Beige Book
For use at 2:00 PM EDT
Wednesday
May 31, 2023
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
May 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 Chicago based on information collected on
or before May 22, 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 ■ May 2023
Overall Economic Activity
Economic activity was little changed overall in April and early May. Four Districts reported small increases in activity,
six no change, and two slight to moderate declines. Expectations for future growth deteriorated a little, though contacts
still largely expected a further expansion in activity. Consumer expenditures were steady or higher in most Districts,
with many noting growth in spending on leisure and hospitality. Education and healthcare organizations saw steady
activity on balance. Manufacturing activity was flat to up in most Districts, and supply chain issues continued to improve. Demand for transportation services was down, especially in trucking, where contacts reported there was a
“freight recession.” Residential real estate activity picked up in most Districts despite continued low inventories of
homes for sale. Commercial construction and real estate activity decreased overall, with the office segment continuing
to be a weak spot. Outlooks for farm income fell in most districts, and energy activity was flat to down amidst lower
natural gas prices. Financial conditions were stable or somewhat tighter in most Districts. Contacts in several Districts
noted a rise in consumer loan delinquencies, which were returning closer to pre-pandemic levels. High inflation and the
end of Covid-19 benefits continued to stress the budgets of low- and moderate-income households, driving increased
demand for social services, including food and housing.
Labor Markets
Employment increased in most Districts, though at a slower pace than in previous reports. Overall, the labor market
continued to be strong, with contacts reporting difficulty finding workers across a wide range of skill levels and industries. That said, contacts across Districts also noted that the labor market had cooled some, highlighting easier hiring in
construction, transportation, and finance. Many contacts said they were fully staffed, and some reported they were
pausing hiring or reducing headcounts due to weaker actual or prospective demand or to greater uncertainty about the
economic outlook. Staffing firms reported slower growth in demand. As in the last report, wages grew modestly.
Prices
Prices rose moderately over the reporting period, though the rate of increase slowed in many Districts. Contacts in
most Districts expected a similar pace of price increases in the coming months. Consumer prices continued to move up
due to solid demand and rising costs, though several Districts noted greater price sensitivity by consumers than in the
prior report. Overall, nonlabor input costs rose, but many contacts said cost pressures had eased and noted price
declines for some inputs, such as shipping and certain raw materials. Home prices and rents rose slightly on balance in
most Districts, after little growth in the prior period.
Highlights by Federal Reserve District
Boston
New York
Business activity was flat on average. Modest revenue
increases were reported among retail, restaurant, and
manufacturing contacts. Labor demand weakened for a
wide range of positions but headcounts declined only
slightly. Wage and price pressures eased further on
average but some sizable price increases were reported.
The outlook was cautiously optimistic.
Regional economic activity declined at a moderate pace,
with ongoing weakness in the manufacturing sector. Still,
the labor market has remained solid, though there have
been scattered signs of cooling due to heightened uncertainty. Inflationary pressures remained persistent. Conditions in the broad finance sector continued to worsen.
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National Summary
Philadelphia
St. Louis
Business activity continued to decline slightly during the
current Beige Book period. Contacts reported positive
consumer sales, but that relatively high profit margins
mean that volumes may be down. Labor availability
improved, and employment grew slightly. Wage growth
and inflation continued to subside. Contacts worried
about the debt ceiling and bank failures but maintained
positive expectations for growth over the next six
months.
Economic conditions have remained unchanged since
our previous report. Labor markets remained tight, but
reports of easing increased. Firms reported margin
compression due to an inability to pass on input price
increases. Residential real estate was largely unchanged, but demand for commercial properties weakened. The outlook worsened slightly due to concerns
about weakening demand and macro uncertainty.
Cleveland
Economic activity and employment were generally stable
in the Fourth District, while cost and price pressures
were little changed. Most firms indicated they were
somewhat concerned about the standstill in Congress
over raising the debt ceiling; however, these concerns
did not appear to impact firms’ outlooks for activity in the
coming months.
The region’s economy grew slightly since early April.
Labor demand was healthy, and wage pressures were
high, but there were also significant layoffs. Price increases were generally modest, but levels remained
high. Some manufacturers said input costs decreased,
but most reported no change. Consumer spending rose
modestly, and travel was strong. Minority-and womenowned firms saw a slight decrease in activity.
Richmond
Kansas City
The regional economy was little changed in recent
weeks. Consumer spending on retail goods declined
slightly but spending on travel and tourism picked up
moderately. A lack of inventory ordering by retailers was
felt in the manufacturing and transportation sectors.
Commercial real estate activity and lending softened.
Employment increased modestly and price growth eased
slightly but remained robust, overall.
Total economic activity across the Tenth District
changed little during May. Job growth continued to slow,
despite the number of job openings remaining elevated,
as businesses were reportedly more selective in their
hiring. Most businesses indicated price growth for finished products will likely moderate over the coming year.
Growth in housing rental rates was also expected to
moderate, even though it remains elevated in many parts
of the District.
Minneapolis
Atlanta
Dallas
Economic activity grew gradually. Labor markets became less tight, and wage pressures eased. Nonlabor
costs moderated, on balance. Retail sales softened.
Sales of new autos were solid. Leisure travel softened to
pre-pandemic levels, and business travel increased.
Housing demand was strong. Transportation activity
declined. Energy demand was robust. Agriculture conditions slowed.
Modest growth continued, with revenue gains in the
service and retail sectors. Housing contacts noted a
decent spring selling season and stable prices. Credit
conditions tightened further, and loan demand continued
to decline. Payrolls rose moderately, and wage growth
remained stubbornly elevated. Outlooks continued to
worsen, and contacts voiced concern over waning demand, rising interest rates, and the overall health of the
economy.
Chicago
Economic activity was little changed. Employment increased moderately; nonbusiness contacts saw a small
increase in activity; consumer and business spending
were flat; and activity decreased modestly both for manufacturing and for construction and real estate. Prices
and wages rose moderately, while financial conditions
tightened modestly. Expectations for farm incomes in
2023 decreased some.
San Francisco
Economic activity expanded somewhat. Employment
levels were stable amid tight labor market conditions,
while wage and price growth moderated further. Retail
sales grew modestly, and activity in the services picked
up somewhat. Manufacturing activity was robust, while
conditions in the agriculture sector weakened slightly.
Residential and commercial real estate activity fell, and
conditions in the financial sector worsened modestly.
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Federal Reserve Bank of
Boston
The Beige Book ■ May 2023
Summary of Economic Activity
Business activity in the First District was about flat on balance. Retail sales increased modestly and restaurants enjoyed
a seasonal uptick in activity in early May. Manufacturers posted mixed results, averaging modest revenue growth. Residential real estate sales were held back by inventory constraints, even though buyer demand strengthened moving into
the spring season. Commercial real estate activity slowed moderately further, with new weakness in the suburban office
market. Employment fell slightly amid broad declines in labor demand, and wage growth slowed somewhat. Prices
increased at a modest pace on average, but some sizable price increases were noted. The outlook was cautiously
optimistic on average, but the commercial real estate forecast weakened further on credit concerns.
responsibilities, housing and transportation instability,
and health challenges.
Labor Markets
Employment was down slightly amid muted hiring activity, and wage pressures eased a bit on balance. According to staffing industry contacts, labor demand slowed for
a wide range of positions, including legal support and
talent acquisition roles, as client firms trimmed hiring
plans—though they so far have enacted no major
layoffs. However, one manufacturing contact engaged in
moderate layoffs related to receding demand for COVIDrelated products, and other manufacturers reduced labor
by shedding temporary workers. Among restaurant
industry contacts, hiring of waitstaff improved while backof-house positions (e.g., chefs and managers) remained
very hard to fill, resulting in further upward wage pressure for those roles. Retail headcounts were roughly
steady, reflecting a combination of limited hiring and
moderately lower attrition. According to staffing contacts,
wage growth remained stable but workers seemed to
lose bargaining power, as some employers at least partly
rolled back flexible work arrangements. Contacts anticipated that selected wage pressures would persist but
that average wage growth would decline considerably
moving forward and that starting wages for some roles
might even see slight declines through the end of 2023.
