in December were less than half their
levels from a year earlier.
Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned businesses
slowed slightly in recent weeks according to reports from
contacts. Input and labor costs were reportedly
diminishing profits for many. A small steel manufacturer
reported success in doubling their workforce after
offering health insurance for the first time, a move they
made at the expense of profitability. Contractors reported
that uncertainty due to ongoing material shortages and
price increases was making it difficult to meet existing
bids. “We never know what we’ll end up paying for
materials,” shared a Minnesota contact. “Bids do not
move with those changes and we cannot walk away.”
Food service businesses were said to be losing the
hiring race to restaurant chains and other more
established businesses. ■
Commercial real estate was flat since the last report.
Vacancy rates remained favorable in multifamily and
industrial sectors even with new construction, but
For more information about District economic conditions
visit: minneapolisfed.org/region-and-community
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ January 2023
Summary of Economic Activity
Economic activity in the Tenth District continued to decline slightly through the end of 2022. Hiring activity slowed further,
but the labor market remained very tight. Several segments of the service sector had modest declines in employment, but
job openings remained elevated. Given the ongoing tightness in the labor market, wage pressures remained high overall,
and businesses noted that wage growth still has momentum. Manufacturing activity continued to decline at a modest
pace, but expectations firmed somewhat. Consumer spending declined recently, particularly at retailers and restaurants.
Given the amount of leisure travel, contacts noted that retail spending was lower than expected. Additionally, retailers
indicated they are dealing with a glut of inventories resulting from loosening supply bottlenecks. Those previously delayed
retail goods now in inventories are reportedly not well aligned with current consumer demand, and so are being sold at
steep discounts. Cost pressures for service businesses remained elevated, but the pass through to customers became
more difficult recently. Across goods and services, price growth slowed to a moderate, yet still-brisk, pace. Growth in
overall energy activity slowed across the District, as falling oil and gas prices were a headwind to new drilling and production.
Labor Markets
Prices
Hiring continued to slow in the Tenth District as labor
demand cooled, though the number of job openings and
overall tightness of the labor market remained high.
Employment remained mostly unchanged for manufacturing businesses, while employers in the service sector
reduced their payrolls slightly. Reductions in employment
were broad-based across service sectors but varied in
scale across segments. Many restaurants and retail
businesses reported modest declines in jobs, while a
small number of technology and financial service businesses reported more substantial job losses. More contacts reported they reduced hours worked by employees
in recent weeks, another indication of cooling labor
demand.
Prices increased at a moderate pace. Most manufacturing businesses reported that input price growth continued to slow in recent weeks, and most of those contacts
reported that they are able to pass over 80 percent of
higher costs to their customers. Conversely, businesses
in the services sector indicated input price growth remains elevated, and less than 20 percent of cost growth
is passed to consumers. Service businesses noted they
are struggling to strike a balance between retaining
customers and maintaining profitability. Most contacts
report that their expectations for future price growth are
moderating compared to last year but remain elevated
above historical norms.
While hiring slowed, wages grew moderately. District
contacts broadly indicated that wage growth continues to
have momentum due to ongoing imbalances in the labor
market. In particular, wage growth in the lodging sector,
where employment shortfalls remain pronounced, increased robustly. Most contacts reported they expect
wages to increase at either the same rate, or a pace that
is slightly faster, than wage growth over the past year.
Consumer spending fell moderately over the past month,
despite robust leisure travel activity. Restauranteurs and
retailers reported that “travelers just aren’t spending like
they used to.” The lower propensity for travelers to dine
out or shop, combined with adverse weather events and
waning demand more broadly, led contacts to report a
softer-than-expected beginning of the winter season.
Travel and accommodation spending was elevated,
driven by higher prices rather than higher volumes, as
total occupancy remained subdued.
Consumer Spending
J-1
Federal Reserve Bank of Kansas City
Community Conditions
Community and Regional Banking
Many non-profit organizations reported expanding their
capacity recently in response to higher levels of household financial stress and food insecurity over the past
year. One food bank in Kansas City reported that the
number of sack lunches they provided tripled in 2022,
with similar reports of heightened demand in other District cities. However, food bank contacts noted the increases in food and fuel costs earlier in the year coincided with declining donations, which depleted financial
reserves and inhibited their ability to provide services in
recent months. Difficulty meeting an increased demand
for services was broad-based in the non-profit sector,
with many organizations also citing difficulty recruiting
volunteers and the health of their employees as major
challenges to their operations.
