Beige Book
For use at 2:00 PM EST
Wednesday
March 8, 2023
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
February 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 New York based on information collected on
or before February 27, 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 ■ February 2023
Overall Economic Activity
Overall economic activity increased slightly in early 2023. Six Districts reported little or no change in economic activity
since the last report, while six indicated economic activity expanded at a modest pace. On balance, supply chain disruptions continued to ease. Consumer spending generally held steady, though a few Districts reported moderate to
strong growth in retail sales during what is typically a slow period. Auto sales were little changed, on balance, though
inventory levels continued to improve. Several Districts indicated that high inflation and higher interest rates continued
to reduce consumers’ discretionary income and purchasing power, and some concern was expressed about rising
credit card debt. Travel and tourism activity remained fairly strong in most Districts. Manufacturing activity stabilized
following a period of contraction. While housing markets remained subdued, restrained by exceptionally low inventory,
an unexpected uptick in activity beyond the seasonal norm was seen in some Districts along the eastern seaboard.
Commercial real estate activity was steady, with some growth in the industrial market but ongoing weakness in the
office market. Demand for nonfinancial services was steady overall but picked up in a few Districts. On balance, loan
demand declined, credit standards tightened, and delinquency rates edged up. Energy activity was flat to down slightly,
and agricultural conditions were mixed. Amid heightened uncertainty, contacts did not expect economic conditions to
improve much in the months ahead.
Labor Markets
Labor market conditions remained solid. Employment continued to increase at a modest to moderate pace in most
Districts despite hiring freezes by some firms and scattered reports of layoffs. Labor availability improved slightly,
though finding workers with desired skills or experience remained challenging. Several Districts indicated that a lack of
available childcare continued to impede labor force participation. While labor markets generally remained tight, a few
Districts noted that firms are becoming less flexible with employees and beginning to reduce remote work options.
Wages generally increased at a moderate pace, though some Districts noted that wage pressures had eased somewhat. Wage increases are expected to moderate further in the coming year.
Prices
Inflationary pressures remained widespread, though price increases moderated in many Districts. Several Districts
reported input costs rose further, particularly for energy and raw materials, though there was some relief reported for
freight and shipping costs. Some Districts noted that firms were finding it more difficult to pass on cost increases to
their consumers. Selling prices increased moderately in most Districts, with several Districts noting a deceleration.
Home prices were generally flat or down slightly, while rents were reported to be steady or higher. Still, home prices
and rents remained high, contributing to ongoing concerns about housing affordability. Looking ahead, contacts expected price increases to continue to moderate over the year.
Highlights by Federal Reserve District
Boston
New York
Business activity increased slightly on average. Retailers
and restaurant owners reported modestly higher sales,
and manufacturers reported a slightly slower pace of
activity. Employment was about flat as wage growth
remained above average. Prices increased slightly as
nonlabor costs continued to ease. Contacts expected at
least modest price increases in 2023.
After a sharp contraction, regional economic activity
leveled off. The labor market has remained strong, with
ongoing slight job gains and a pickup in wage growth.
Inflationary pressures remained persistent as price increases picked up. Housing markets remained subdued
but showed signs of picking up beyond the seasonal
norm.
1
National Summary
Philadelphia
St. Louis
Business activity appeared to increase slightly during the
current Beige Book period after declining last period. In
the absence of a definitive COVID-19 wave, consumers
responded positively. Employment rose modestly. Wage
growth and price inflation continued to subside but still
grew at moderate paces. Expectations improved despite
continued cautious sentiment.
Economic conditions have remained unchanged since
our previous report. Firms reported tight labor markets
but slowing wage growth. Consumer demand was mixed
but came in slightly above expectations. Homebuying
activity slowed, but demand for commercial and industrial space grew.
Cleveland
Economic activity in the region grew modestly in recent
weeks. Employment gains were moderate, and recruitment improved some. Price increases were modest and
wage pressures were flat. Consumer spending declined,
and struggles for construction and real estate firms
continued. Minority-and women-owned firms reported
steady activity but struggled with hiring.
Minneapolis
The District’s economy contracted slightly early in 2023,
in large part because higher interest rates and prices
continued to weigh on household spending. Contacts in
other sectors, including freight and manufacturing, often
cited the weakness in household spending as contributing to softer demand in their own industries. Firms
added workers at a slower pace as many expected
softer business conditions to persist in the months
ahead.
Kansas City
Economic activity in the Tenth District declined slightly in
February. Employment levels remained high and labor
markets tight. Yet, overtime hours, hiring of temp workers, and job postings declined. Consumer spending
continued to fall, primarily due to reduced discretionary
spending, as spending on food, energy, and healthcare
continued to rise. Prices rose broadly at a moderate
pace, but rental rates for housing continued to increase
at a robust pace.
Richmond
The regional economy grew at a modest rate in recent
weeks. Retail spending, travel, and tourism picked up
moderately while nonfinancial service and residential
real estate activity picked up modestly. Manufacturing
and commercial real estate activity was unchanged.
Lending volumes and transportation contracted modestly. Employment and wages grew modestly. Price growth
slowed slightly but remained elevated.
Dallas
Modest economic growth continued, with a pickup in
home sales and service sector activity but a slight contraction in manufacturing output. Job growth was moderate, and labor market tightness eased. The pace of input
and selling price increases generally remained elevated.
Outlooks were mostly negative, and contacts voiced
concern about weakened demand, inflation, and higher
interest rates.
Atlanta
Economic activity grew modestly. Labor markets improved slightly, but wage pressures persisted. Some
nonlabor costs rose while others moderated. Retail sales
were healthy. Auto sales were strong. Leisure travel was
robust and business travel grew. Housing demand improved somewhat. Transportation was mixed. Loan
growth was solid. Energy demand was strong. Agriculture activity remained mixed.
San Francisco
District economic activity expanded modestly. Labor
supply ameliorated, while wage and price growth moderated further. Demand for retail goods and services was
strong. Manufacturing activity was unchanged on net,
while conditions in the agriculture sector softened slightly. Residential real estate activity eased further, while
demand for commercial spaces changed little. Lending
activity rose slightly.
Chicago
Economic activity increased. Employment increased
moderately; consumer spending increased modestly;
business spending and manufacturing increased slightly;
nonbusiness contacts saw little change in activity; and
construction and real estate activity decreased modestly.
Prices and wages rose moderately, while financial conditions were unchanged. Agricultural incomes were expected to be lower in 2023 than in 2022.
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Federal Reserve Bank of
Boston
The Beige Book ■ February 2023
Summary of Economic Activity
Business activity in the First District increased slightly on average amid modest growth in retail and restaurant activity.
Manufacturers reported a slightly slower pace of activity, especially for semiconductor sales, but remained upbeat.
Residential real estate sales fell modestly, while commercial real estate markets were stable but the outlook weakened.
Employment was flat as wage growth remained above average and labor shortages persisted for many positions. No
contacts planned to enact significant layoffs in the near term, even if recent sales had slowed. Some firms expected to
offer above-average wage increases in 2023 to stave off still-high attrition rates, while others were planning for average
wage growth. Prices increased slightly overall, as a variety of nonlabor costs continued to ease. Contacts expected to
enact at least modest further price increases in 2023.
some leverage in demanding hybrid work and flexible
schedules. Contacts in the semiconductor industry said
that they had no plans to lay off workers despite slowing
sales, although one paused plans to expand headcounts. Otherwise, hiring plans among manufacturers
were unchanged, and retail headcounts were expected
to hold steady moving forward. The outlook for wage
growth was mixed, as staffing contacts expected the
pace of wage growth to soften, while retailers expected
to have to raise wages (and other compensation) at an
above-average pace in 2023 to stave off attrition, and
manufacturers planned for average merit increases
despite some larger gains in starting pay for hard-to-fill
positions.
Labor Markets
Wage growth was steady at an above-average pace,
and headcounts were roughly flat on balance. Retailers
reported a modest decline in headcounts on average,
with significant layoffs at one firm and elevated attrition
at others, while restaurant employment rose slightly
since the last report but remained somewhat below its
pre-pandemic benchmark. One manufacturer noted
strong hiring, while other manufacturing contacts reported flat or slightly lower headcounts. Retailers said that
wage pressures remained strong (if stable) in the face of
elevated attrition, and manufacturers said that hiring
remained a challenge or got slightly easier. A workforce
development contact faced difficulties keeping candidates engaged in their degree and placement programs
(for technical roles) despite abundant job openings; the
contact noted that high childcare costs deterred some
candidates but that other cases of disinterest were harder to explain. According to staffing services contacts,
welders, carpenters, and mechanics were highly sought
after by construction employers and remained very hard
to find. Wage growth for construction workers remained
well above average. Light industrial roles were also hard
to fill despite employers’ having enacted large hourly
wage increases for such positions in recent years. Some
firms hesitated to make direct hires given fears of a
recession, but hiring from temporary roles became more
common. Labor market power was seen as shifting
slightly more in favor of employers, as employees lost
Prices
Prices were up slightly on average, as nonlabor pricing
pressures continued to abate but with some noteworthy
exceptions. Retail and restaurant contacts reported
further declines in freight and shipping costs. Nonetheless, restaurants faced new pressure on profit margins
from rising rents and rising health insurance costs, in
addition to still-elevated (if relatively stable) food prices
and credit card processing fees. One retailer posted
moderate price increases to pass on increased propane
and labor costs, as other retailers held prices steady.
Manufacturing contacts said that nonlabor cost pressures had moderated recently. Lumber costs stabilized,
but overall construction costs remained elevated due to
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Federal Reserve Bank of Boston
lingering supply chain issues and scarce labor. Although
none had significantly changed their output prices since
the last report, manufacturers perceived that further price
increases were likely for 2023.
weak—a Hartford contact described the market as
“abysmal”—another contact noted a slight increase in
leasing interest for larger spaces in downtown Boston,
and leasing was stable in Providence. In the retail market, food and beverage establishments experienced
relatively strong leasing demand, while vacancies continued to pile up for department stores and big-box retail.
Credit conditions tightened further, for example, as construction loans faced increased capital requirements.
The only significant construction activity pertained to
industrial properties. Most contacts expected commercial
real estate activity to weaken moving forward, with the
industrial market outperforming other sectors. The office
class was predicted to weaken further, mainly as the
result of pending lease maturations and the likelihood of
high-profile loan defaults, and downward pressure on
rents was expected.