Prices
Prices increased modestly on average as cost pressures
eased further. Pricing activity was mixed among manufacturers, as some held prices steady and others enacted sharp price increases with little pushback from consumers. Retail prices were flat or down slightly as a
result of increased promotions. Manufacturers and retailers alike said that freight and shipping costs declined
further. Nonlabor cost pressures were mixed for restaurant owners, as wholesale food prices were flat in recent
months but other costs such as rent, utilities, and health
insurance increased further. The pricing outlook for the
rest of 2023 was mixed, as most contacts expected to
hold prices steady but some planned to post additional,
above-average price hikes in response to ongoing cost
pressures.
Retail and Tourism
Among First District contacts, retail and restaurant sales
increased modestly in recent weeks. An online retailer
experienced an uptick in sales volume that was attributed in part to increased sales of outdoor furniture. Two
discount retailers saw further modest improvements in
sales volumes, pointing to their lower price points as a
source of strength. A Massachusetts restaurant industry
contact reported pockets of softer sales in April that were
followed by broad improvements in recent weeks from
On the labor supply side, a workforce development
contact continued to see many potential job candidates
struggling with persistent barriers to labor force engagement. The barriers included childcare and eldercare
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Federal Reserve Bank of Boston
Mother’s Day and graduation celebrations, as well as
from seasonal increases in outdoor dining. Despite
growth in restaurant sales volume, profits continued to
lag due to upward wage pressures and selected increases in nonlabor costs. Retail and restaurant contacts alike
were cautiously optimistic for sustained modest growth
for their own businesses in the near-term, but nonetheless cited concerns about the broader economy moving
forward.
pacting both the suburban and urban markets. Office
rents were mostly stable but tenant allowances and other
concessions increased further. The retail class was
reportedly experiencing mixed conditions, with groceryanchored and big-box retail spaces performing the best
and the worst, respectively. On average, however, retail
rents and leasing activity were unchanged since April.
Across property types, investment sales slowed to a
trickle and there was no new construction of note, facts
attributed largely to financing difficulties. Looking ahead,
contacts expected further declines in leasing and investment activity in both the office and retail property markets, with the office sector having the weaker outlook of
the two. The industrial class is expected to see relatively
stable activity, other than experiencing limited access to
credit to finance new construction.
Manufacturing and Related Services
Reports from First District manufacturing contacts were
mixed, but revenues increased modestly on balance.
One manufacturer reported an abrupt decline in sales
linked to the recent downturn in the semiconductor industry. A manufacturer of testing equipment said that
sales were stable but short of expectations, in part related to slumping smartphone sales. A contact serving the
scientific and life sciences industries said that revenue
growth had returned to robust, prepandemic levels, in
part owing to strong demand from China, although some
of the firm’s customers became more cautious in their
spending. None of our contacts reported revisions to
their capital expenditure plans. However, one contact
heard that smaller peer firms were pulling back on
spending on concerns about financing in the wake of
recent bank failures. Looking ahead, contacts ranged
from cautiously optimistic to very optimistic.
Residential Real Estate
First District residential real estate sales ticked up slightly
in March and April (the latest months for which data were
available) in line with seasonal patterns, but continued to
fall well short of year-earlier levels. Contacts around the
District attributed the still-low sales numbers more to low
inventories than to weak demand, as slightly lower mortgage rates helped bring more buyers to the market.
Indeed, the Boston area enjoyed an above-average
surge in single-family sales in March thanks to an uptick
in inventories, and contacts reported a rise in instances
of multiple offers and buyer concessions such as the
waiving of inspections. Inventories were otherwise quite
mixed, falling significantly from a year earlier in Massachusetts (outside of Boston) and Vermont, and down
more modestly or flat elsewhere in the District. House
price appreciation slowed on average but remained
slightly positive, with the exception that home prices in
Massachusetts (not including Boston) experienced modest declines from a year earlier. The modest price growth
in the Boston area marked a reversal of trend from the
preceding few months. Contacts anticipated that, despite
healthy buyer demand, home sales would likely experience only a modest seasonal increase moving forward,
owing to extremely low inventory levels. ■
Staffing Services
First District staffing contacts reported modest declines
in revenue on balance through the second quarter of
2023, driven by decreased labor demand across many
roles. Nonetheless, one firm reported sharply higher
revenues from hiring for skilled manufacturing and engineering positions. Contacts described the recent slowdown in demand for staffing services as the continuation
of a trend that began in late 2022 and that is expected to
continue through the end of 2023. Contacts described
the overall environment as one of caution, as firms anticipated a modest contraction in the economy. One contact noted further that demand for legal support roles had
decreased, suggesting (in their view) that mergers and
acquisitions might be slowing. Regarding the outlook,
staffing firms expected their own revenues to hold relatively steady even with the anticipated further contractions in hiring.
Commercial Real Estate
In the First District, the commercial real estate market
experienced a moderate decline in activity since April. In
the industrial class, rents continued to level off and leasing began to slow due to a lack of available space. The
office class saw a further slowing of deal flow, now im-
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ May 2023
Summary of Economic Activity
Economic activity in the Second District declined at a moderate pace in the latest reporting period. Still, the labor market
has remained solid, though the pace of hiring has slowed slightly, and wage growth was little changed. Inflationary
pressures have remained persistent, with the pace of selling price increases picking up slightly in the service sector.
Supply availability, while still constrained, continued to improve, though goods production was sluggish. Consumer
spending continued to increase at a steady clip, and tourism in New York City is nearing pre-pandemic peaks. The
home sales market and rental market have been strong, with record-high rents in New York City. Commercial real estate markets were mostly unchanged. Conditions in the broad finance sector continued to worsen. Regional banks
reported ongoing tightening in credit conditions and declining loan demand. Amid heightened uncertainty, businesses
expect little improvement in the months ahead.
Labor Markets
Prices
Labor market conditions have remained solid, though
there have been scattered signs of cooling as heightened
uncertainty has made some businesses more cautious.
While employment has continued to increase, on net, the
pace of hiring has slowed slightly. Moreover, businesses
in the construction, transportation, and finance sectors
reported a significant decline in employment in recent
weeks. Nonetheless, layoffs have generally remained
concentrated in large companies outside the region.
Though still challenging, it has become slightly easier to
find workers—particularly for smaller businesses that
have struggled to do so through much of the recovery.
Still, a contact at a New York City employment agency
indicated that labor demand has remained strong and
that recent stress in the banking sector has not had
broader impacts in the local labor market. A contact at an
upstate New York employment agency noted strong
demand for workers with leadership and technology
skills. Contacts report that attrition rates remain exceptionally low.
Inflationary pressures have remained persistent. Businesses reported that the pace of input price increases
has held steady in recent weeks, though there has been
some abatement in the prices of raw materials such as
steel and aluminum. The pace of selling price increases
in the manufacturing sector was also little changed, while
selling price increases picked up slightly in the service
sector and more noticeably among retailers. Businesses
generally expect pricing pressures to remain fairly widespread in the coming months.
Consumer Spending
Consumer spending continued to increase at a steady
clip in the latest reporting period. Though spending on
travel-related services declined somewhat from exceptionally high levels since the last report, this decline was
offset by strong spending at apparel and department
stores, hardware and home furnishing stores, and at
restaurants and bars. Auto dealers in upstate New York
reported that sales of new vehicles increased slightly as
inventory continued to steadily improve, while sales of
used vehicles softened. With elevated prices and more
limited inventory of used vehicles, contacts noted that
some consumers have opted instead for a new vehicle.
Wage growth has been little changed in the latest reporting period. Although some contacts expressed concern
about ongoing increases in New York State’s minimum
wage, most businesses plan to hire in the months ahead.
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Federal Reserve Bank of New York
Residential rental markets have continued to firm. Rents
are at all-time records in Manhattan, Brooklyn, and
Queens and vacancy rates remain exceptionally low.
Rents remain at a high level in much of upstate New York
as well. A strong economy and relatively high mortgage
rates have pushed some movers to the rental market,
boosting demand.
Manufacturing and Distribution
Manufacturing activity fell sharply in recent weeks, continuing a prolonged period of weakness. New orders and
shipments have been erratic but sluggish. Supply availability improved, delivery times shortened somewhat, and
inventories declined. Businesses in transportation &
warehousing also reported falling activity, while wholesalers saw activity increase. Manufacturing and distribution firms generally do not expect conditions to improve
much in the months ahead.
Commercial real estate markets were little changed in
recent weeks. Office vacancy rates were steady at elevated levels across the District and rents were mostly flat.
New York City’s retail market weakened, with increases in
vacancy rates and rents trending down. By contrast, vacancy rates remained at low levels in the industrial market
and rents trended up modestly, except in northern New
Jersey, where vacancy rates increased somewhat.