Loan demand remained stable in the past month, except
for residential mortgages, which continued to decline
swiftly. Bankers experienced steady interest from borrowers across the Commercial and Industrial and Commercial Real Estate segments of their loan portfolios,
despite higher interest rates on new originations. Although credit quality remained stable in recent weeks,
contacts expected deterioration in the next six months as
higher interest rates impair property valuations and
borrowers’ ability to generate sufficient cash flow for debt
service, particularly in the CRE space. Deposits declined
moderately this month as competitive rate pressures and
inflationary dynamics eroded deposit balances. Nonbank
financial institutions and firms with reduced liquidity
drove deposit rates higher over the month.
Manufacturing and Other Business Activity
Energy
Manufacturing activity declined modestly with production
levels, the length of backlogs and the volume of new
orders all continuing to fall over the past few weeks.
Changes in service sector business activity were mixed
across segments. Sales were down broadly, however,
tourism businesses noted sales growth remained moderate due to ongoing price growth. Although overall activity softened over the past few weeks, expectations for
growth over the next 6 months increased moderately.
Growth in overall energy activity slowed modestly in the
Tenth District, as falling oil and gas prices were a headwind to new drilling and production. Contacts in the
service segments of the sector reported little change in
business activity. Despite several notable developments
during the past month – in particular, G7 price caps and
European sanctions on Russian oil exports and production cuts by OPEC – the overwhelming majority of contacts reported no changes to their production plans
resulting from these events thus far. Looking ahead to
later this year, most businesses indicated they expect oil
and gas production to increase by less than 5 percent,
as they expected prices to be slightly below levels necessary for more significant production increases. Several
contacts also noted that ongoing delays in industry supply chains are expected to constrain production growth in
2023.
Demand for goods at retail businesses fell slightly. The
lower demand coincided with a glut in inventories after
shipping bottlenecks loosened. Retailers reported they
are now dealing with a mismatch between final goods
held in inventories and the type of goods consumers are
demanding, forcing businesses to heavily discount misaligned merchandise. Although international freight conditions have reportedly recovered, broad disruptions
across various modes of inland domestic transportation
remain.
Agriculture
Agricultural economic conditions in the Tenth District
were generally strong through the end of 2022 alongside
elevated commodity prices. Prices of some key crops
and livestock declined slightly during December but
remained at a profitable level. Most contacts in the District reported gradual improvement in farm income and
credit conditions, but others noted that drought had
weakened conditions for some producers. Strong real
estate values continued to bolster farm finances, but
increased interest rates, high production costs, challenging weather conditions, and the outlook for commodity
prices remained key concerns. ■
Real Estate and Construction
Subleasing activity in commercial real estate increased
rapidly in recent weeks. Commercial space previously
occupied by tech sector businesses became increasingly
available. Contacts reported they expect further acceleration in the amount of office space that will be offered on
secondary markets in coming months. Accordingly,
prices of subleased space dropped, and terms became
more favorable for incoming tenants. In residential real
estate, builders of new single-family homes noted an
uptick in the number of buyer cancellations for projects
underway. In recent weeks, those cancelled purchases
were backfilled by secondary buyers seeking homes.
However, contacts indicated they expect “a bigger cliff of
cancellations will hit builders in the spring.” .
For more information about District economic conditions visit:
www.KansasCityFed.org/research/regional-research
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ January 2023
Summary of Economic Activity
Modest growth continued in the Eleventh District economy overall. Growth accelerated in manufacturing but abated in
the service sector. Retail sales and home sales fell further, while oil and gas activity expanded. Rising interest rates
prompted further deterioration in loan demand. Local nonprofits cited higher demand for assistance amid rising household costs. Rainfall improved agricultural conditions. Employment growth remained moderate overall and wage growth
stayed elevated. Prices climbed further although firms expect pressures to moderate somewhat next year but remain
elevated. Outlooks were mostly pessimistic except for the energy sector, and many contacts voiced concern about
weakened demand, a potential recession, and inflation.
20 percent on certain items last year. Meanwhile, growth
in selling prices did not ease in the latter part of 2022 but
instead remained stubbornly high. Contacts said they
raised prices by 7.4 percent last year and expect to push
through price increases this year on the order of 4.7
percent amid increased consumer price sensitivity.