Retail and Tourism
Among First District contacts, retail and restaurant sales
increased modestly in recent weeks. An online retailer
experienced a slight uptick in sales volume relative to
seasonal expectations following the holidays. A salvage
store similarly enjoyed a small increase in sales, which
the contact attributed to a strong inventory of high-quality
goods and the recovery of cross-border commerce with
Canada to above pre-pandemic levels. A Massachusetts
restaurant industry contact said that sales increased
modestly throughout the state, contrary to typical seasonal dips after the holidays, although business at downtown Boston establishments continued to substantially
trail pre-pandemic levels. Despite growth in sales volume, profits were hurt by increases in ancillary costs. A
discount furniture retailer experienced minor improvements in sales volume so far this year, noting that new
product lines at lower price points were a particular
source of strength. Contacts were optimistic on balance,
but several pointed to an increased focus on cost containment strategies to maintain profits and minimize the
need for further price increases.
Residential Real Estate
In First District residential real estate markets, weak
sales activity persisted even as inventory continued to
improve in recent months. Boston and Vermont reported
year-over-year changes for December 2022 while all
other areas reported year-over-year changes for January
2023. Connecticut data were unavailable. Closed sales
fell modestly in most markets since the last report and
were down 30 percent from a year earlier, although sales
of Maine condos improved slightly and were off by just 4
percent year-over-year. Inventories increased substantially in Rhode Island from the previous report and were
stable elsewhere. Price growth slowed slightly from the
previous report on balance, as median sales prices
increased modestly over the year in most markets and
were flat in Massachusetts (for single-family homes) and
down slightly in Boston (for both single-family and condos). The Boston, Rhode Island, and Maine contacts
attributed the slow sales activity to higher mortgage
rates. That same set of contacts continued to express
concerns about low inventories, stressing that even with
recent increases in supply, the market remains unbalanced.■
Manufacturing and Related Services
News from our manufacturing contacts was largely positive. Contacts reported generally high levels of economic
activity, but sales growth slowed to a modest pace on
average. Reports from the cost side showed a similar
pattern: prices and wages remained high, but price and
wage inflation moderated significantly compared with
2022, and supply chain issues improved. Contacts in the
semiconductor industry said that the boom of the last few
years has cooled. Although booms and busts are typical
in that industry, our contacts expected this bust cycle to
be mild and possibly short-lived (less than one year). A
furniture maker, who had recently been somewhat pessimistic about the direction of consumer spending, became more optimistic after their sales responded very
positively to recent promotions. Otherwise, contacts
were generally optimistic about 2023, expecting growth
to revert to sustainable levels after a period of exceptional performance.
Commercial Real Estate
The commercial real estate market in the First District
has been relatively stable since the beginning of 2023.
The industrial market continued to see low vacancy rates
and high leasing demand, but nonetheless rents have
levelled off recently. Though the office market remained
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ February 2023
Summary of Economic Activity
Economic activity in the Second District leveled off in early 2023 following a period of significant contraction. Supply
availability continued to improve and is expected to improve further in the months ahead. Inflationary pressures remained persistent as the pace of both input and selling price increases picked up in recent weeks after a sustained
period of moderation. The labor market has remained strong: employment increased slightly, wage growth picked up,
and hiring plans remained solid. Consumer spending was steady to up slightly, and tourism has continued to strengthen.
The home sales market has remained subdued but showed signs of picking up beyond the seasonal norm, while the
rental market has firmed. On balance, commercial real estate markets were steady. Conditions in the broad finance
sector improved somewhat, though regional banks continued to report widespread declines in loan demand, ongoing
tightening in credit, and rising delinquency rates. Businesses expect economic conditions to improve modestly in the
coming months.
Labor Markets
Prices
Labor market conditions have remained strong. On balance, employment increased slightly in recent weeks,
with the strongest gains reported by businesses in the
information and wholesale trade sectors. However, manufacturers indicated that employment declined for the first
time since early in the pandemic. Still, job openings remained widespread and contacts at two major employment agencies indicated that concerns about a broader
weakening in the labor market have not materialized.
While it has become easier to attract and retain workers,
finding workers with desired skills or experience remains
a significant challenge. A New York City employment
agency attributed some of the recent churn in the labor
market to more workers looking for full or hybrid remote
work options as many businesses have started to require
more time onsite from their employees. Overall, hiring
plans generally remain solid.
Inflationary pressures remained persistent. After a sustained period of moderation, business contacts reported
that the pace of input price increases picked up in recent
weeks. Of note, shipping charges, energy costs, and the
prices of raw materials rose noticeably. Selling price
increases also picked up after slowing for much of last
year. Retailers and leisure & hospitality firms reported
modest increases in their selling prices. Businesses
expect both input and selling price increases to remain
fairly widespread in the months ahead.
Consumer Spending
Consumer spending was steady to up slightly in early
2023. Nonauto retailers indicated that business steadied
but remained sluggish in recent weeks, while spending
on travel-related services and in restaurants and bars
was up moderately. Auto dealers in upstate New York
reported that sales of new vehicles were up modestly as
inventory levels continued to improve. However, sales of
used vehicles have remained soft. Consumer confidence
edged down but remained high.
Wage growth picked up in early 2023, in part due to an
increase in the minimum wage across the District. In the
coming year, businesses expect wage increases to moderate to rates observed before the pandemic.
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Federal Reserve Bank of New York
Residential rental markets have firmed. In Manhattan,
rents remained high and have been little changed in recent
weeks, even when taking landlord concessions into account. Already low rental vacancy rates in Manhattan
edged down slightly. However, rents increased sharply in
Brooklyn and Queens to start the year. Rents also remain
high and continue to rise in upstate New York.
Manufacturing and Distribution
Manufacturing activity declined further in early 2023,
following a period of sharp contraction. Contacts in
wholesale distribution also reported declining activity,
while businesses in the transportation & warehousing
sector reported that activity steadied. A growing number
of businesses indicated that supply disruptions continued
to ease, and delivery times shortened for the first time
since the pandemic began. Looking ahead, businesses
in manufacturing and distribution expect conditions to
improve somewhat in the coming months.
Commercial real estate markets were little changed in
early 2023. Office vacancy and availability rates edged up
in New York City and northern New Jersey and were
steady across upstate New York. Office rents were flat
across the District. Retail vacancy and availability rates
held steady, though retail rents fell slightly. Vacancy and
availability rates edged up from low levels in the industrial
market and rents trended up modestly.
Services
Service sector activity continued to weaken in the new
year, though at a slower pace than in the previous reporting period. Information sector businesses noted
widespread weakening, while providers of professional &
business and leisure & hospitality services reported
modest declines in activity, and contacts in the education
& health sector indicated some leveling off in activity
after a sustained period of weakness. For the first time
since last Fall, businesses in the service sector expect
economic conditions to improve in the months ahead.
Construction contacts reported some stabilization in business conditions but remained pessimistic about the nearterm outlook. New office construction starts remained at
low levels in most of the District, though there was some
pickup in northern New Jersey. New industrial construction
starts were up in and around New York City but were little
changed elsewhere. Multi-family residential starts remained weak across the District.
Tourism activity in New York City strengthened further in
early 2023. Demand for hotel rooms continued to trend
up, with hotel occupancy rates now just slightly below
and average room rates modestly above pre-pandemic
levels despite new hotels opening in the city. Attendance
at Broadway shows has continued to improve, and a
substantial number of shows are scheduled to open.
Though business travel has yet to bounce back, domestic leisure travel has been strong, buoyed by the ability to
work remotely. International travel continues to improve
but has not returned to pre-pandemic levels.
Banking and Finance
Contacts in the broad finance sector reported some improvement in business conditions. However, with rising
interest rates, small to medium-sized banks in the District
continued to report widespread declines in loan demand
across all segments—especially residential mortgages.
Already low levels of refinancing activity decreased further.
Credit standards continued to tighten on all loan types
except consumer loans. Loan spreads narrowed. Nearly all
bankers reported higher deposit rates. Finally, delinquency
rates rose noticeably on all types of loans.
Real Estate and Construction
The residential sales market remained subdued in early
2023, though there are signs that activity has begun to
pick up beyond the seasonal norm. Real estate contacts
in upstate New York reported that prices have been flat
to down slightly, and that sales volume and buyer traffic
remain sluggish. By contrast, sales of both single-family
homes and apartments picked up in and around New
York City, and prices held steady. The inventory of available homes has declined in Manhattan and has remained exceptionally low elsewhere. Bidding wars are
still occurring for desirable properties in upstate New
York and remain fairly widespread in and around New
York City outside of Manhattan.
Community Perspectives
Community leaders highlighted the pressures faced by
many households from a lack of availability of childcare
and preschool. Such services are operating at a reduced
capacity because of teacher shortages, the decline in
childcare centers, and the expiration of pandemic-era
funding. Housing affordability remains a significant challenge, despite efforts to improve affordability through
changes in zoning and regional collaborations to build
more housing. A rise in homelessness and large influx of
asylum seekers have increased demands on the region’s
shelter and transitional housing sector. ■
For more information about District economic conditions visit:
https://www.newyorkfed.org/regional-economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ February 2023
Summary of Economic Activity
On balance, business activity in the Third District appears to have increased slightly after declining slightly last period.
Consumer demand appeared to tick up, but contacts cautioned against comparisons with year-ago sales that were
dampened by the Omicron wave. Moreover, bankers and nonprofit agencies warned that lower-income households
were buying food and other necessities on credit. Employment resumed a modest pace of growth despite the tight labor
market. Wage growth and inflation continued to subside, but both remained moderate. Overall, firms continued to report
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
quarter of 2022. However, these recent expectations
were lower than the 5.8 percent in the third quarter of
2022. Manufacturers expected wage increases of 5.0
percent; nonmanufacturers expected 5.5 percent.
Employment growth resumed a modest pace after having maintained a slight pace since July 2022. About onefifth of the firms reported increased employment; onetenth reported less employment. Contacts, including
staffing firms, noted that hiring continued to be easier,
with more applicants, lower turnover, and less wage
pressure. One staffing contact commented that billboards advertising jobs were no longer seen in the area.
Prices
On balance, inflation continued at a moderate pace –
comparable with the prior period. However, reports of
price increases were generally less widespread, and
expectations of future price hikes continued to fall.
However, firms continued to describe a very tight labor
market in which staffing remained their primary challenge. Contacts pointed to a lack of childcare, baby
boomer retirements, disconnected youth, the national
immigration policy, and lingering effects of the pandemic
as critical underlying factors.
Contacts reported that increases in prices received for
their own goods and services over the past year held
steady at a moderate pace in the first quarter of 2023.