Services
Service sector activity declined moderately in the latest
reporting period. Businesses in the personal services
sector reported a particularly sharp contraction, while
activity reportedly held steady for leisure & hospitality
and education & health providers. On balance, businesses in the service sector expect little improvement in the
coming months.
Overall, construction contacts reported that conditions
continued to weaken since the last report. Office construction remained steady at a low level in most of the District,
though there were some new starts in northern New Jersey, Long Island, and upstate New York. Industrial construction activity was little changed across the District, with
some new space coming to market in the second and third
quarters of this year. Multi-family residential starts increased in New York City and parts of upstate New York
but remained weak elsewhere.
Tourism activity in New York City has remained strong
and is nearing pre-pandemic peaks. Business travel has
continued to pick up, particularly domestic travel, despite
competition with destinations in warmer parts of the
country. For the first time in three years, graduation
season has brought many international visitors to New
York City. European tourists are returning in large numbers but lags in visa processing have continued to constrain visitors from China and parts of South America.
Hotel performance has remained on a strong upward
trend, and New York City has had the highest hotel
occupancy rates of all the major markets in the country
in recent weeks.
Banking and Finance
Conditions in the broad finance sector continued to worsen
in recent weeks at a similar pace to the last reporting
period. Small to medium-sized banks reported lower loan
demand across all loan segments, including refinancing.
Credit standards tightened for all loan types, and loan
spreads continued to narrow. Most banking contacts reported higher deposit rates. Delinquency rates increased
on all mortgage and loan types.
Real Estate and Construction
The residential sales market has been strong across the
District in the latest reporting period. A New York Cityarea contact reported that the sales market in and
around New York City has picked up strongly in recent
weeks after a brief pause in early April due to uncertainty
related to stress in the banking sector. After a slow start
to the year, housing markets in upstate New York have
also started to pick up, with bidding wars and multiple
offers becoming more common. Inventory remains exceptionally low and is restraining sales activity in much of
the District. A key factor suppressing new listings is the
prevalence of homeowners with historically low interest
rates on their existing mortgages, reducing the incentive
to sell and move.
Community Perspectives
Community leaders reported that heavy congestion and
long commute times make transportation difficult for many
people, particularly those living in the New York City area.
Employers noted that transportation is especially challenging for lower-wage workers, who often face extended travel
times. Though hybrid working arrangements have reduced
the number of workers commuting to city centers in the
region, there has been an influx of younger remote workers residing in these areas to take advantage of urban
amenities and conveniences. ■
For more information about District economic conditions visit:
https://www.newyorkfed.org/regional-economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ May 2023
Summary of Economic Activity
On balance, business activity in the Third District continued to decline slightly. Although the consumer sector appeared
to be growing, contacts suggest that higher sales, in part, reflect inflated prices rather than volume. High interest rates
are limiting listings of existing homes for sale, which has helped new home builders. Employment edged up as labor
availability improved. Wage growth and inflation continued to subside. Wages continued to grow within a modest range,
while inflation cooled to a modest range for the first time since early 2021. Overall, contacts reported far fewer supply
chain disruptions – instead noting that many sectors of the economy are enjoying unusually high profit margins. Contacts continued to note tighter credit standards, although credit quality remains very good. On balance, most firms noted
no evidence of a recession, and most expect modest economic growth over the next six months. However, current
sentiment is quite negative, as contacts worry about banking sector woes and the debt ceiling crisis.
Labor Markets
costs per employee was typical of the pre-pandemic era,
when modest wage growth prevailed.
Employment appeared to edge up after holding steady
during the prior period. Contacts noted relatively few
layoffs and observed that when layoffs or plant closings
occur, other firms scoop up the workers. Most firms
reported that labor availability continued to improve. A
leisure firm noted shortages remain for housekeeping
staff and cooks, but that was true before the pandemic.
On a quarterly basis, firms’ expectations of the one-yearahead change in compensation cost per worker fell to a
trimmed mean of 4.6 percent in the second quarter of
2023, from 5.2 percent in the first quarter (and from a
peak of 5.8 percent in the third quarter of 2022). Expectations averaged 3.2 percent prior to the pandemic.
Expected compensation growth was essentially the
same for manufacturers and nonmanufacturers.
In our monthly surveys, employment grew slightly as the
share of nonmanufacturing firms that reported an increase in full-time jobs rose. This was offset, in part, by a
rising share of nonmanufacturing firms reporting a decline in part-time jobs and by a rising share of manufacturing firms reporting a decline in overall jobs. Staffing
firms confirmed that the demand for labor continued to
be positive but had softened; clients are seeking more
permanent placements rather than temporary positions.
Prices
On balance, inflation subsided into a modest range –
edging down from the moderate pace observed since
October 2022. Moreover, reports of price increases were
generally less widespread; however, expectations of
future price hikes held steady this period.
Contacts reported that increases in prices received for
their own goods and services over the past year were
significantly lower in the second quarter of 2023 than in
the first quarter. The trimmed mean for reported price
changes as indicated by responses to our quarterly survey questions fell to 4.6 percent from 6.0 percent for all
firms. Price increases fell to 3.7 percent from 4.7 percent
among nonmanufacturers and fell to 5.8 percent from 7.8
percent for manufacturers. Reported price increases had
Firms reported that wage inflation remained at a modest
pace overall but continued to slowly subside. Moreover,
firms expected worker compensation to subside further
over the coming year. A construction contact noted that
wages rose about 2.5 percent for basic trades and about
4 percent to 5 percent for specialty trades.
In our monthly surveys, the distribution of nonmanufacturing firms reporting higher or lower wage and benefit
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Federal Reserve Bank of Philadelphia
peaked during 2022 at 5.6 percent for nonmanufacturers
and at 10.7 percent for manufacturers.
for a recession, but few reported signs of a recession.
Expectations for growth over the next six months have
risen.
In our monthly surveys, reported increases in prices paid
and received were significantly less widespread than one
year ago. While the price indexes remain somewhat
elevated for nonmanufacturers, among manufacturers,
the prices paid index is well below its nonrecession
average and the prices received index is negative.
Financial Services
The volume of bank lending (excluding credit cards)
continued to grow moderately during the period (not
seasonally adjusted) – faster than the modest growth
observed in the same period last year.
Looking ahead one year, the increases that firms anticipated in the prices for their own goods held at a modest
rate – the trimmed mean for all firms remained at 4.0
percent in the second quarter of 2023. It has fallen from a
peak of 5.9 percent in the fourth quarter of 2021. The
expected rate of growth remained at 3.9 percent for nonmanufacturers and near 4.1 percent for manufacturers.
During the period, District banks reported strong growth
in home mortgages, auto loans, and commercial and
industrial loans. The latter two segments represented a
rebound from much weaker growth in the prior period in
the wake of two prominent bank failures. Other consumer loans and commercial real estate lending grew modestly, while home equity loans were flat.
Manufacturing
Credit card volumes rose modestly after holding steady
last period, but the pace was slower than the moderate
growth during the same period last year – a potential
sign of an ongoing pullback in consumer spending.
Manufacturing activity declined modestly – rebounding
from a moderate decline in the prior period. The index for
new orders rose from the last period but was negative for
the 12th consecutive month. The shipments index also
rose but remained slightly negative.
Banking contacts reported good credit quality – noting
only small upticks in loan delinquencies, which remain at
very low levels. In the wake of recent bank failures, most
contacts expressed concern about a credit crunch resulting from increased caution, whether from internal policies or external regulatory oversight. One contact described a one-page list of regional banks that had shut
off the tap for new loans.
Contacts reported a mix of positive and negative perspectives for current activity and for expectations. Some
firms noted that their recent growth reflected the easing
of the supply chain problems that constrained their output last year. Several large firms with extensive linkages
to the broader economy reported steady or improving
demand and no signs of a recession.
Real Estate and Construction
Consumer Spending
According to contacts, high interest rates have continued
to dissuade existing homeowners from listing their house
and losing their low interest rate. Existing home sales fell
moderately, and prices resumed rising as the market
heated up again. New home builders benefited with
unseasonably modest sales, as the resale market
slowed.
Consumer spending held steady, at best. One retailer
reported strong sales, although underlying volumes may
have softened. Several contacts noted that their suppliers or their competitors are maintaining high profit margins – that competition has not emerged to drive prices
down for the consumer. Auto dealers reported a modest
increase in sales as new car inventories grew. However,
the mix is weighted toward high-margin cars, including
expensive electric vehicles. Consumer reticence has
prompted an increase in incentives.