Labor Markets
Employment growth remained moderate overall. Hiring
was robust in manufacturing and energy but slowed
slightly in the service sector and stalled out in retail.
Hiring difficulty remained a top business concern, particularly in energy, hospitality, education, and healthcare,
though there are some signs of easing in other sectors.
A restaurant said they turned away business in December due to staffing shortages.
Manufacturing
Texas factory output increased in December after
stalling in November. New orders for manufactured
goods continued to decline, however. Production growth
was led by durable goods—in particular fabricated metals and machinery, with some contacts noting increased
demand from the oil industry as a driving force. Weakness continued in chemical manufacturing, and contacts
noted slowing global demand for PVC and other materials used in interest-rate-sensitive sectors like construction and automobiles. Supply-chain issues continued to
improve. Overall, outlooks weakened, with more than
half of contacts noting waning demand and/or recession
concerns. Other headwinds cited were elevated input
costs, labor shortages, and higher labor costs.
Wage growth remained elevated. In a Dallas Fed survey
of 265 executives in the service sector, average wage
growth in 2022 was 7.4 percent. Reported wage growth
was even higher in manufacturing and retail—averaging
8.5 and 8.2 percent, respectively. Multiple manufacturing
contacts mentioned investing in automation due to high
labor costs. Looking ahead to next year, contacts overall
expect to raise wages 5.6 percent, on average.
Prices
Input costs remained elevated, though upward pressure
eased slightly in December, continuing the trend seen
throughout most of 2022. Contacts reported input price
increases of 9.6 percent last year, on average, and
expect a 5.9 percent increase this year. In the energy
sector, cost growth remained high but eased in the fourth
quarter. Manufacturers noted cost increases in excess of
Retail Sales
Retail sales continued to decline over the past six
weeks. A clothing store noted both less traffic and lower
average sales per transaction, while wholesalers of
K-1
Federal Reserve Bank of Dallas
nondurable goods reported an increase in sales in December. Auto sales stabilized after declining last fall,
though auto dealers continued to note that higher interest rates were hampering business. Outlooks worsened,
with concern about a potential recession, rising interest
rates, and inflation.
Energy
Energy activity continued to expand during the reporting
period, with a slight increase in the Eleventh District rig
count over the past six weeks and sizeable increases in
both oil and natural gas production in fourth quarter
2022. Contacts seemed confident that crude oil markets
will remain tight for the next several years, keeping oil
prices in the $80 to $90 per barrel range, which is high
enough for most District producers to profitably drill new
wells. Due to high demand for oilfield services and supply chain issues, the industry remained constrained on
equipment and labor, and expectations were for activity
to expand at a slow, steady pace this year. Outlooks
improved overall, and most contacts expect increases in
capital spending this year.
Nonfinancial Services
Service sector activity was flat in December, with growth
abating amid reports of a slowdown in consumer spending. Business services and education and health saw a
contraction in revenue while transportation services
posted continued revenue gains, citing increased cargo
volumes. Airlines reported unseasonably strong leisure
demand but noted business travel had yet to fully recover from the pandemic. Activity in the leisure and hospitality sector held steady. Staffing firms reported solid demand for their services, though one noted a slowdown in
some manufacturing and construction sectors. Outlooks
deteriorated overall, with a majority of contacts citing
weakening demand and/or potential recession as a
primary concern going forward.
Agriculture
Rainfall continued to improve soil moisture conditions,
setting a good foundation for winter wheat and spring
crops. Cotton exports declined, and contacts cited weak
mill demand prompted by low consumer demand. Relatively high grain prices and promising soil moisture will
likely favor an increase in grain acreage and reduction in
cotton acreage next year.
Construction and Real Estate
Activity in the single-family housing market continued to
decline. Home sales and prices fell further, and cancellations stayed elevated. In homebuilding, buyer incentives
were widespread and construction costs were generally
high, putting downward pressure on builders' margins.
Outlooks weakened. Apartment leasing softened beyond
seasonality, with occupancy and rents slipping modestly.