The trimmed mean for reported price changes in our
quarterly survey questions remained at 6.0 percent for all
firms. Price increases rose to 8.1 percent from 7.9 percent for manufacturers but fell to 4.4 percent from 4.6
percent among nonmanufacturers.
Firms again reported that wage inflation had subsided
since the prior month but remained pervasive and moderate. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per
employee was nearly equal to the share reporting no
change (at a little under 50 percent); the share reporting
lower compensation levels was just over 4 percent.
Likewise, reported increases in prices paid and received
were significantly less widespread than one year ago.
Since year-end, reported increases for prices paid for
inputs were also less widespread among all firms; however, increases in prices received for their own goods
were more widespread, especially for nonmanufacturers.
On a quarterly basis, firms’ expectations of the one-yearahead change in compensation cost per worker essentially held steady, with a trimmed mean of 5.2 percent in
the first quarter of 2023 versus 5.1 percent in the fourth
Looking ahead one year, the increases that firms anticipated in prices for their own goods subsided further to a
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Federal Reserve Bank of Philadelphia
modest rate – the trimmed mean for all firms fell to 4.0
percent in the first quarter of 2023, from 4.3 percent over
the past two quarters. Previously, it had fallen steadily
from 5.9 percent in the fourth quarter of 2021. The expected rate of growth edged down to 3.9 percent from
4.0 percent for nonmanufacturers and fell to 4.1 percent
from 4.8 percent for manufacturers.
same period last year. Inflationary effects on home prices and other big-ticket items continued to boost loan
volume growth during the current year relative to past
years.
During the period, District banks reported strong growth
in home mortgages and other consumer lending, moderate growth in auto loans, and modest growth in commercial and industrial lending. Home equity lines declined
modestly, and commercial real estate lending was essentially flat. Banks reported strong declines in credit
card volumes – typical of the postholiday season.
Manufacturing
Manufacturing activity declined modestly – after declining moderately in the prior period. The index for new
orders was negative for the ninth straight month but was
not as deep as last period. Moreover, the shipments
index turned positive after dipping negative at year-end.
Nonprofit contacts noted that some of their clients have
begun charging basic food and utility expenses to credit
cards and are using “buy now, pay later” online services
for movies and dinners. Several contacts noted that as of
the end of February, low-income households in our three
states will lose significant supplemental SNAP benefits
that were made available during the pandemic. Moreover, local food banks are contending with falling levels
of donations, higher food prices, and staffing challenges.
Contacts confirmed that demand slowed and backlogs
fell. Demand tended to be slower for firms supplying
construction-related sectors; however, one contact noted
an early pickup in orders in anticipation of future infrastructure spending.
Expectations among manufacturers for growth in six
months remained muted. The index for future activity
turned slightly positive, and the new orders index
changed little since year-end. However, expectations for
increases in shipments, employment, and capital spending over the next six months were less pervasive.
Real Estate and Construction
Homebuilders reported an unexpected uptick in sales in
early 2023. Contacts attributed the improvement to incentives, discounts on older inventory, and new homes
built with smaller footprints and lower-cost features.
Builders also noted that homebuyers may have resigned
themselves to the current mortgage rate environment.
Consumer Spending
Nonauto retailers and restaurateurs tended to report
slight growth because of several positive factors: good
weather, early tax refunds, and an easy comparison
against year-ago sales, which were dampened by the
Omicron wave. Tourism contacts reported steady activity
but also noted that comparisons with the first quarter of
2022 “may provide false hope.” Auto dealers reported a
slight uptick in sales in the new year as manufacturers
began delivering more new cars. However, a builder
noted that dozens of small businesses in its community
neighborhoods were struggling, as their customers became increasingly budget conscious.
Existing home sales fell moderately in most markets –
following a modest decline in the prior period. Brokers
noted that a sellers’ market persists as new listings
remain scarce. Housing affordability continued to decline.
Requests for assistance with housing and utility bills
continued to dominate the share of 211 requests in the
three-state region, at 36 percent and 18 percent, respectively. In turn, 39 percent of the housing requests were
for rental assistance.
Nonfinancial Services
Market participants in commercial real estate continued
to report steady current construction activity but noted
additional softening of the pipeline as more projects are
delayed, canceled, or redesigned. Leasing activity continued to slow modestly. While demand for warehousing
and life sciences space remained strong, concerns about
other commercial real estate prompted at least one large
law firm to gear up for handling distressed properties. ■
On balance, nonmanufacturing activity appeared to
resume a slight pace of growth after two periods of little
change. Growth was more widespread, as the share of
firms reporting increases in sales and new orders edged
out the share of firms reporting decreases. However, the
difference was smaller than normal for nonrecessionary
periods.
Financial Services
The volume of bank lending (excluding credit cards)
grew modestly during the period (not seasonally adjusted) – slower than the prior period but faster than in the
For more information about District economic conditions visit:
www.philadelphiafed.org/regional-economy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ February 2023
Summary of Economic Activity
The Fourth District economy contracted slightly in recent weeks amid persistent softness in household spending, particularly goods spending. Several retailers and restauranteurs reported a typical post-holiday sales slump, but some said
that sales fell short of their expectations as inflation continued to weigh on discretionary spending. In addition, higher
interest rates contributed to ongoing weakness in light vehicle and home sales. Freight and manufacturing firms suggested that softer household spending dampened demand in their own industries, while bankers noted that higher interest rates curbed overall loan demand. Contacts generally expected business activity to soften further in coming months.
Employment rose slightly, and while reports of layoffs remained few, a larger share of contacts noted that they had
paused hiring. Increased labor availability, particularly among lower-paid workers, was accompanied by some further
relief in wage pressures. Nonlabor input cost pressures changed little in recent weeks, while selling price pressures
edged higher.
earlier. Moreover, an increased share of contacts reported that their costs had stabilized recently. In addition,
even when costs were said to be rising, contacts reported that they were increasing at a slower pace. Looking
forward, contacts expect nonlabor input cost pressures
to ease slightly further in the months ahead.
Labor Markets
District employment increased slightly, though a larger
share of contacts indicated that they had held staffing
steady. Firms that were hiring often cited ongoing turnover and persistently high job vacancies as the main
drivers. For instance, one manufacturer stated, "We still
need about 10 percent [more] staff … to reach preCOVID levels." On balance, contacts’ hiring expectations suggest employment growth will slow further in
coming weeks. Looking forward, several contacts suggested that they were less likely to lay off workers in the
event of an economic downturn because they were
focused on retaining enough staff to meet longer term
production goals.
The share of contacts reporting increased selling prices
was up slightly from that in the previous cycle but still
down considerably compared to a year ago. Many contacts raised prices to offset high input costs. However,
some firms reported increased pressure to not raise
prices even as their costs remained elevated. For example, one freight hauler noted, “We have lost some of our
normal business because we were not willing to reduce
rates as much as our customers demanded. Our costs
are not decreasing, so our margins are getting
squeezed."
Wage pressures continued to ease, and the share of
contacts reporting increased pay was one of the lowest
in the past 12 months. However, the relief was spotty.
Notably, food and hospitality firms reported declining
wage pressures related to increased labor availability.
Meanwhile, contacts in the financial services and nonresidential construction sectors reported that sustained
competition for skilled workers was still leading to large
pay increases. Similarly, manufacturing contacts often
offered wage increases that exceeded prepandemic
norms to help employees offset the effects of inflation.
Consumer Spending
On balance, contacts’ reports suggest consumer spending was down somewhat as households faced continued
pressure from high prices and increased interest rates.
One general merchandiser noted that slower than normal holiday sales had been followed by further declines
to start the new year, while another reported that high
prices had led to a “pretty dramatic bias toward food and
consumables over discretionary purchases. If there’s
money left over, customers will spend some on general
merchandise.” Auto dealers continued to report that
Prices
On balance, nonlabor input cost pressures changed little
in recent weeks but were down meaningfully from a year
D-1
Federal Reserve Bank of Cleveland
higher vehicle prices and increased interest rates had
resulted in softer customer demand. One industry contact said that his returning lease customers were often
“shocked by the increase in monthly payments.” On
balance, contacts expected consumer spending to remain soft in coming months.
tinued to decrease slightly, and bankers suggested that
deposit rate competition and a shift to higher-yield alternatives contributed to the decline. Looking ahead, lenders anticipated that loan demand would weaken further
as borrowing costs are expected to remain elevated.
Manufacturing
Freight activity remained weak, which contacts attributed
to a variety of factors including weaker demand in construction and consumer goods, as well as an ongoing
inventory correction cycle. Contacts expected freight
demand to remain soft in the months ahead. Demand for
professional and business services grew at a relatively
steady pace this period. One firm that provides transaction authentication services indicated that the continued
upward trend of internet shopping will ensure growth in
demand for his services.
Nonfinancial Services
Overall demand for manufactured goods changed little
from the prior reporting period. However, reports continued to vary by industry segment. Demand increased for
firms in aerospace and in heavy trucks and trailers. By
contrast, softer demand was reported by firms associated with interest rate-sensitive sectors, including residential real estate and light vehicles. Multiple contacts said
that softer consumer spending had reduced demand for
their customers’ products. Broadly, manufacturers expected demand for their products to remain steady or
increase slightly in the coming months and they frequently cited improved supply chains and stabilizing
inventories as contributing to their relatively optimistic
expectations.
Community Conditions
Workforce development contacts indicated that the number of individuals seeking their services remained below
prepandemic levels, though a few reported an uptick in
recent months. Contacts noted that individuals were
more likely to seek their services for training opportunities than for job placement. One contact mentioned that
every worker who recently completed a manufacturing
training program had at least two job offers. The difficulty
manufacturers are having attracting and retaining workers led some to explore apprenticeships to meet their
staffing needs. According to multiple contacts, lowerwage workers have greater options for employment and
have become more selective in their job choices, prioritizing flexible work schedules in addition to pay. An
eastern Kentucky contact reported increased demand for
skilled trade workers as the region continued to rebuild
from the July 2022 floods. ■
Real Estate and Construction
Residential construction and real estate contacts reported that elevated interest rates continued to constrain
demand, though the pace of contraction slowed somewhat. In fact, one homebuilder noted that demand had
increased in recent weeks, a situation which he attributed to stabilizing mortgage interest rates and slower
increases in materials costs (and home prices) compared to the prior two years. Still, contacts anticipated
demand overall would remain below typical levels into
the near future.