Market participants in commercial real estate reported a
slight uptick in construction activity but noted that the
pipeline for future work continues to diminish. Leasing
activity fell moderately as weakness in the office market
continued to emerge. ■
Tourism contacts continued to report slight growth –
noting that the recovery was leveling out. Business travel
and urban destinations continued to recover, while leisure travel and resort locations were flattening.
Nonfinancial Services
On balance, nonmanufacturing activity appeared to
decline modestly for most of the reporting period, and
then late-arriving reports began to show a slight uptick in
new orders and sales or revenues. Many contacts expressed concerns about the debt ceiling and prospects
For more information about District economic conditions visit:
www.philadelphiafed.org/regional-economy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ May 2023
Summary of Economic Activity
Fourth District contact reports suggested little change in aggregate business activity, though conditions continued to
vary by sector. Retail sales were relatively flat as a seasonal uptick in consumer services spending, such as at restaurants and tourist locations, was offset by weaker goods spending. Some manufacturing and freight contacts suggested
that customers were drawing down inventories, a situation which constrained demand for their own goods and services.
Housing markets stabilized with the start of the peak sales season. However, interest rates remained elevated and were
reported to be constraining nonresidential construction. Bankers noted declines in commercial and consumer lending. A
majority of contacts expressed some concern about the impasse in Congress over raising the debt ceiling, but, on balance, this issue did not appear to alter their expectations for business activity in the near term. Employment was stable
in recent weeks. Wage growth remained elevated, particularly for bankers and manufacturers troubled by persistent
hiring challenges. Nonlabor input cost pressures and price pressures changed little in recent weeks.
higher costs for steel and utilities and for electronics and
electrical equipment that have been in short supply.
Multiple contacts said that costs for business services
continued to increase, and some posited these increases were linked to higher labor costs. On balance, contacts expected similar nonlabor input cost pressures to
persist in coming months.
Labor Markets
Employment was stable in recent weeks. Some manufacturing and construction firms reported delaying hiring
because of economic uncertainty, while others were
reducing “noncritical” staff to cut costs in preparation for
future softer demand. In contrast, leisure and hospitality
contacts reported a seasonal increase in staffing, as did
one manufacturing contact who also mentioned that
hiring was less difficult than in the recent past. That
said, hiring remained challenging for many firms across
industries. Most firms generally planned to hold headcount steady in coming months.
On balance, selling-price pressures were relatively unchanged, as well. Some contacts raised prices modestly
to account for higher input costs, while others raised
prices simply because strong demand allowed for it. One
nonresidential builder said, “We’re working to be as
opportunistic as we can be.” However, some manufacturers and restaurateurs reported that increased price
sensitivity from customers limited their ability to raise
prices. Multiple freight haulers reported a drop in rates
because of weakened demand.
On balance, wage pressures changed little from those in
the prior period. In banking and manufacturing, where
hiring difficulties persisted, contacts continued to raise
pay to attract and retain workers. However, several
contacts were holding wages steady because hiring had
become less difficult, while others mentioned that wage
increases were no longer sustainable. One manufacturer was considering a one-time bonus rather than a pay
increase to keep workers “happy and loyal” without
embedding long-term labor-cost increases.
Consumer Spending
Consumer spending was mostly unchanged from that of
the previous reporting period, though activity varied by
sector. The arrival of spring boosted sales for tourist
attractions and restaurants, with some restauranteurs
describing better activity year over year. However, nonauto retailers generally experienced weaker sales. One
department store contact reported a sharp sales decline
in his stores that he said had “worsened throughout
March and April.” Another contact suggested that some
Prices
Nonlabor input cost pressures changed little in recent
weeks. Manufacturers and retailers reported relief from
increasing input costs, in particular for fuel, freight, and
some raw materials. By contrast, contacts highlighted
D-1
Federal Reserve Bank of Cleveland
retailers had begun “reducing future orders and current
inventory levels” in response to slowing sales. Reports
from auto dealers indicated continued pressure on sales
because of higher interest rates, historically high vehicle
prices, and an ongoing lack of manufacturer incentives.
Industry contacts generally expected consumer spending
to remain soft in the coming months.
of high rates. Delinquency rates remained low; however,
one banker indicated that he expected delinquencies to
increase in coming months. Core deposits continued to
decline for a variety of reasons, most notably because of
deposit-rate competition. Looking forward, bankers expected loan demand to weaken further in the coming
months.
Manufacturing
Nonfinancial Services
Overall demand for manufactured goods was relatively
stable. Demand remained strong for aerospace-related
products and heavy trucks and trailers, and some manufacturers reported benefitting from an increase in international orders. Multiple contacts reported that slower endmarket demand had resulted in fewer orders for their
products as their customers sought to rein in inventories.
One manufacturer indicating weaker demand said that
customers were still “working off excess inventory stockpiled during pandemic.” On balance, however, manufacturers expected demand to remain stable in the months
ahead.
Freight activity remained relatively weak this reporting
period. One logistics company contact said that the
persistent weakness was because many “customers
have ‘paused’ projects and inventory builds.” Moreover,
haulers anticipated that demand would remain soft in the
months ahead. Overall, professional and business services contacts reported slower growth. A management
consultant mentioned that clients were pulling back on
spending as economic uncertainty grows. Looking forward, contacts anticipated that demand would decline in
the coming months.
Real Estate and Construction
Nonprofit contacts indicated that housing affordability
remained a challenge and had recently worsened for low
- and moderate-income households. Contacts cited
rising housing costs, low inventory, and purchases by
institutional investors as factors contributing to the affordability issue. A community stakeholder reported that
two outside investors purchased more than 500 units of
affordable housing in one community, and the residents,
all of whom were low-income tenants, were asked to
vacate the property with minimal notice. Another contact
reported that all-cash transactions limited access to firsttime homebuyers, particularly those looking to purchase
homes in lower-priced markets. To help counter these
trends, one public agency acquired more than 190 properties from a private investment company and was recently working with renters to keep the units as affordable housing. ■
Community Conditions
Demand for residential construction and real estate
stabilized, and contacts attributed this stabilization to the
arrival of spring and to flattening interest rates. One
homebuilder indicated that potential homebuyers had
been afraid that rates would continue to rise before they
could close on a home, but the recent stabilization of
rates had helped to increase activity. A couple of homebuilders reported an increase in speculative construction
projects because many individuals want to purchase and
move into homes immediately, in part to avoid further
rises in interest rates.
Nonresidential construction and real estate activity softened on balance. One general contractor noted that
clients have started to “put the brakes” on projects because of high interest rates and general economic uncertainty. Several commercial real estate brokers also noted
that elevated interest rates were negatively impacting
leasing activity. However, a contact who specializes in
industrial space indicated there had been an increase in
construction activity from manufacturing clients in recent
weeks that he attributed to an uptick in reshoring projects.
Financial Services
Overall, loan demand continued to decline this reporting
period. Bankers posited that increased interest rates
along with economic uncertainty contributed to a slowdown in borrowing from households and businesses.
One lender suggested that small businesses were beginning to use available cash in lieu of borrowing because
For more information about District economic conditions visit:
www.clevelandfed.org/en/region/regional-analysis
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ May 2023
Summary of Economic Activity
Economic activity in the Fifth District was little changed, on balance, in recent weeks. Manufacturing activity was unchanged as new orders from retailers softened while orders from industrial clients were strong. District ports saw a
moderate decline in total volumes as import activity fell; however, export volumes held strong. Trucking firms also reported declines in demand and shipping rates and put a pause on hiring as a result. Retail spending declined slightly
overall, although some goods categories saw gains. Consumer spending on travel and tourism, on the other hand,
increased moderately. Residential real estate activity picked up slightly amid historically low levels of existing home
inventory. New home sales slowed, however, and builders offered incentives to close deals. Commercial real estate
activity declined modestly, but some segments such as medical, industrial, and retail leasing remained strong. Overall,
loan demand declined across commercial loan types, deposit levels declined, and delinquencies rose but were still near
historically low levels. Meanwhile, nonfinancial services saw modest growth in demand and steady revenue growth.
Employment rose modestly amid a tight labor market; however, wage growth moderated. Inflation remained high despite
a slight slowdown in the pace of price growth in recent weeks.