Community Perspectives
Nonprofits reported higher demand for their services
during the reporting period. Housing affordability remained a key concern amid higher rents, and some
struggling households have moved further away from
urban cores, leaving them without public transportation
access and further away from nonprofit resources. Evictions have risen notably in some areas. Food insecurity
was another primary issue, as lower-income individuals
faced challenges in deciding to pay for rent versus groceries when there was not enough money for both. Contacts said a lack of affordable childcare was stunting
economic mobility for lower-income women, with one
nonprofit noting some improvement in daycare availability but no relief yet in pricing. Community colleges report
continued growth in career and technical program enrollment, and numbers are up from pre-pandemic levels.
Overall community college enrollment is still down, but
rebounding. ■
Demand for office space remained somewhat weak,
pushing up sublease space availability. Fundamentals in
the industrial market stayed solid, but contacts expressed concern about the pipeline of new construction.
Investment sales activity has slowed noticeably, as
investors take a wait-and-see approach partly due to the
higher cost of capital and economic uncertainty.
Financial Services
Loan volumes declined for the third reporting period in a
row, and loan demand fell further. Volume declines were
across all loan categories but led by residential real
estate, while commercial real estate and commercial and
industrial loans experienced an accelerated decline from
the prior period. Loan nonperformance increased slightly
overall, with the rise stemming from residential real
estate and consumer loans. Contacts again overwhelmingly reported loan price increases, and credit standards
and terms continued to tighten. Business activity experienced a significant decline, and expectations for the next
six months are for loan demand and business activity to
decline further and loan nonperformance to increase.
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ January 2023
Summary of Economic Activity
Economic activity in the Twelfth District expanded modestly during the mid-November through December reporting
period. Labor supply improved somewhat, 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 stable, and activity in the consumer
and business services sectors was strong. Demand for manufactured products was mixed, while conditions in the agriculture and resource-related sectors remained weak. Activity in residential real estate markets weakened further, while
commercial real estate activity was flat overall. Lending activity rose slightly over the reporting period. Communities
across the Twelfth District were challenged by elevated living costs and lack of affordable housing. 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 as labor availability improved across the
District. Job turnover and voluntary quits reportedly fell in
recent weeks, and hiring difficulties eased in consumer
services sectors such as retail, food services, and hospitality. Contacts reported strong competition for labor and
difficulties attracting experienced talent in health care,
legal services, manufacturing, and skilled trades. Several
real estate firms and mortgage providers reported reducing the number of open positions in response to moderating demand and noted that recent hiring freezes and
layoffs in the technology sector improved the size and
quality of the applicant pool. Contacts in Alaska and
Hawaii continued to report challenges filling entry-level
positions, partly due to elevated shelter costs. Several
employers noted that, despite overall economic uncertainty, they plan to maintain current employment levels to
avoid the hiring challenges they have experienced
throughout the pandemic.
recent weeks. Several contacts, particularly in manufacturing and construction, reported plans to pass through
last year’s cost increases to their customers when annual contracts are renegotiated. Several sectors reported
higher prices, including health care, food services, hospitality, insurance, and air travel. Conversely, gradually
improving supply chains and cooling overall demand
have resulted in stable or lower prices for many goods,
including energy products, medical equipment, electronics, office supplies, and manufacturing inputs such as
steel and lumber.
Community Conditions
Communities across the District continued to highlight
key issues such as high inflation, lack of affordable housing, and lower enrollment rates at community colleges
and higher education institutions. Reports indicated
people are working “side hustles” or multiple jobs to
afford the elevated living costs, and concerns of evictions have increased of late as rent inflation further
strained household budgets. Donation-dependent nonprofit and philanthropic organizations noted that tighter
financial markets have resulted in significant drops in
fundraising inflows. This reduction was partially offset by
government funding in some areas, including parts of
California and Nevada. Contacts also highlighted that the
recent uptick in respiratory infections, including influenza, intensified worker and volunteer shortages at many
community and social support organizations.
Wages grew further, albeit at a slower pace. Workers
continued to ask for higher pay and end-of-year bonuses
in response to elevated living costs. Employers continued to use bonuses and comprehensive benefits packages to attract and retain talent and reported more willingness to push back against flexible work arrangement
requests.