Nonresidential construction contacts reported that demand softened further because of high interest rates for
commercial projects. One general contractor noted that
the projects that are moving forward have often been self
-funded. Real estate developers also cited weaker demand as customers have become increasingly concerned about high interest rates and general economic
uncertainty. Contacts said that these same factors would
lead to further softening in demand in coming months.
Financial Services
Overall, loan demand continued to decline this reporting
period. Bankers noted a slowdown in lending to both
businesses and households, which they attributed to
high interest rates. Some lenders also suggested that
perceived economic uncertainty was causing borrowers
to be more cautious. Overall, delinquency rates have
remained low, though a few bankers noted a slight increase in credit card delinquencies. Core deposits con-
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 ■ February 2023
Summary of Economic Activity
The Fifth District economy grew modestly since our previous report. Manufacturing activity was unchanged, on balance,
as some segments continued to grow while others contracted. District ports reported a net decline in total volumes as
import activity slowed while loaded exports picked up moderately. Trucking companies also saw a decline in total volumes leading to lower spot market rates. Retailers experienced solid growth in sales and most said that consumer confidence was strong. Travel and tourism grew moderately, and hotels reported strong growth in revenues as occupancy
was solid and average room rates were up. Residential real estate activity picked up in recent weeks, but the low inventory of houses continued to restrict sales volumes. Commercial real estate activity was unchanged since our previous
report. Financial institutions reported weakening loan demand and a decline in deposit levels. Nonfinancial services
demand held up while revenues flattened out due to rising costs. Employment grew modestly and employers continued
to struggle to find qualified workers. The pace of wage growth slowed somewhat but was still elevated, overall. Prices
continued to rise strongly on a year-over-year basis.
Labor Markets
Manufacturing
Employment grew modestly in recent weeks. Contacts
continued to report significant issues with finding qualified workers. A motorcoach company cited a lack of
applicants, even after offering to train candidates on how
to drive their buses. An ice cream chain put expansion
plans on hold so they could focus on hiring and retaining
employees. Conversely, a staffing agency reported that
they were able to fill numerous data mining openings, as
the position attracted a good supply of quality candidates. The growth rate of wages was beginning to slow;
however, wages were still above what employers were
expecting to offer. An air compressor supplier reported
that the wage for a replacement worker was significantly
higher than the employee they were replacing.
Manufacturing activity in the Fifth District was little
changed in recent weeks. Sentiment about business
conditions reflected the industries manufacturers serve.
For instance, a steel manufacturer reported a “siloing” of
demand, as growing industries – like electric vehicle
plants – was making-up for declining parts of their business, like shopping centers. On balance, supply chains
continued to improve as order backlogs and vendor lead
times declined. Hiring was growing at a slower pace than
previous periods. A cabinet manufacturer was forgoing
layoffs amid expected declines in new orders, allowing
attrition to naturally happen without replacing departing
workers.
Prices
Fifth District ports reported a continued slowdown in total
volume this period. Loaded import containers were
down, primarily for furniture and retail goods, while loaded export volumes increased moderately, led by an
increase in auto parts, agricultural products, and paperboard. Rolling stock exports grew modestly this period.
Spot rates for trans-Asia containers declined to below
pre-pandemic pricing and were significantly under current contract rates; Transatlantic rates were slightly
lower this period. With reduced import volumes, the ports
were anticipating carriers doing more blank sailings and/
Ports and Transportation
Year-over-year price growth remained elevated, however
the pace of growth eased slightly in recent months. According to our most recent surveys, prices received by
manufacturers grew around six percent over the prior
year, but that was down from around ten percent growth
reported in November 2022. Prices received by services
firms, on the other hand, remained elevated and have yet
to ease significantly from their recent peak. These trends
largely reflected price growth for firms’ inputs, with manufacturers seeing input price growth slowing more than
services firms reported.
E-1
Federal Reserve Bank of Richmond
or taking ships out of rotation in the first quarter of 2023.
starting to decrease, particularly for mid-priced units;
high end apartment rents were unchanged. Retail leasing was strong this period especially for service and food
businesses. New retail centers continued to be built and
most were pre-leased, leading to lower vacancy rates.
The industrial market continued to be strong with higher
rental rates and good absorption levels. The supply of
Class A space tightened, particularly in suburban markets. Commercial contractors noted that a general shortage of key components, including labor, remained a
significant factor. Overall, commercial buyers remained
hesitant to commit due to market uncertainty.
Trucking firms reported a decrease in freight volume this
period, and contacts indicated that capacity is no longer
an issue. Some customers were seeking to bid out their
existing contracts now in order to take advantage of
lower freight rates. Spot market rates have decreased
moderately this period. Despite higher fuel costs, a
contact stated that it’s hard to maintain existing rates in
this environment. In the Less-than-Truckload segment,
both volumes and shipping rates held steadier this period. Trucking firms indicated little difficulty retaining
drivers and have been slower to backfill open positions
due to the lower freight volumes.
Banking and Finance
Financial institutions noted a continued weakening of
loan demand across all loan types, especially in the
commercial portfolio. Increasing interest rates were
mentioned as the primary driver of this weakening, along
with borrower uncertainty about the strength of the overall economy. Deposit levels continued to decrease, with
competition for deposits beginning to rise. Moderate
deposit interest rate increases were noted as institutions
work to maintain their base. Institutions are observing a
stabilization of delinquencies within their loan portfolios
with no increases reported. Financial institutions expected moderate decreases in loan and deposit levels
for the remainder of the year.
Retail, Travel, and Tourism
Retailers reported solid growth in sales in recent weeks
with several business reporting sales figures at or above
pre-COVID levels. Most retailers said that consumer
confidence was strong and that customers were willing
to accept price increases. A grocery store, on the other
hand, saw more customers trading down by buying store
brands or less expensive proteins due to elevated food
prices.
Travel and tourism grew moderately since our previous
report. Hotels reported that 2023 was off to a good start
with solid growth in bookings and average daily rates
leading to strong revenue growth. A hotelier in South
Carolina said that occupancy rates were slightly below
pre-COVID but that was only because the inventory of
hotel rooms increased at a faster rate than bookings. An
airport contact said that passenger traffic was up at the
start of this year but compared to pre-COVID, traffic was
still down for lack of available planes and pilots.
Nonfinancial Services
Nonfinancial service providers reported stable demand
for their services but a flattening of revenue. Contacts
expressed a general feeling of concern that their clients
had with inflation and recession fears, which was impacting the level of work being performed by their firms. They
were also seeing less non-mandatory engagements
being performed, with clients sticking to only what is
necessary for their businesses. Contacts were also
seeing a slight change in the mix of sectors that were
utilizing their services. Attracting labor was still a concern
with contacts, and they were looking for ways to maintain
and grow their workforces. ■
Real Estate and Construction
Most residential real estate professionals and builders
noted a surprising uptick in new home sales activity
since the beginning of the year. Housing inventory increased moderately, nevertheless it had a long way to
go to reach market equilibrium. One respondent indicated that buyers were out looking again but it would be a
better scenario if there were more homes available for
sale. The low housing inventory also has resulted in
fewer closed and pending home sales this period. Sales
prices decreased modestly from their peak last spring;
however, terms were more beneficial to the buyers.
Lumber prices were down but overall construction costs
remained high; the average base cost of a new home
was up 33% in the last 2 years.
Commercial real estate activity remained unchanged
since the last period. However, rent costs were moderating in certain sectors. Leasing rates for multifamily were
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ February 2023
Summary of Economic Activity
The Sixth District economy grew at a modest pace from January through mid-February. Labor markets improved somewhat amid persistent wage pressures. Many nonlabor costs increased, particularly food, utilities, and insurance; however, freight and shipping costs moderated. Low-income families continued to face barriers to full-time employment opportunities, and rising food and gas prices further strained household budgets. District retail sales exceeded expectations,
and auto sales remained solid. Leisure travel activity showed continued strength, and business travel grew. Housing
demand improved slightly as mortgage rates fell. Commercial real estate activity slowed. Transportation activity was
mixed. Loan growth at financial institutions was solid, but delinquency rates rose slightly. On balance, energy demand
was strong. Agricultural conditions remained mixed.
growth at 3.5 percent, on average, in February, down
from 4.3 percent in January. Firms' year-ahead inflation
expectations were relatively unchanged at 2.9 percent in
February, on average.
Labor Markets
Labor market pressures continued to ease since the
previous report; however, contacts still described conditions as tight, especially among front-line, skilled trades,
and IT positions. Most firms continued to hire. Layoffs or
hiring freezes were noted by a few contacts, but they
were largely limited in scope. Restaurants continued to
close dining rooms and other firms noted postponing
planned projects due to lack of available labor. To combat labor shortages, firms reported investments in training to upskill employees and capital expenditures in
technology to reduce reliance on labor. Overall turnover
has eased somewhat but not among hourly paid staff,
who continued to change jobs for higher pay. Several
employers also noted that affordable housing and childcare availability and costs further restrained the supply of
workers at all levels.
Community Perspectives
District nonprofits serving low-income households noted
that rising wages have not yet offset obstacles (e.g.,
access to childcare and transportation, affordable housing) challenging their ability to hold traditional full-time
employment. Some workers have chosen part-time jobs,
self-employment, and participation in the gig economy to
maintain needed flexibility. Elevated food and gasoline
prices continued to impact household cash flow. Consumer-facing contacts noted that rising prices resulted in
increased use of credit for routine purchases.
Consumer Spending and Tourism
District retailers reported higher-than-expected sales
levels over the reporting period. Pent-up demand continued to fuel solid automobile sales. Despite ongoing
inflationary pressures and rising interest rates, retail and
auto contacts cite cautious optimism for the first half of
the year.
Wage pressure remained persistent, though some easing was noted. Several contacts indicated that the wage
levels for various positions, especially lower wage jobs,
jumped significantly over the last year. Upward wage
pressure is expected to persist this year, but many firms
are targeting more modest increases than last year.
Travel and tourism contacts noted continued strong
demand, on balance, for leisure travel accompanied by
positive growth in business travel and conventions. Hotel
occupancies and average daily rates were above prepandemic levels, although there was a slight softening in
on-premises spending, such as for spa services and gift
shop purchases. Hotel bookings for spring break were
reported as healthy.