Labor Markets
Manufacturing
Firms continued to grow their employment levels modestly over the most recent reporting period. Several firms
reported having multiple open roles they were not able to
fill due to a tight labor market. A textile manufacturer was
struggling to hire the “next generation” of workers to
replace retiring workers, as the average age of new hires
is in the fifties. Many other firms, on the other hand, were
adequately staffed and held employment levels unchanged. Firms reported already having gotten through
their large wage increases and are feeling okay with the
current level of moderate wage growth. A craft beer
manufacturer reported that wage growth, although still
somewhat high for the skill set of workers, has stabilized
from last year.
Manufacturing activity was mixed in the most recent
reporting period. Finding and retaining workers remained
a significant concern. A packaging manufacturer purchased two pieces of equipment so they could grow their
business through productivity-enhancing technology
rather than with new employees. A steel manufacturer
increased the frequency and amount of bonus payments
to maintain a stable workforce. New orders, on balance,
were down compared to the previous reporting period.
Several contacts reported that their clients had excessive inventory, resulting in lower levels of business.
Contacts reported that retailers have “right sized” their
inventory levels, resulting in new orders returning to prepandemic levels.
Prices
Ports and Transportation
Price growth eased slightly in recent weeks, but overall
inflation remained elevated. According to our surveys,
year-over-year growth in prices received by services
slowed slightly while growth in prices received by manufacturers was little changed. In both sectors, price growth
remained well above historical levels. A small appliance
manufacturer, however, said that costs had fallen as
shipping costs from China returned to pre-covid levels.
As a result, combined with pressure from big box retailers that were looking to cut prices to consumers, the firm
was lowering its prices.
Fifth District ports reported a moderate decline in loaded
import volume this period. Imports of consumer goods
and automobiles were down. However, with the growth
of investments in manufacturing, there was an increase
in imports of machinery and parts. Loaded export volumes were strong and mainly driven by agricultural
products and lower value commodities, as well as rolling
stock. Container dwells have shortened dramatically and
there were no issues with empty containers causing
backups at the port. Spot rates were low relative to the
E-1
Federal Reserve Bank of Richmond
last two years, but transatlantic spot rates are still slightly above their pre-pandemic level mainly due to some
blank sailings and carriers removing capacity. There
was a return of some purchasing power back to the
shipper.
flex space leasing, which remained robust. Class A office
vacancy/subleases increased this period in most markets. Rental rates remained flat; however, landlords were
offering higher incentives and/or concessions to potential
credit tenants. Respondents stated there was very little
new construction activity and limited credit availability for
commercial real estate deals, especially in the office
sector. Additionally, respondents cited some cases of
commercial real estate loan defaults. Commercial contractors noted a continued shortage of labor despite
increased wages. As well, they reported that requests for
new work had slowed down considerably.
Trucking firms reported a sharp decline in freight volume
this period with excess capacity in the system. Respondents indicated that there was a freight recession, and it
was more difficult to find loads. Weakness in demand
was primarily in consumer and industrial segments. Spot
prices have declined primarily due to more price sensitivity by shippers and competition for freight. Consequently, trucking firms stated that they had implemented
a pause in hiring and were anticipating decreasing the
number of drivers by attrition. Trucking firms also said
that the supply chain had improved with better availability of equipment and parts.
Banking and Finance
Loan demand was down slightly across all commercial
loan types, including commercial real estate, where
rising interest rates and increased underwriting scrutiny
kept growth muted. Consumer lending continued to be
stable, with moderate demand for both new and used
auto loans. Deposit levels continued to drop but have
started to stabilize. Institutions noted that they were
working closely with customers to maintain deposit balances and tailoring products to meet their needs due to
rising rates and increased competition in the overall
marketplace. Loan delinquencies continued to rise, but
at rates that were still near historically low levels.
Retail, Travel, and Tourism
Retail spending softened slightly, on balance, but sales
growth varied by market segment. For example, a couple of furniture stores said sales were down because
home sales were low. Additionally, sales were reportedly
down for some consumer durables—like household
appliances, sports equipment, toys, and games—
whereas some apparel and cosmetic products sales
were up. Retailers continued to work down inventories
and were hesitant to make new orders.
Nonfinancial Services
Nonfinancial service providers reported modest growth in
demand for their services and stable revenues. Firms
continued to work through their backlogs and backorders
of work, and they noted those streams were what was
keeping revenues stable for now. Firms continued to
struggle with finding qualified employees and noted the
labor markets were still “tight”, even with large technology firms announcing layoffs. They also noted that external costs continued to rise as well. One respondent
noted that the future has never been “so foggy and
murky” for their firm as well as their customers when it
comes to expected revenues and growth. ■
Travel and tourism increased moderately this cycle.
Hotel performance remained strong with increased room
nights sold and strong revenue per room amid continued, but slight, room rate growth. Sports and entertainment venues also reported increased demand and
steady revenues in recent weeks.
Real Estate and Construction
Residential real estate respondents indicated that the
spring market was off to a good start with sales prices
continuing to appreciate but not at the same pace as
last year. Inventory of homes for sale remained constrained due to a fewer people putting their homes on
the market after locking in a low interest rate during the
pandemic. Buyer traffic was steady and days on market
increased slightly in the last month. However, fluctuations in mortgage interest rates caused buyers to pull
back, with pending sales and closed sales both down
this period. Builders were offering strong incentives to
close deals. Some residential renovation firms noted a
steady decline in closing sales due to the cost of those
services and the consumer's lack of funding.
Overall commercial real estate market activity slowed in
the last month, except for retail, medical and industrial/
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ May 2023
Summary of Economic Activity
Economic activity in the Sixth District grew at a slow pace from April through mid-May. Labor markets, while still tight,
eased, reducing wage pressures. Nonlabor costs stabilized, on net, though property and liability insurance premiums
rose. Low- to moderate-income consumers showed further signs of declining household financial health. Retail sales
continued to moderate as consumers traded down; new auto sales were solid. Leisure travel softened, but business
travel continued to rebound from pandemic levels. Demand for housing was strong even amid interest rate fluctuations.
Commercial real estate conditions were mixed. Transportation activity weakened. Activity in the energy sector was
robust. Agriculture conditions softened.
tions were also relatively unchanged at 2.9 percent in
May from April’s 2.8 percent.
Labor Markets
Sixth District contacts reported that labor markets remained tight, but pressures have eased since late last
year. Most firms continued to backfill open positions;
however, some noted that weaker demand for products
and services was slowing the pace of hiring. Several
contacts noted they were increasing hiring standards.
The majority of firms indicated that most positions were
easier to fill, and retention had improved. Some challenges filling certain roles persisted; labor shortages
varied from market to market but were most acute in
South Florida, where housing availability and affordability
were cited as limiting the pool of candidates.
Community Perspectives
Workforce training providers and banking contacts who
serve low- and moderate-income individuals continued to
see signs of declining household financial conditions.
Regional bankers observed that consumer financial
stress had intensified from a period of higher savings as
delinquencies returned to pre-pandemic levels. While
some employers noted slightly lower staff turnover,
workforce development contacts affirmed that workers
continued to leave jobs in search of higher wages to
offset rising expenses, especially housing. Others said
workers continued to report a need to work from home to
cope with household demands. Some owners of small
businesses who previously relied on traditional banks for
loans, faced credit constraints, leading them to turn to
Community Development Financial Institutions for financing.
Most contacts reported that wage pressures continued to
ease, and the pace of increases was expected to moderate. However, wage pressure remained elevated for
certain positions, particularly for skilled labor and those
in retail/warehouse, accounting, and nursing.
Prices
Consumer Spending and Tourism
Nonlabor costs were largely reported as stabilizing over
the reporting period. Construction inputs, particularly
steel and other metals, moderated; freight and container
costs were reported as back to pre-pandemic levels.
Some contacts reported declining food costs. Various
retailers implemented discounts amid slowing foot traffic
and price pushback from consumers. Property and liability insurance costs rose markedly for firms in coastal
areas threatened by storms. The Atlanta Fed’s Business
Inflation Expectations survey showed year-over-year unit
cost growth at 3.5 percent, on average, in May, unchanged from April. Firms' year-ahead inflation expecta-
While consumer spending was still above pre-pandemic
levels, District retailers reported some softening of sales
since the previous report. Consumers continued to trade
down and remained cautious with discretionary spending. Restaurants facing labor shortages continued to limit
menu options or hours of operation. Automobile dealers
reported further improvements in inventory levels along
with continued strong demand for new and used vehicles.