Prices
Prices rose at a slower pace relative to the previous
reporting period, but overall price levels remained very
elevated. Contacts cited wage pressures as the primary
driver of the price inflation they have experienced in
Retail Trade and Services
L-1
Retail sales were stable over the reporting period. Reports on holiday season sales were mixed, and retailers
Federal Reserve Bank of San Francisco
noted higher prices and healthier inventory levels compared with last year. Contacts also highlighted a continued shift in spending behavior away from in-store shopping to e-commerce. Sales for some consumer durables,
such as automobiles, were reportedly up in recent
weeks, and demand for wood products strengthened as
consumers favored renovation projects over new home
purchases. Labor availability eased somewhat but remained tight, and some contacts reported continued
adoption of labor-saving technology to address worker
shortages.
the District, including for cherries, grapes, and nuts.
Seafood production was also down, partially due to
closures of crab fisheries in Alaska. Contacts noted that
supply chain bottlenecks ameliorated further, but transportation and materials costs remained elevated. One
producer in the Pacific Northwest noted that demand for
timberland remained high, partially due to growing private interest in opportunities for carbon offset investment.
Real Estate and Construction
Residential real estate activity weakened further in recent weeks. Demand for new and existing single-family
housing fell modestly across the District, primarily driven
by high prices and mortgage costs. Contacts reported
that selling prices began to come down and rental rates
were stable on balance. Construction of single-family
housing dropped moderately as existing projects
reached completion and starts fell modestly. Construction activity for multifamily housing varied across the
District as activity was solid in Northern California and
Washington but down in Oregon. Contacts noted some
construction materials prices, such as wallboard, fell
substantially, while other materials prices remained
stable but high.
Activity in the consumer and business services sectors
was unchanged but remained strong on balance. Demand for health-care services picked up in recent weeks,
in line with seasonal trends. Activity in the leisure and
hospitality sector remained robust, although a Southern
California contact reported a notable softening in demand for hotel stays. Demand for insurance and legal
services was strong. A Southern California contact reported increased demand for marketing products recently as companies aimed to bolster brand recognition and
employee engagement. Labor costs remained elevated
and increased slightly in some sectors, such as health
care and hospitality, but contacts noted that higher wages improved employee retention.
Conditions in the commercial real estate market were
stable on net. Office leasing activity was weak, and
vacancies remained elevated. Demand for industrial,
medical, and retail space was generally strong, particularly in Nevada. Several contacts in the Pacific Northwest and California noted that overall commercial real
estate activity softened in recent weeks due to higher
interest rates. Construction of new commercial space
remained strong in segments other than office space,
although contacts commented that the shortage of construction workers continued to constrain new development.
Manufacturing
Activity in the manufacturing sector was mixed over the
reporting period. Demand strengthened for capital equipment and manufactured intermediate goods in the packaging, logistics, and aviation industries. Conversely,
demand for manufactured metal products, renewable
energy equipment, and intermediate construction goods
softened, partially due to slower activity in the residential
real estate market. Capacity utilization in food manufacturing improved, although labor shortages continued to
constrain production. Manufacturers reported that disruptions in labor markets and supply chains had eased but
input costs remained elevated. Contacts in Utah highlighted strong overall conditions for local manufacturers,
noting increased business migration to the state.
Financial Institutions
Lending activity rose slightly across the District. Many
contacts noted that demand for consumer loans, including for credit cards, home equity, and vehicles, has
picked up in recent weeks. Conversely, residential and
business lending activity slowed further, reflecting high
interest rates and rising economic uncertainty. Competition for deposits tightened as deposit growth slowed,
with one credit union financier mentioning the need to
borrow funds to match loan demand. Credit quality remained strong, but bankers observed some general
deterioration of late. Some business contacts reported
pausing large borrowing and investment plans given the
current economic uncertainty.■
Agriculture and Resource-Related Industries
Conditions in the agriculture and resource-related sectors remained generally weak. Overall domestic agricultural sales were up in terms of dollars but down in volume. Sales abroad varied by export market, with demand from Asian and European markets declining or
remaining unchanged, while demand from the Middle
East increased significantly. Global economic uncertainty
and a generally strong dollar continued to put downward
pressure on international demand. Adverse weather
conditions negatively impacted agricultural yields across
L-2
Cite this document
Federal Reserve (2023, January 31). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20230201
@misc{wtfs_beige_book_20230201,
author = {Federal Reserve},
title = {Beige Book},
year = {2023},
month = {Jan},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20230201},
note = {Retrieved via When the Fed Speaks corpus}
}