Prices
District contacts noted moderation in freight and shipping
costs along with improvements in supply chain imbalances over the reporting period. Some construction inputs,
like lumber, saw prices decline, while concrete prices
rose, increasing building project costs, on balance. Food
and utilities costs also rose, further straining businesses’
balance sheets. Rising insurance costs and wages were
cited most often as risks to the business outlook over the
coming year. The Atlanta Fed’s Business Inflation Expectations survey showed year-over-year unit cost
Construction and Real Estate
Although purchase transactions remained substantially
F-1
Federal Reserve Bank of Atlanta
contacts continued to report strong demand, although
contacts noted that demand for chemicals related to
adhesives and steel manufacturing fell. A few contacts
described reduced investment in the gasoline industry as
demand for gasoline slowed amid improvements in fuel
efficiency and growing demand for electric vehicles. The
ongoing trend in renewable energy investments remained robust. Utility providers reported strong demand
across segments and continued infrastructure investment.
below year ago levels, housing demand improved slightly since the previous report as mortgage rates edged
lower. Contacts indicated marginal increases in buyer
traffic and sales in January as mortgage rates moderated from the highs experienced in October 2022. Though
down from peak levels, year-over-year home price appreciation throughout the District was slightly stronger
than the nation as a whole. Affordability remained a
significant headwind primarily for entry-level buyers, and
a larger share of homes sold at a discount from the
asking price. New home builders continued to experience a high rate of cancellations and the majority offered
incentives to attract buyers.
Agriculture
Agricultural conditions remained mixed. Demand for beef
increased, especially for calves, following the downsizing
of Texas herds during the recent drought. Demand for
milk declined amid reduced exports of powdered milk to
China, and demand for butter fell from high levels. Cotton demand remained weak. While Florida’s production
of citrus fruits was limited by tree damage, demand
remained strong. The Avian flu continued to limit the
supply of eggs, which are generally sold domestically,
and to drive prices upward. However, Avian flu-related
restrictions on exports substantially softened global
demand for poultry meat, thus increasing domestic supply; poultry companies reported losing money amid high
costs and falling prices. ■
Commercial real estate (CRE) contacts reported slowing
market conditions in lower-tier office, multifamily, and
certain segments of retail. The downward trend in the
office sector eased further as more employers required
staff to return to the office; however, heightened levels of
sublease space remained an impediment to market
recovery. Concerns regarding declining CRE values
accelerated. Contacts reported increases in operating
expenses and slowing or negative net operating income
and rent growth. Additionally, firms continued to report
instances of declining asset prices and buyers seeking
greater concessions.
Transportation
Transportation activity was mixed over the reporting
period. Railroads experienced significant declines in
shipments of farm products, pulp and paper, non-metallic
minerals, and pet coke, which were offset by increased
carloads of coal, metallic ores, aggregates, and primary
metal and forest products; intermodal freight volumes fell
significantly. Air cargo contacts reported stable demand.
Freight brokerages noted that revenue per load declined
as trucking capacity rose. District ports saw increases in
exports, vehicle imports, and heavy machinery exports
amid slowing container volumes.
Banking and Finance
District financial institutions reported solid loan growth
across all portfolios, particularly in construction and
development loans. The level of unrealized losses in
securities portfolios improved marginally but remained
high compared to year-earlier levels. Financial institutions reported placing additional reliance on higher cost
alternatives as a source of funding amid slow deposit
growth and elevated unrealized losses. Delinquency
rates rose slightly, especially for loans past due 90 days
or more, though the levels remain below historical
norms.
Energy
For more information about District economic conditions visit:
www.atlantafed.org/economy-matters/regional-economics
Crude oil refining and petrochemical manufacturing
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ February 2023
Summary of Economic Activity
Economic activity in the Seventh District increased modestly overall in January and early February. 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 spending increased modestly; business spending and manufacturing increased slightly; nonbusiness contacts saw little change in activity; and construction and real estate activity decreased modestly. Prices and wages rose moderately, while financial conditions were unchanged. Agricultural incomes
were expected to be lower in 2023 than in 2022.
Labor Markets
Consumer Spending
Employment increased moderately in January and early
February, and contacts expected a somewhat slower
increase in employment over the next 12 months. Many
contacts continued to report difficulty finding workers,
though the number of applicants for open positions
increased. There were also more contacts reporting they
were not looking to hire or were reducing their workforce.
Wage and benefit costs continued to increase, with
several contacts noting higher health insurance costs.
Consumer spending increased modestly over the reporting period. Nonauto retail sales were up slightly, helped
by promotional offerings. There was strong sales growth
in the personal care and sporting goods sectors, but
weaker growth in the grocery, electronics, and apparel
sector. Contacts noted softer discretionary spending by
consumers, especially for lower-end products. New and
used light vehicle sales were unchanged, and low inventories continued to support high prices. Leisure and
hospitality activity continued to expand.
Prices
Business Spending
Prices rose moderately over the reporting period, and
contacts expected a similar rate of increase over the
next 12 months. Producer prices rose moderately, with
contacts highlighting higher costs for raw materials and
energy. Several contacts noted that growth in shipping
costs had slowed noticeably, particularly for long distance shipping. One contact indicated that there was a
noticeable increase in wholesale used vehicle prices as
dealers stocked up in anticipation of strong demand.
Consumer prices generally moved up with the continued
elevated level of demand and the passthrough of higher
costs, though there was growing customer resistance to
paying higher prices.
Business spending increased slightly in January and
early February. Capital expenditures remained stable on
balance, with contacts reporting purchases of new software and replacing old equipment. Demand for transportation services was little changed as activity remained at
a high level. Shipping backlogs declined but remained
elevated. Retail inventories moved down closer to comfortable levels, and contacts said promotions had been
successful in helping pare stocks. Auto inventories continued to slowly recover from low levels and were most
limited for the most popular models. In manufacturing,
inventories remained slightly elevated, though wait times
for raw materials improved. Many contacts indicated they
were no longer experiencing supply chain disruptions.
G-1
Federal Reserve Bank of Chicago
Construction and Real Estate
approaching pre-pandemic levels. Consumer loan standards tightened slightly.
Construction and real estate activity decreased modestly
over the reporting period. Residential construction was
down modestly. Home remodeling activity was steady,
though one contact saw a decrease in quoting. Residential real estate activity decreased moderately. Sales
volumes were down across all segments, but one contact noted an increase in leasing of multifamily units.
Home prices were little changed overall, while rents
increased slightly. Nonresidential construction was unchanged over the reporting period, with contacts noting
solid demand from health care and the public sector but
weaker demand for distribution center construction. High
interest rates and input costs continued to hold back
activity, while lead times remained long for critical products such as HVAC and power generation equipment.
Commercial real estate activity was little changed over
the reporting period. Demand for high quality space
remained solid, with one contact highlighting strong
interest in retail space previously occupied by big box
tenants. Overall, prices and rents decreased modestly,
while vacancies and the availability of sublease space
were up moderately.
Agriculture
Contacts’ forecasts for District agricultural income for
2023 were mostly for near average returns, down from
an above average 2022. Wheat prices were up, in part
because of longer Russian inspection times for Ukrainian
grain shipments and buyers’ greater reluctance to enter
purchase agreements given uncertainty about whether
the shipping deal with Russia would continue. Corn and
soybean prices were also higher, spurred by uncertainty
about the size of South American harvests. Contacts
noted that lower costs for some inputs would help farm
incomes but rising feed costs were a continuing concern
for livestock producers. Egg prices dropped from extremely high levels, and dairy prices were generally
lower. There were reports of closures of smaller dairy
operations, for which higher interest rates on loans were
making it more expensive to expand to a more profitable
scale. Cattle and hog prices moved higher during the
reporting period.
Community Conditions
Community development organizations and public administrators reported little change in overall economic
activity in January and early February. State government
officials again saw healthy growth in tax revenues and
low demand for unemployment insurance. Small business support organizations reported rising costs for their
clients, highlighting higher insurance premiums. Affordable housing developers said they were facing doubledigit percentage increases in materials and labor costs,
which were stressing the financing structures of projects.
As financial supports associated with COVID-19 are
coming to an end, nonprofit organizations reported greater demand for job search support as well as challenges
to their own revenue streams. ■
Manufacturing
Manufacturing demand increased slightly in January and
early February. Manufacturing backlogs were down
slightly as contacts continued to struggle with short
supplies of certain inputs, though overall, wait times
improved. Steel demand rose, with contacts noting
growth in sales to other manufacturing sectors and the
energy industry (both for renewable and nonrenewable
production). Fabricated metals demand decreased
slightly across a range of sectors. Auto production ticked
up but remained constrained by semiconductor and labor
availability. Heavy truck orders increased slightly. Heavy
machinery production moved down some but remained
at a high level, supported by large backlogs and solid
spending from the agriculture and infrastructure construction sectors.
Banking and Finance
Financial conditions were little changed over the reporting period. Bond and equity markets saw a slight increase in asset values and flat volatility. There was a
small decline in business loan demand across a range of
sectors. Business loan quality edged down, and standards tightened slightly. In consumer markets, loan volumes decreased moderately, with contacts pointing to
declines in residential mortgage lending and unsecured
consumer loans. Consumer loan quality slightly decreased overall, and one contact noted that credit card
and auto loan delinquency rates had edged up and were
For more information about District economic conditions visit:
chicagofed.org/cfsec
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ February 2023
Summary of Economic Activity
Economic conditions have remained unchanged since our previous report. Employers continue to report tight labor
markets, although the pace of wage growth has slowed. Contacts reported slowing price increases and plans to accept
tighter profit margins in order to maintain prices. Consumer spending was mixed, with reports of continued price sensitivity but demand slightly outstripping expectations. The real estate sector saw rent growth flatten and homebuying
demand slow, but demand for industrial and retail space rose. Manufacturing growth declined, and lending conditions
remained stable. The overall outlook rose slightly thanks to expected improvements in input prices, labor costs, and
demand.
Labor Markets
Prices
Employment remains unchanged since our previous
report, with contacts reporting tight labor markets but
varying turnover rates. Several contacts reported challenges in hiring enough workers to meet demand, but an
increased share reported more success in retaining
employees. A restaurant contact in Memphis estimated
60% of restaurants in the area are understaffed and 80%
have reported difficulty filling jobs. A logistics contact in
Little Rock saw more rotation in and out of the company,
while an employment contact in Memphis reported that
more clients are staying at their current jobs. An agriculture contact reported a sharp increase in the number of
firms using temporary visa worker programs for the first
time.
Prices have increased modestly since our previous
report. Overall, contacts reported slowing price increases
and projected lower rates of price growth in the year
ahead. This year, 63% of respondents reported an ability
to pass on costs, down from 82% a year ago. Some
industries expect to see the pace of price increases slow
more than others, with retail respondents projecting a
4% increase this year, compared with 14% a year ago.