Travel and hospitality contacts noted persistent strong
demand, and activity was described as normalizing from
F-1
Federal Reserve Bank of Atlanta
District banks also reported ongoing commercial real
estate loan growth, albeit at a slower pace. Shifts in
commercial real estate property values raised additional
concerns about increasing credit risk as financial institutions began reevaluating the collateral values of underwritten loans.
2022 peaks. Leisure and business travel rebalanced
back toward the pre-pandemic mix as demand for leisure
travel softened, and business travel improved. Contacts
expect further stabilization throughout the remainder of
the year.
Construction and Real Estate
Energy
Housing demand throughout the District remained strong
despite interest rate and home price volatility. Though
below year-ago levels, home sales in many markets
increased on a monthly basis as buyer sentiment modestly improved. The supply of existing homes for sale
remained low as homeowners showed increased hesitancy to list homes for sale, especially if they had financed at a low interest rate. Home prices remained
down from peak levels but have recently shown month-to
-month improvement. New home builders have responded to inventory shortages by increasing speculative
inventory production and some have begun to reduce
buyer incentives.
Energy contacts reported continued robust activity in
liquefied natural gas expansion projects, power infrastructure, clean energy manufacturing, and crude oil
production. Global demand for oil and natural gas was
steady over the reporting period. Contacts reported that
crude oil and finished products refining continued at a
high rate. Utility providers described growth across sectors, including strength in the industrial segment due to
electric vehicle manufacturing, data center development,
and plant expansion projects across the Gulf Coast, as
well as sustained growth in residential from in-migration
to the Southeast.
Agriculture
Commercial real estate (CRE) conditions were mixed.
The industrial sector remained healthy, while office,
multifamily, and some segments of retail, slowed. Some
contacts reported increasing expenses, especially property insurance, as an area of heightened concern. An
increasing number of contacts reported worries about
the availability of financing as some lenders reduced
funding commitments and increased underwriting standards. Most CRE contacts noted increasing uncertainty
and declining property values as a significant industry
headwind.
Agricultural conditions softened since the previous report. Demand for cotton remained weak, leading many
farmers to plant less cotton than last year. Cattle demand was strong. Producers of poultry meat continued
to struggle as limits on exports resulting from Avian Flu
concerns have led to over-supply domestically. Domestic
egg demand remained high. Dairy consumption declined. Demand for citrus remained strong amid lower
production. ■
Transportation
Demand for transportation services softened, on balance, over the reporting period. Trucking contacts noted
significant year-over-year declines in freight volumes and
revenue amid what some referred to as a “freight recession.” Activity in the warehousing sector remained robust; however, warehouse development transaction
volumes fell substantially. Ocean carriers reported lower
container import volumes as retailers worked to deplete
elevated inventory levels. Inland barge companies reported stable demand. Transportation contacts’ outlooks
were mixed, but several downside risks were cited,
including the potential for weaker consumer spending,
rising interest rates, and persistent inflation.
Banking and Finance
Liquidity remained a top concern for financial institutions
over the reporting period. Continuous variations in interest rates, along with some deposit flight to higheryielding alternatives, put stress on liquidity. Financial
institutions reported that the fair value of securities portfolios continued to stabilize but unrealized losses remained elevated compared with pre-pandemic levels.
For more information about District economic conditions visit:
www.atlantafed.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ May 2023
Summary of Economic Activity
Economic activity in the Seventh District was little changed overall in April and early May. Contacts generally expected
slow growth in the coming months, though many expressed concerns about the potential for a recession over the next
year. Employment increased moderately; nonbusiness contacts saw a small increase in activity; consumer and business
spending were flat; and activity decreased modestly both for manufacturing and for construction and real estate. Prices
and wages rose moderately, while financial conditions tightened modestly. Expectations for farm incomes in 2023 decreased some.
Labor Markets
strong demand for essentials was offset by relatively
weak spending on discretionary items. For example,
contacts highlighted solid demand for groceries and
household items, but lower sales of furniture and jewelry.
Unseasonably cool weather reportedly hurt lawn and
garden sales. Light vehicle sales increased slightly.
Several vehicle dealers said that high prices were putting
a damper on demand. Leisure and hospitality spending
fell slightly—notably sales at restaurants were down—
but overall activity remained at a high level, with contacts
reporting strong spending on cruises and at travel agencies.
Employment increased moderately over the reporting
period and contacts expected a similar rate of growth in
the coming year. Many contacts continued to have difficulty finding workers, especially when hiring for skilled
trades positions. However, more contacts said that hiring
had become easier or that they were fully staffed. Wages
and benefit costs rose moderately, with several contacts
noting continued wage pressures.
Prices
Prices rose moderately in April and early May, and contacts expected a similar rate of increase over the next 12
months. Producer prices increased modestly, with contacts highlighting higher costs for some raw materials
and for energy. However, several contacts said that
growth in many raw materials prices had slowed. In
addition, a number reported that increases in shipping
costs had slowed noticeably, particularly for trucking and
ocean freight. Consumer prices generally increased due
to solid demand and the passthrough of higher costs.
That said, a retail industry observer said price growth
was moderating across categories.
Business Spending
Business spending was little changed overall in April and
early May. Capital expenditures increased slightly, with
several contacts reporting purchases of new software.
Transportation demand edged down, and one contact
noted that truck freight activity had slowed enough that
some trucking capacity was no longer on the road. Demand for industrial, commercial, and residential energy
decreased slightly. Inventories for most retailers were a
bit above desired levels. In manufacturing, inventories
stayed slightly elevated, and many contacts indicated
that they were no longer experiencing supply chain
disruptions.
Consumer Spending
Consumer spending was unchanged on balance over
the reporting period. Nonauto retail sales were flat, as
G-1
Federal Reserve Bank of Chicago
Construction and Real Estate
with contacts highlighting a slower mortgage market.
Consumer loan quality was flat, while standards tightened slightly.
Construction and real estate activity declined modestly
on balance over the reporting period. Residential construction activity was down modestly. Contacts reported
that high interest rates had led some projects to be postponed or cancelled, and that while construction costs
had fallen, the decline wasn’t enough to offset higher
financing costs. Contacts in the multifamily sector were
more sanguine, noting that many projects were moving
forward despite tighter financial conditions. Residential
real estate activity decreased modestly. Prices and rents
declined, and contacts said that the low inventory of
homes for sale helped prevent larger declines. Nonresidential construction moved down slightly, though warehouse building remained a bright spot. Contacts also
noted that school construction was robust, supported
both by American Rescue Plan funding and the passage
of state and local referendums. Commercial real estate
activity decreased moderately, with contacts pointing to
high interest rates as a key factor behind the slowdown.
Prices and rents were down, and the availability of sublease space increased. However, there were reports of
rising retail rents in some areas because of a lack of high
-quality new construction.
Agriculture
Expectations for Seventh District farm incomes in 2023
fell some as prices for key products moved lower. Corn
and soybean prices decreased, as rapid fieldwork and
planting progress heightened expectations for a large
harvest. Soft red wheat prices remained weak, but hard
wheat prices rose due to drought affecting much of the
U.S. wheat crop and uncertainty surrounding another
extension of the agreement allowing exports out of
Ukraine. There were lower prices for eggs and dairy
products, especially cheese. Hog prices increased from
a low level and cattle prices moved higher. In light of
higher interest rates, contacts expected farmers to conserve working capital to minimize the need to take out
farm operating loans. There were reports of slower farm
machinery sales but also shortages of some types of
equipment. Prices for farmland were higher again as
demand remained solid and inventories of farms for sale
were limited.
Community Conditions
Community development organizations and public administrators reported a small increase in overall economic activity in April and early May. State government officials said tax revenue continued to grow but at a slower
pace. Unemployment insurance claims remained low,
though one contact noted a rise in claims from workers
at temporary help firms. Demand for social services was
elevated; contacts said that the need for food assistance
had been exacerbated by the recent end of Covid-19
benefits. Tight labor market conditions were again a
challenge for small businesses and community-serving
organizations, as employees were reportedly willing to
change jobs for modest increases in pay and were less
swayed by benefit options. Elevated interest rates continued to be a factor limiting the supply of affordable
housing. ■
Manufacturing
Manufacturing demand decreased modestly in April and
early May. Manufacturing backlogs were down moderately, and inventories were slightly elevated. Contacts
reported fewer supply chain problems, though some
items were still difficult to find. Steel orders increased
slightly. One contact noted that steel service center
inventories were low, in part because high interest rates
made it expensive to hold inventory. Fabricated metals
orders were down modestly, with contacts pointing to the
aerospace and construction sectors as reasons for the
decline. Machinery sales were down slightly, and contacts also cited weaker demand from the aerospace
sector. Auto production was steady on balance.