However, some industries expect to see prices increase
by more than the previous year, with tourism respondents projecting increased prices of 5.2% this year, compared with 0.3% a year ago. A contact in the hotel industry estimated they would pass on 60-70% of costs to
consumers. A contact in the automobile sales industry
reported that increased inventory levels led to more
competitive market pricing, keeping prices lower. Firms,
especially smaller ones, reported accepting tighter profit
margins instead of increasing prices.
Wages have grown slightly since our previous report. In
contrast with the past few reports, contacts have reported minimal increases in wages. A healthcare contact in
Louisville reported labor costs have been lowering reimbursements and pushing profit margins to just above
break-even, while a retail contact in St. Louis has not
been able to pass labor costs on to customers, which
threatens the viability of their business. A construction
contact in St. Louis reported that higher labor costs
coupled with declining demand have placed a strain on
the company.
Consumer Spending
District general retailers, auto dealers, and hospitality
contacts reported mixed business activity and a mixed
outlook. January real sales tax collections increased in
Kentucky, Missouri, and Arkansas relative to December
and decreased in West Tennessee. Retailers in St. Louis
noted generally lower business activity due to customers
H-1
Federal Reserve Bank of St. Louis
cutting back on spending because of higher prices.
District auto dealers reported generally steady business
activity due to increased inventory, though they expected
business activity may slow in the upcoming months due
to higher interest rates. An auto dealer in Louisville reported they have been seeing new vehicle sales rates
slowing. A restaurant in Memphis noted that demand
continues to be steady even with food costs surging.
District hospitality contacts noted that business activity
was generally mixed, with demand moderated by rising
costs.
are staying in their current rentals. Residential real estate inventory has continued to increase since the previous report, as homebuyer demand slows. Some real
estate contacts reported signs of increased demand in
recent weeks due to some relative stabilization in mortgage rates.
The commercial real estate sector has been mixed.
Office demand remains low, but industrial demand remains high despite increased rents. Retail real estate
has improved since the previous report, and one contact
reported retail projects are back in demand for the first
time since before the pandemic. Construction demand
has slowed, with contacts reporting that many projects
are on hold as investors wait out market uncertainty
about rate hikes. One St. Louis contact reported increased construction activity as interest rates flattened.
Manufacturing
Manufacturing activity growth has modestly declined
since our previous report. Firms have reported modest
decreases in new orders and production. Contacts reported that international shipping costs are returning to
their pre-pandemic levels. Similarly, prices for raw materials are falling but have yet to return to pre-pandemic
levels. The labor market for manufacturing remains tight
as firms look to hire more workers. On average, firms
reported they expect slight increases in production,
capacity utilization, and new orders in the coming quarter.
Banking and Finance
Banking conditions in the District remain stable since our
previous report. Overall loan demand remains largely
unchanged from the past quarter. Commercial and industrial loan demand saw a small decline, while demand
for mortgage loans moderately increased with the dip in
the 30-year fixed mortgage rate. Despite this recent
growth, Memphis banking contacts expect mortgage
lending to slow down in the coming month. Contacts also
expect margins on interest-bearing deposits to contract
as federal funds rate increases ease up and the resulting
pressure from competition requires banks to pay higher
interest rates. Credit and asset quality remain strong,
and delinquency rates showed no significant change
from the past quarter.
Nonfinancial Services
Activity in the nonfinancial services sector has remained
stable since our previous report. Air freight and passenger traffic has remained stable, but trucking services in
the Memphis and St. Louis areas reported decreased
pay per load, increased fuel costs, and parts shortages.
In the Louisville area, investment in infrastructure
sparked investment opportunities in freight transportation. A Memphis-area wedding planner reported a decline in spending on 2023 weddings, noting that couples
are choosing less expensive options and spending wedding funds on honeymoons and house purchases instead.
Agriculture and Natural Resources
District agriculture conditions have declined moderately
since our previous report. The number of acres of winter
wheat planted in the District this season has increased
by 27% compared with this period a year ago. These
increases range from 15-55% across District states with
the lone exception of Arkansas, which saw a moderate
decrease of 14%. District contacts are no longer optimistic on the outlook for the rest of the year, due to concern
about the increased cost of inputs, especially labor.
Additionally, contacts noted sales were either at or below
expectations, and some contacts expressed concern that
higher interest rates were putting additional strain on
their balance sheets.
Nonprofit firms that provide housing experienced steady
funding and scaled up construction in the Memphis area.
In the St. Louis area, nonprofit contacts in arts and public
policy faced competition for volunteer labor. Rural
healthcare in the Memphis area continued to face funding challenges and reduced the number of services and
beds in response. While education contacts in the Louisville area reported depressed university enrollment,
enrollment in community college increased due to new
programs that reduced tuition costs.
Natural resource extraction conditions increased moderately from December to January, with seasonally adjusted coal production rising just under 10%. However,
January production decreased moderately by 11% compared with the previous year. ■
Real Estate and Construction
Residential real estate rental rates have continued to
stagnate since our previous report. Multiple residential
real estate contacts reported that the rate increases of
the past year are being met by resistance and families
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ February 2023
Summary of Economic Activity
The Ninth District economy grew modestly since the previous report. Employment gains were moderate, and large
firms were having more recruiting success. Wages were unchanged overall but remained at high levels. Price
increases were modest overall, with input prices expected to increase in coming months. Consumer spending as
well as commercial and residential construction fell. Residential real estate decreased significantly. Manufacturing
activity increased modestly, and agricultural conditions remained strong. Activity among minority- and womenowned businesses was steady.
Labor Markets
Prices
Price increases were modest overall since the last report
amid some signs of easing inflationary pressures. Half of
respondents to a monthly District business conditions
poll reported no change to the prices they charged for
their products and services in January from a month
earlier, but a slight majority said their nonlabor input
prices increased. Two-thirds of respondents either
expected not to change their selling prices or to
decrease them slightly in the coming month, though the
outlook for input price increases remained elevated.
According to a semiannual survey of businesses, about
2 in 5 firms reported “little or no change” in prices
charged to customers over the past month. About half
said wholesale prices from suppliers were modestly
higher. Retail fuel prices in District states increased
moderately since the last report.
Employment grew moderately since the last report. A
survey of District firms in early February found a large
majority hiring in some capacity. Less than 30 percent of
employers said they were not hiring, and only 5 percent
reported cutting workers. Other contacts also noted that
firms were overhiring to ensure operational coverage or
to create more attractive schedules that avoid overtime.
Survey respondents from large firms reported notably
better success at adding workers. Some contacts said
that labor availability improved slightly, but overall it
remained problematic. A recent Minneapolis-area job
fair with more than 20 employers and hundreds of job
openings attracted only 20 people. A Montana
construction firm has found it economical to rent a jet to
fly workers in to one of its plants to fill operational needs.
Hiring local employees “would be our first choice, but we
had to adjust when we could not staff that way.”
Worker Experience
Wage pressures were flat but remained high. A Montana
contact said hospitality and recreation employers “are
paying stupid amounts of money for entry-level
employees just to get them for short seasons.” Thirty
percent of surveyed District firms reported annual wage
increases of more than 5 percent, roughly in line with
earlier surveys. A Minnesota contact reported that he
was seeing “restaurants and hotels balk at moving any
higher with wages. They feel they just can’t adjust their
prices any higher."
Some workers formerly in food and hospitality said they
quit their jobs in recent months to start their own
businesses and have more control over their lives. “At
the beginning, I was afraid to leave a job I had done for
15 years,” shared a former cook. “I have been cleaning
houses for a few months now, and I am much happier.”
More electrical engineering graduates from a District
college were reportedly applying for jobs in smaller
companies with competitive wages, a move they had
snubbed in the past, according to a contact. In
Minnesota, workforce development contacts said more
I-1
Federal Reserve Bank of Minneapolis
people were applying for jobs but “ghosting" prospective
employers. A labor contact in Minnesota said that the
narrow workplace flexibility in education was pushing
people out of the profession and into other fields. Many
were leaving within the first five years, and fewer were
entering preparation programs in the field.
December and January year over year.
Manufacturing
District manufacturing activity increased modestly since
the previous report. Manufacturing respondents to
surveys generally reported increased or steady orders
and revenues, and positive near-term outlooks.
However, about a quarter of firms said recent sales had
declined. A regional index of manufacturing conditions
indicated an expansion in activity in Minnesota and
South Dakota in January from a month earlier, while
activity contracted in North Dakota. A firm that supplies
fabricated metal inputs to industrial customers noted
strong demand for robotics and automation.
Consumer Spending
Consumer spending fell slightly overall since the last
report. More than 100 firms in retail, hospitality, and
entertainment reported that recent revenues and profits
were lower overall compared with the previous quarter
and year over year. A western Wisconsin restaurant
owner noted that “costs are much higher while guests
are tightening their purse strings and not as willing to
accept price increases.” January gross sales in South
Dakota grew compared with last year, but at the lowest
monthly rate in over two years. A dealership with
multiple locations reported that January vehicle sales
rose 2 percent year over year, but new-vehicle sales
dropped by 15 percent. Car and truck sales were also
lower in Wisconsin, and sales of powersport and
recreational vehicles remained lower across the District.
Airline travel through District airports in January was
higher year over year, with most seeing double-digit
increases; Minneapolis-St. Paul International traffic rose
6 percent.
Agriculture, Energy, and Natural Resources
District agricultural conditions remained strong heading
into the end of winter. According to the Minneapolis
Fed’s fourth quarter (January) agricultural credit
conditions survey, nearly three-quarters of lenders
reported farm incomes increased from October through
December compared with the same period a year earlier.
Farm household spending, capital spending, and loan
repayment rates also increased on balance, while
demand for loans fell. A forestry contact noted that
prices that sawmills were paying for logs had increased
recently, leading to operating losses and production cuts
at mills. Production at District iron ore mines was
expected to increase slightly in 2023; one facility was
making a large investment into producing a higher grade
of ore. District oil and gas exploration activity was
unchanged since the previous report.
Construction and Real Estate
Commercial construction fell slightly since the last report.
Some of that slowdown was seasonal. A manufacturer of
building products said that “November through January
are our weakest months. But the trend is down.” A
Montana architecture firm said that large corporate
clients have delayed project starts. Other contacts
reported a smaller pipeline of future projects. A
contractor in Minneapolis-St. Paul said, “Interest rate
hikes have put a considerable damper on new
construction projects.…Projects aren’t penciling out.”
Residential construction was lower. Single-family units
permitted in December and January fell by half
compared with a year earlier in Minneapolis-St. Paul.
Billings, Montana, and Sioux Falls, South Dakota saw
larger declines. Most other major markets were flat.
Commercial real estate was flat since the last report.
Office space continued to struggle overall despite a slow
but ongoing return of workers to downtown offices. But
overall vacancy rates grew as some large tenants
downsized and space available for sublease increased.
Industrial property remained strong, though higher
financing costs reportedly had some developers
reevaluating speculative projects. Residential real estate
continued to crater. Most large markets in the District
saw closed sales fall between 25 and 50 percent in
Minority- and Women-Owned Business Enterprises
Minority- and women-owned businesses reported steady
activity in recent weeks. Labor market tightness
continued to put uneven pressure on minority and
women entrepreneurs. A childcare provider said that
despite higher demand for services, they cannot find
qualified staff to maximize their licensed capacity:
“Parents want their children to learn Spanish, they look
for that added value in our services, but finding staff is a
big challenge.” Electricians, plumbers, framers,
cosmetologists, and other workers requiring certifications
were also said to be in short supply. Contacts highlighted
that while more people were looking at entrepreneurship
as an alternative to employment, many faced challenges
like access to capital, lack of credit history, lack of
understanding of business processes, and lack of
management and marketing skill. ■
For more information about District economic conditions
visit: minneapolisfed.org/region-and-community
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ February 2023
Summary of Economic Activity
Total economic activity across the Tenth District fell slightly in February. Consumer spending continued to decline, primarily due to reduced discretionary spending on leisure and retail, while non-discretionary spending on food, energy, and
healthcare continued to rise. Several contacts noted declines in workers’ overtime hours, less hiring of temp workers, and
fewer new job openings. However, employment levels remained high and labor market conditions continued to be tight.
Contacts reported labor costs were elevated and indicated more difficulty in passing these costs to customers in recent
weeks. In the housing sector, contacts highlighted the elevated levels of mobility of residents as an opportunity for rental
property managers to raise rents more frequently, leading to faster rent growth on an annual basis. The recent surge in
rent prices was reportedly a headwind to financing for new multifamily housing development, as the uncertainty about
how to estimate future revenue growth from housing properties squelched new projects. Community bankers reported low
past due and problem loan levels. Although some bankers highlighted concerns regarding future consumer credit performance, most respondents expected credit quality to remain largely unchanged over the next six months.
Labor Markets
Prices
Tenth District contacts reported that employment increased moderately over the past few weeks, though the
pace of hiring has significantly slowed from its recent
elevated level. Businesses continue to report difficulty
finding qualified workers to fill open positions, reflecting
ongoing tightness in the labor market. Labor force participation declined in most District states over the last few
months, further constraining labor supply for businesses
seeking to fill open positions. Business contacts continued to report difficulty hiring for entry-level positions, but
in recent weeks indicated they are focused on hiring for
both entry-level and mid-level positions over the next six
months.
Prices rose at a moderate pace across most sectors of
the District economy. Contacts in the service sector
noted that labor cost pressures continue to rise at a
robust pace, but indicated these pressures were increasingly difficult to pass on. In the housing sector, several
contacts suggested that elevated levels of residents’
mobility are allowing rental property managers to adjust
rents more frequently, leading to faster rent growth on an
annual basis. Expected price growth over the next several months remained elevated across most sectors.
Consumer Spending
Consumer spending fell slightly over the past month,
held down primarily by softer leisure and hospitality
spending. Contacts reported the return of international
travelers this year partially offset recent declines in
spending by domestic travelers. Though overall consumer spending declined, businesses noted a bifurcation in
spending patterns. Discretionary and more interest rate
sensitive consumption categories – such as travel and
car purchases – declined at a rapid pace, while spending
on non-discretionary consumption categories – such as
food, energy, and healthcare – increased modestly.
While most contacts reported that they currently do not
have plans to lay off workers, a greater number of businesses reported they are reducing employee hours, use
of overtime, and their hiring of temporary employees.
Wages continued to grow moderately for manufacturing
and services businesses with expectations for robust
growth over the next six months.
J-1
Federal Reserve Bank of Kansas City
Community Conditions
Community and Regional Banking
Low to moderate income (LMI) households in the Tenth
District reported greater difficulty securing adequate
childcare over the past few months. Contacts cited both
a lack of availability and rising costs at childcare facilities
as the major barriers faced by households seeking care.
Insufficient childcare availability and unaffordability continued to hinder workforce participation among LMI
households. Recent policy efforts to improve childcare
availability – for example, a recent zoning reform in
Wichita, Kansas increased maximum home daycare
capacity from 10 to 12 children – have reportedly been
more than offset by an acceleration of closures of childcare facilities.
Loan demand weakened modestly in the past month as
rising interest rates and continued economic uncertainty
weighed on borrower sentiment. Contacts reported
weaker demand across all key portfolios but highlighted
stable credit quality last month amid low past due and
problem loan levels. Although some contacts highlighted
concerns regarding future retail credit performance,
respondents expected credit quality to remain largely
unchanged over the next six months. Deposit levels
declined moderately again this month as banks experienced strong rate pressure from other bank and nonbank competitors amidst increases in short-term interest
rates. Further, deposits rotated from checking and noninterest-bearing accounts into time deposits and high-yield
savings products as customers demanded additional
yield on cash.
Manufacturing and Other Business Activity
Manufacturing businesses reported that overall activity
remained mostly unchanged over the past few weeks.
Higher prices supported revenues, but measures of real
activity, including production, backlogs, and new orders,
declined moderately. Durable goods manufacturers
reported more severe declines in production and expectations. Growth among services businesses was mixed
across sectors. While retail and tourism businesses
reported moderate declines in activity, professional
businesses services, transportation, and healthcare
businesses reported greater levels of activity.
Energy
Tenth District energy activity fell slightly over the last
month. The number of newly drilled and completed wells
declined, as profitability for drillers began to fall for the
first time in two years. Oil prices were roughly flat over
the last month and crude oil stocks increased due to
unscheduled refinery maintenance, contributing to the
recent declines in District rig counts. On average, natural
gas rig counts across District states are expected to
decline over coming months, driven by generally lower
domestic natural gas prices. However, there were some
differences among District states. The number of gas
rigs ticked up in Wyoming, as regional (western) natural
gas prices were elevated. Additionally, Wyoming coal
miners saw strong production growth related to higher
coal prices in recent months.
Across manufacturing and service sectors, businesses
indicated tighter financial conditions reduced demand for
their products significantly. However, most businesses
revised their plans for capital expenditures downward
only slightly, which they attributed more to softening
demand than to the higher interest expenses from tighter
financial conditions.
Agriculture
Real Estate and Construction
The farm economy in the Tenth District remained strong,
but risks to the outlook lingered. In the livestock sector,
cattle prices increased slightly in February and reached
multi-year highs alongside lower inventories. In the crop
sector, prices of corn, soybeans and wheat remained
high and continued to support profitability. Despite strong
market conditions, District contacts reported that elevated production costs, higher interest rates, and ongoing
drought in some areas have put downward pressures on
profit margins for many producers. Cost pressures have
been particularly challenging for livestock operations,
with several reports of early calf sales and herd liquidation as a result of intense drought and high feed costs,
which could reduce revenues going forward. ■
Developers of multifamily housing indicated further deterioration of conditions from already depressed levels.
Rising interest rates continue to be a challenge to financing multifamily housing projects, but contacts also highlighted recent volatility in rental rates as an additional
headwind. Uncertainty about projected rent growth is
reportedly very high, further hindering financing activities
for new projects. Builders of single-family homes reported costs associated with higher interest rates are exacerbated by ongoing delays related to delivery of materials, inspections, and worker shortages. Such delays
raise the effective cost of higher rates for builders because that interest expense must be carried over a longer period.
For more information about District economic conditions visit:
www.KansasCityFed.org/research/regional-research
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ February 2023
Summary of Economic Activity
The Eleventh District economy continued to expand modestly. Manufacturing output and demand declined, but growth
picked up slightly in the service sector. Retail sales fell again, and energy activity eased slightly. Rising interest rates
further weakened loan demand. Agricultural conditions and housing market activity improved. Local nonprofits cited
higher demand for assistance. Overall payrolls rose moderately, though job growth stalled out in manufacturing. Wage
and cost pressures were little changed and generally remained above average. Outlooks were mostly negative, and
uncertainty remained high, with contacts voicing concern about weakening demand, inflation, and high interest rates.
Labor Markets
Prices
Employment increased moderately during the reporting
period. The pace of hiring slowed in the service and
energy sectors, and employment growth stalled out in
manufacturing. While several firms continued to cite
difficulty recruiting for open positions, many others reported an improvement in both the quality and quantity of
applicants. Airlines cited capacity constraints due to pilot
staffing issues, and one health care contact said they
were lowering education and licensing requirements for
several hundred job openings to expand the applicant
pool. Some small or rural school districts in Texas have
transitioned to a four-day school week in part due to
staffing shortages and the need to attract teachers. In
contrast, several firms noted hiring to cover turnover
rather than to expand payrolls, and contacts in the education sector said there were less job opportunities for
graduating students, particularly in high tech. There were
reports of hiring freezes or layoffs in construction, manufacturing, financial services, and professional and business services.
Input cost pressures generally remained elevated but
there were some reports of easing in raw material pricing
due to improving supply chains. Construction and land
development costs were generally stable but high, and
prices rose for concrete. Apartment operators noted a
sizable increase in operating costs, particularly for insurance. Selling price pressures accelerated in manufacturing but were little changed in energy and services.
Homebuilders continued to use incentives and discounts
to close sales. Airlines expect ticket prices to stay elevated.
Manufacturing
Texas factory output dipped slightly during the reporting
period after increasing modestly in December. New
orders for manufactured goods continued to decline for
both durables and nondurables in part due to falling
backlogs, inventory realignment, economic uncertainty,
and slowing construction activity. Weakness in demand
was most pronounced in construction-related manufacturing, though computer and electronic product and food
manufacturers cited declines as well. Refinery utilization
rates slipped, but margins remained healthy. Overall,
economic uncertainty remained elevated, and outlooks
weakened.
Wage pressures remained elevated, though they have
stabilized or eased recently in some industries. A staffing
firm said that candidates were realizing they can’t keep
demanding higher wages. Downstream energy firms said
wage pressures softened slightly, and construction contacts noted some easing in pricing for certain trades.
Retail Sales
Retail sales declined broadly over the past six weeks.