Banking and Finance
Financial conditions tightened modestly over the reporting period. Bond and equity market participants saw little
change in asset values or volatility. Business loan demand was flat overall, though one banking contact noted
that clients manufacturing or selling discretionary consumer items had increased their credit line utilization in
response to lower demand. Loan quality deteriorated
some, but a few contacts noted that delinquencies remained below pre-pandemic levels. Business lenders
reported slightly tighter standards, while borrowers said
that credit conditions had tightened moderately. In the
consumer market, new loan demand decreased slightly,
For more information about District economic conditions visit:
chicagofed.org/cfsec
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ May 2023
Summary of Economic Activity
Economic conditions have remained unchanged since our previous report. Contacts continued to report difficulty hiring
workers, but generally had a slightly easier time finding and retaining workers. Wages and other input costs increased
modestly, which led to margin compression, as firms were unable to pass on these cost increases as sales prices.
Consumer spending was mixed: Some firms noted they had lowered expectations due to weaker overall economic
conditions while others were limited by their ability to meet strong demand due to labor shortages and supply chain
issues. The residential real estate sector was largely unchanged, but commercial real estate contacts reported softer
sales and concerns over looming vacancy and debt issues. Banking contacts noted loan demand softened and delinquencies continued to tick up. Overall, the outlook was slightly weaker due to concerns about future demand and broader concerns about weakening macroeconomic conditions in the second half of the year.
costs and a similar share reporting higher or slightly
higher labor costs. Just under half of survey respondents
projected that third quarter prices will be higher than in
the previous year. Respondents reported that consumers
continued to become more price sensitive, which prevented businesses from fully passing on increasing costs
to consumers. A contact in the automobile industry reported that wage pressures, higher interest rates, and
increased inventories industry-wide have decreased
profit margins. A contact in the retail industry reported
softening demand due to higher prices, causing them to
lower prices and decrease their margins.
Labor Markets
Employment has improved slightly since our previous
report. Unemployment rates remained low, and hiring
and retaining workers has remained a challenge in several industries. However, more contacts have been
reporting an ability to hire and retain workers to meet
demand over the past few reports. A healthcare contact
in Louisville reported that the labor market has improved
to where only lower paid jobs are left to fill, and a St.
Louis startup reported that they have been able to hire
new talent more quickly than was the case a year ago.
Wages have grown slightly since our previous report. A
majority of contacts reported an overall net increase in
wage costs. Agriculture contacts in Memphis reported
wages were still rising, and financial services contacts in
St. Louis had an increase in wages for employees and in
overall labor costs.
Consumer Spending
General retailers, auto dealers, and hospitality contacts
reported mixed business activity and a slightly weaker
outlook. April real sales tax collections increased in
Kentucky, Missouri, and Arkansas relative to March and
decreased in West Tennessee. Retailers in Memphis
noted that business activity met their expectations; however, they had lower expectations for future business
activity due to rising interest rates and broader economic
uncertainty due to the looming decision on the debt
ceiling. A St. Louis auto dealer reported that business
activity was relatively unchanged from the previous
month and noted that they have lowered expectations for
upcoming sales because they do not have enough prod-
Prices
Prices have increased modestly since our previous
report. Half of District survey respondents reported higher or slightly higher prices since the first quarter, 31%
reported similar prices, and 19% reported lower or slightly lower prices. These responses appear to be driven by
increasing input costs, with over three-fourths of respondents reporting higher or slightly higher nonlabor
H-1
Federal Reserve Bank of St. Louis
uct to meet demand. Restaurants in Little Rock that were
impacted by the tornado at the end of March were preparing to start reopening. According to contacts, economic activity linked to the Kentucky Derby rose more
than 10% from the previous year, and contacts estimated that the event surpassed pre-pandemic numbers.
Residential real estate contacts reported that sales met
expectations in recent months.
Commercial real estate has slowed slightly since our
previous report. One commercial real estate contact
reported concern over “shadow vacancies” – offices that
are still leased due to longer-term leases, but not actually used due to remote work. The contact expressed
concern that the majority of the leases on these office
spaces will not be renewed. Construction contacts were
most worried about shortages of labor, followed by a
slowdown in demand for new projects. A majority of
construction and commercial real estate contacts reported sales falling short of expectations.
Manufacturing
Overall, manufacturing activity has slightly increased
since our previous report. Firms have reported moderate
increases in new orders, while production has moderately increased for firms in Missouri and modestly decreased for firms in Arkansas. Relative to last year,
average work hours have risen and wages have increased by over 5%. Contacts reported that retaining
workers also remains an ongoing issue. On net, firms
expect slight increases in productivity, capacity utilization, and new orders, but a minority are concerned about
weakening demand going forward.
Banking and Finance
Banking conditions in the District have remained unchanged since our previous report. Contacts surveyed
reported that overall loan demand across all loan types
softened in recent months. Contacts expect loan demand to further weaken in the upcoming quarter and
noted recent increases in consumer credit use, particularly for everyday purchases, due to higher prices. Meanwhile, high interest rates have held down demand for
business credit. Contacts reported that clients have been
taking distributions from their portfolios to pay off loans
and avoid new borrowing. Credit standards were largely
unchanged from the previous quarter, but delinquency
rates saw a slight uptick, a continuation of an ongoing
slow rise over the past several quarters.
Nonfinancial Services
Activity in the nonfinancial services sector has remained
stable since our previous report. Air traffic remained
stable, and a transportation contact in the St. Louis
region reported that their clients’ desires to replenish
shrinking inventories have led to higher demand for
transportation and logistics services. Transport contacts
reported delaying capital investment projects due to
increased labor and input costs. Healthcare contacts
reported that conditions worsened due to increased input
costs and lower-than-expected sales.
Agriculture and Natural Resources
Overall conditions have remained unchanged, but the
outlook has weakened slightly since our previous report.
Most agriculture contacts surveyed reported that their
costs, including labor, have increased, which has contributed to the slightly worsening outlook. The percentage of row crops planted has increased as expected
since the previous reporting period and is up slightly
from this time in 2022. The progress of acres planted is
mixed across the District: Some states, such as Missouri
and Illinois, have improved strongly over last year, and
the other District states have fared slightly to materially
worse. ■
Investment in workforce education and development by
both nonprofit and for-profit firms increased across the
District. In the St. Louis region, an energy firm invested
in summer programs for high school students to provide
them with training in the hope they would return as fulltime employees in the future. In the Little Rock region,
universities received grants from local businesses to
invest in manufacturing, engineering, automation, design
process, and technology programs, and a nonprofit-run
education and community center began offering classes,
transportation, and childcare for adults to earn high
school diplomas and receive career services.
Real Estate and Construction
The residential real estate market has remained unchanged since our previous report. Rental rates for
residential real estate increased slightly. The number of
new listings in residential real estate has dropped sharply in Louisville since our previous report, while new listings in the Memphis and Little Rock regions have remained unchanged. Seasonally adjusted home sales
have remained unchanged since our previous report.
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ May 2023
Summary of Economic Activity
Economic activity in the Ninth District increased slightly since the previous report. Employment grew modestly with
some volatility; labor demand remained healthy, but some firms reported significant layoffs. Wage pressures remained
high, while price pressures were stable. Growth was noted in consumer spending and manufacturing, and agricultural
conditions were solid. Commercial construction was flat and commercial real estate activity fell, while residential construction and real estate remained subdued. Minority- and women-owned business contacts reported a slight decrease
in activity.
costs, with an overall flattening in the pace of increases
over the past three months. Lumber and certain steel
prices decreased. Contacts in construction and
agriculture reported that heavy equipment prices
remained elevated despite some reduction in demand.
Retail gasoline prices increased slightly since the last
report, while diesel prices declined. Prices received by
farmers increased from a year earlier for corn, potatoes,
hay, cattle, turkeys, and eggs; prices decreased from a
year earlier for soybeans, wheat, milk, hogs, chickens,
sugar beets, dry edible beans, lentils, and canola.