K-1
Federal Reserve Bank of Dallas
Clothing, food and beverage, furniture, and electronics
store retailers cited a decrease in revenues on net. A few
retailers reported less traffic, and auto dealers continued
to note that higher interest rates and economic uncertainty were hampering sales. Outlooks worsened, with
continued concern about affordability, high interest rates,
and inflation.
Energy
Oilfield activity eased slightly during the reporting period
largely due to winter weather-related disruptions. Overall, energy sector activity has levelled off as labor and
supply chain challenges have weighed on activity. Contacts expect spending on drilling and well completions to
increase steadily this year. Outlooks remained positive,
but contacts said there was still considerable uncertainty
regarding the impact of sanctions on Russian refined
products and of Chinese demand on energy markets.
Nonfinancial Services
Service sector activity expanded modestly during the
reporting period. Activity in business services, information, and leisure and hospitality sectors increased,
and transportation services firms generally noted higher
revenues and cargo volumes. Airlines saw continued
strong leisure demand and said that business travel was
steadily recovering. Staffing firms cited mixed demand
for their services, with a few noting declines in temp
hiring.
Agriculture
Agricultural conditions improved slightly over the reporting period. Though much of the district remained in some
level of drought, the winter wheat crop was faring better
this year than last. Spring row crop planting was on the
horizon, and contacts expect an increase in grain acres
and a decrease in cotton acreage in 2023. Agricultural
commodity prices were relatively high, and some improvement was seen in input costs, particularly fertilizer.
Cattle prices rose amid solid beef demand, while egg
prices have declined after surging at the beginning of the
year.
Construction and Real Estate
Activity in the single-family housing market improved
during the reporting period following dreadfully slow
activity in prior months. Buyer traffic picked up, and
sales, particularly for new homes, were exceeding expectations. Contract cancellations were coming down as
well, though they remained slightly elevated. Buyer
incentives on new homes, including rate buydowns and
discounting continued to be widespread. Prices have
dipped but were holding up relatively well due to tight
inventories. Outlooks improved since the last report.
Apartment leasing remained sluggish, and occupancy
and rents were flat.
Community Perspectives
Nonprofits continued to report higher demand for their
services. Housing affordability remained a key concern
amid high rents and housing costs. Evictions ticked up,
and contacts said that higher interest rates and home
prices were eroding the impact of down payment assistance programs. Lack of affordable childcare was another primary issue, impeding employment for lower-income
women. Nonprofits expressed concern that high operating costs together with the recent decline in public funding would limit their capacity to provide services. A contact at a public university reported that enrollment was
solid but the cost of attendance and the ability to pay
tuition remained a challenge for students from low to
moderate income households, particularly in light of the
depletion of the Higher Education Emergency Relief
Funds (HEERF). Notwithstanding, a community college
contact noted increased enrollment in career and technical education. ■
Demand for office space remained lackluster. Activity in
the industrial market continued to be solid, but contacts
were concerned about the elevated construction pipeline. The higher cost of capital, tighter lending standards,
and economic uncertainty has made it difficult to price
deals, diminishing investment sales activity.
Financial Services
Loan demand declined further, with more than half of
bankers reporting a decrease over the past six weeks.
Nonperformance increased notably, particularly for consumer loans, and a financial services contact said that
higher interest rates had boosted inbound call volumes.
Loan price growth moderated somewhat but remained
highly elevated, and credit standards and terms continued to tighten. Business activity declined significantly,
and expectations are for loan demand and business
activity to fall further and loan performance to worsen.
Contacts cited rising interest rates and inflation as headwinds and voiced concern over deposit outflows.
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ February 2023
Summary of Economic Activity
Economic activity in the Twelfth District expanded modestly during the January through mid-February reporting period.
Hiring activity grew modestly and labor supply improved somewhat. Wage and price growth moderated further, although
overall levels remained elevated. Demand for retail goods was strong, and activity in the consumer and business services sectors was robust. Demand for manufactured products remained unchanged on net, while conditions in the agriculture and resource-related sectors softened slightly. Activity in residential real estate markets eased further, while
commercial real estate activity was little changed. Lending activity declined modestly over the reporting period. Communities across the Twelfth District sought more workforce development and childcare services and continued to experience price pressures due to high inflation. Contacts expected a weaker outlook for the economy going forward as well
as increased overall uncertainty.
Labor Markets
Hiring activity grew modestly during the reporting period.
Labor supply improved somewhat across most sectors,
allowing employers to fill long-standing job vacancies.
Firms reported higher applicant counts and lower staff
turnover rates in many sectors, including finance, tourism, and agriculture. Despite improved labor availability,
competition remained tight across skill levels, including
for positions in food services, hospitality, construction,
health care, and manufacturing. In fact, labor market
tightness continued to be an issue for many providers for
consumer services, except for those in the technology
industry. Additionally, contacts in both health care and
business services reported an increased demand for part
-time positions in recent weeks. Many financial firms
either slowed their hiring or contracted somewhat their
employee head counts due to fewer real estate loan
originations in an elevated interest rate environment.
Other contacts reported stable employment levels, reduced job postings, or hiring freezes due to slowing
demand and increased uncertainty. Contacts in the
technology, entertainment, and transportation sectors
mentioned that layoffs have either continued or are being
considered as firms seek cost-cutting strategies amid
lower demand.
continued to demand flexible work arrangements where
applicable but were faced with firms’ mixed appetites for
remote work.
Prices
Price levels remained elevated and rose further, albeit at
a slightly slower pace. Firms generally reiterated their
ability to continue passing higher costs through to clients, although the degree of which varied by sector.
Contacts noted higher prices for natural gas, produce,
eggs, electrical components, ferrous metals, packaging,
food services, and hotel rooms. Conversely, some products and services saw stable or lower prices, including
those for transportation, rents in certain areas, advertisements, cardboard, lumber, and other building materials.
Community Conditions
Demand for community and workforce development
services remained high as elevated prices, interest rates,
and uncertainty continued to challenge low-income
households and rural communities across the District. In
particular, households and community members sought
support for childcare, food assistance, rental assistance,
house affordability, mental health services, and financial
literacy programs. Reports highlighted a recent increase
in the number of new small businesses, especially those
with diverse leadership, despite strong competition for
labor. Some small business financiers raised concerns
about capital access and increasing delinquency rates.
Educators highlighted efforts to improve compatibility
between their community college programs and local
workforce needs.
Wage growth moderated somewhat across most sectors.
Strong competition for workers and elevated living costs
continued to drive wages upward, but increased labor
availability lessened wage pressures overall. Some
employers reported that pay for entry- and mid-level
positions increased at somewhat faster rates than for
those at management and executive levels. Workers
L-1
Federal Reserve Bank of San Francisco
Retail Trade and Services
Retail sales were strong overall but started to show signs
of softening in recent weeks, in part due to consumers’
rising credit card debt. Shopping centers experienced
softer retail sales despite strong foot traffic. Reports also
indicated that more consumers substituted usual purchases with lower quality or less expensive products,
when possible, to compensate for higher prices. One
retailer noticed that elevated energy prices led to moderated spending at the gas pump in recent weeks. These
customers reportedly spent the freed-up funds at convenience stores located at the fuel stations. A specialty
retailer with a national presence highlighted that inventory levels were stable.
to be hampered by the strong dollar. One contact observed that producers continued to shift sales to domestic markets, and another commented that domestic demand has been high enough to largely absorb available
supply. However, demand for produce from retailers and
food services providers was reportedly either stable or
down in recent weeks. Contacts continued to report low
crop yields due to drought conditions, while a contact in
Alaska noted continued stability in some major seafood
stocks. Input costs, such as labor, energy, water, and
fertilizer, increased, though one contact in the Pacific
Northwest noted that food transportation costs fell substantially.
Activity in the consumer and business services sectors
was robust. Demand for health-care services was high.
Activity in the food services sector trended up, supported
by good weather and more people returning to on-site
work and to school campuses. Demand for leisure travel
and accommodations started to moderate somewhat. A
contact from Southern California noted that demand for
accommodations during spring break was strong but
lower than anticipated. Demand for business travel continued to modestly improve as conference and convention attendance remained strong. A contact from the
Pacific Northwest highlighted the negative impact of
technology firm layoffs on local retail and services sectors.
Real Estate and Construction
Activity in residential real estate eased further over the
reporting period. Demand for single-family homes continued to soften. Properties took longer to sell, and prices
were lowered. Multifamily housing demand remained
steady, though contacts reported that asking rents or the
rate of rent increases declined. One contact in Oregon
noted strong demand for larger rental units as renters
shared spaces to keep shelter costs down. New residential construction fell moderately or remained steady
across the District, with contacts citing financing costs
and concerns about future demand. Price pressures for
raw materials were reportedly mixed, rising in some
areas, such as Northern California, and falling in others,
such as the Mountain West.
Manufacturing
Activity in the commercial real estate market was little
changed on net. Demand for office space showed continued weakness with low rents and high vacancies. A
contact in Oregon reported slowing demand for warehouse and industrial space, though other contacts reported continued strength in these sectors. One contact
in Nevada observed that businesses expressed interest
in purchasing commercial spaces, rather than renting
them.
Demand for manufactured products remained unchanged on net. The metal production and recycling
industries reported favorable conditions supported by
inventory investment by domestic firms and demand
from South Asia. However, offsetting factors arose from
a softening of the construction industry and global macro
concerns. Food manufacturing and capital equipment
sectors reported robust demand, although a contact from
the Pacific Northwest noted a slowdown in local manufacturing activity. Availability of raw materials normalized
further as most contacts reported improvements in supply chain disruptions, except for inputs dependent on
semiconductors. Demand for manufactured building
supplies and home heating equipment weakened, although a contact from Southern California noted an increase in demand for specific building products, such as
steel tubing and line pipes.
Financial Institutions
Lending activity declined modestly in recent weeks.
Contacts reported that overall economic uncertainty and
higher interest rates led to a drop in demand for most
commercial and personal loans, with notable softness in
residential and commercial real estate lending. Deposits
moderated, and in some cases fell, but liquidity remained
elevated overall. According to reports, credit quality was
generally healthy, but financial institutions continued to
tighten lending standards in response to increased economic uncertainty.■
Agriculture and Resource-Related Industries
Conditions in agriculture and resource-related sectors
softened slightly. While international transportation bottlenecks eased further, demand from abroad continued
L-2
Cite this document
Federal Reserve (2023, March 21). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20230322
@misc{wtfs_beige_book_20230322,
author = {Federal Reserve},
title = {Beige Book},
year = {2023},
month = {Mar},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20230322},
note = {Retrieved via When the Fed Speaks corpus}
}