Labor Markets
Employment grew modestly in the District since the last
report, but with some volatility. Overall labor demand
remained healthy. Several recent surveys of various
sectors and geographies all found strong recent demand
for labor. Businesses expected growing demand heading
into the summer season but continued to report difficulty
with turnover and finding labor. However, there were
also some signs of softening labor demand. In April
alone, Minnesota saw almost as many mass layoff
events as in all of 2022, affecting more than 2,600
workers in total, a greater number than last year.
Worker Experience
Wage pressures remained high. A survey of construction
firms found that about 35 percent reported wage
increases of 5 percent (annually), and a similar share
increased wages by 3 to 5 percent. A survey of
hospitality and tourism firms found that more than 40
percent gave annual wage increases of 5 percent or
more. Firms in both surveys expected some easing in
future wage pressures, even though they also reported
strong labor demands and a lack of worker availability.
Workers and job seekers in low- and middle-income
households prioritized better pay and benefits as they
looked for work, according to a recent survey. Food,
gasoline, and household energy costs continued to
tighten people’s budgets. “Gas is rising to a point where I
cannot afford it,” shared a South Dakota agricultural
worker. A preschool teacher reported that his paycheck
was barely sufficient to pay for necessities. He and
others in similar situations were looking for second jobs
to supplement their incomes. Young migrant workers at
a Minnesota milk factory reported working 12 hours a
day and having one day off every two weeks. Their
hourly wages ranged from $10 to $13 for “hard work that
others don’t want to do.” They shared feeling as if they
had no freedom because they spent most of their time
working and resting for the next day.
Prices
Since the last report, additional price pressures were
minimal. Just over half of respondents to a Ninth District
business conditions survey reported an increase in input
prices in April relative to a month earlier, while a smaller
share reported increases in final prices for products or
goods sold. Most manufacturing contacts reported no
change in recent nonlabor input prices, and about a
quarter reported a slight decrease. Construction survey
respondents indicated a mixed picture for materials
Consumer Spending
Consumer spending rose modestly since the last report.
Gross sales in April were flat in South Dakota year over
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Federal Reserve Bank of Minneapolis
year, and the Montana accommodation and lodging
sector remained strong this spring. Air travel continued
to grow at District airports, with several seeing doubledigit passenger growth in April compared with last year.
An airport contact said that leisure travel “remains very
strong,” adding that business travel has continued to
recover. A May survey found that Minnesota restaurants
continued to see strong patronage, while hotels and
entertainment venues reported mostly flat revenues
compared with the same period last year. Businesses
were optimistic regarding the summer season,
particularly among restaurants and entertainment
venues. A dealership with multiple locations in the
western part of the District reported that new car sales in
April were 23 percent higher year over year, thanks
mostly to “getting some vehicles out of railyards,” but
there remained significant pent-up demand.
their office footprint. Those purchasing buildings with
debt faced a tightening market for refinancing.
Residential real estate remained subdued. Closed sales
in April fell notably year over year across the District,
with many larger markets seeing declines of 30 to 50
percent. Median sale prices declined in western and
central Montana and were flat in several other markets.
Manufacturing
Manufacturing activity increased modestly since the
previous report. A regional index of manufacturing
conditions indicated that activity expanded in April from a
month earlier in Minnesota, North Dakota, and South
Dakota. Contacts in agricultural equipment and
processing mostly reported growth in recent activity.
Other manufacturers gave mixed reports on recent
demand, with roughly similar numbers reporting
increased or decreased sales.
Construction and Real Estate
Agriculture, Energy, and Natural Resources
Nonresidential construction activity was flat overall since
the last report, with subsectors experiencing some
variability. Firms in infrastructure and other heavy
construction reported generally stronger activity, in part
from federal infrastructure initiatives. Firms in industrial
and commercial construction reported some softening.
However, increases in project cancellations were seen
across the industry, the result of high input prices, higher
financing costs, and general uncertainty about the
economy. New projects out for bid, as well as project
backlogs, were also reported to be lower than this time
last year. Smaller firms reported some unwillingness to
commit to longer-term projects, or doing so only with
elevated work bids, due to the volatility of material costs.
On the positive side, supply chains reportedly improved
overall, though they have not yet had a material effect on
project completion times, in part because of labor
shortages. Residential construction remained subdued.
Single-family permitting in April was more than 40
percent lower year over year in the Minneapolis-St. Paul
region; most other large markets in the District saw even
bigger declines. Discounts have started to appear for
some speculative developments. A Wisconsin
homebuilder said the “majority of the work comes from
people who have cash and not from people taking out
loans.”
District agricultural conditions were solid heading into
planting season. About half of respondents to a survey of
agricultural credit conditions reported that farm incomes
increased in the first quarter from a year earlier. Lenders
noted improvements in liquidity and in the financial
condition of producers, but they were concerned about
commodity price volatility and rising interest rates. Heavy
snow over the winter and persistent cold weather will
significantly delay spring planting in some areas,
contacts reported. District oil and gas exploration activity
decreased slightly since the previous report.
Minority- and Women-Owned Business Enterprises
Minority- and women-owned business contacts reported
a slight decrease in activity over the last month. Higher
nonlabor input costs were narrowing profit margins for
some entrepreneurs, who said that they were hitting a
limit in their ability to increase final prices. Compensation
was mostly unchanged and finding applicants remained
a challenge for those hiring. Entrepreneurs expected to
see some improvement in sales but remained wary in
their profit forecasts. A contact who provides technical
assistance to women entrepreneurs said she has seen
an increase in demand for services, including among
working mothers. She warned that higher interest rates
“scare new entrepreneurs” and presented additional
challenges to some who already struggled with financial
literacy and access to capital. ■
Commercial real estate fell since the last report.
Industrial and multifamily markets remained strong, and
new construction has slowed recently in both sectors,
helping keep vacancy rates low and rents healthy. Office
real estate was seeing real strain from continued low
levels of worker occupancy. Incentives to retain tenants
were common because many were looking to downsize
For more information about District economic conditions visit:
minneapolisfed.org/region-and-community
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ May 2023
Summary of Economic Activity
Total economic activity across the Tenth District changed little during May. Consumer spending at restaurants and for
travel picked up in recent weeks, but most contacts did not expect the surge in spending to persist into coming months.
Job growth continued to slow. However, the number of job openings remained elevated as businesses indicated they
recently became more selective among potential candidates. Worker retention improved substantially, supporting the
more cautious recruiting practices among businesses. Prices rose at a moderate pace. Growth in housing rental rates
remained elevated in several western District states, but the pace of increases declined broadly and swiftly from the
growth rate experienced during the past year. Although many businesses indicated some persistence in their ability to
pass on higher costs, they also reported slower expected growth in costs ahead. Corn and soybean prices declined slightly since April based on reports of ideal planting conditions throughout most states and early projections that production
could hit record levels due to historically strong yields. Banking customers continued to diversify account balances among
multiple banking institutions. Overall, deposit levels remained stable across the District, with continued rotation of balances toward time deposits.
Labor Markets
Prices
Although the overall pace of hiring in the Tenth District
continued to be modest, most businesses indicated they
had just as many, or more, job openings over the past
month as they did at the beginning of the year. Contacts
indicated they became much more selective in their
hiring recently even as the number of applicants increased, partly explaining the disparity between the
number of jobs posted and the level of hiring. Contacts
reported that worker retention improved further in recent
weeks. Several businesses also noted that competition
for talent from businesses in different industries became
less prevalent recently. Most businesses indicated that
some of the slowness in hiring activity was also due to
ongoing labor shortages, particularly for skilled workers
in jobs with limited education requirements.
Prices continued to rise moderately across the District.
Businesses were mixed in their ability to pass along
higher costs to their customers. Regardless, the pace of
input price growth slowed broadly, suggesting easing
cost pressures. Accordingly, most businesses indicated
that price increases for finished products will likely soften
over the coming year. Housing rents rose at a moderate
pace generally, increasing somewhat faster in western
District states. However, rents were growing much more
slowly across the District than the accelerated pace
witnessed over the previous year. “Since peaking in
September of last year, growth in rental rates is returning
to the pre-pandemic trend,” one contact reported.
Consumer Spending
Consumer spending at restaurants, in hotels and at
entertainment venues rose at a robust pace in several
District cities over the past month. Some of this surge in
spending was tied to success of certain professional
sports teams, which led to inbound travel and activity for
post-season games and for a highly attended player
draft event. Notably, both hotel occupancy and daily
rates picked up recently. However, several contacts
reported that spending for personal care services continued to decline at a moderate pace.
Although businesses reported ongoing wage pressures,
most contacts indicated they expect the pace of wage
growth to slow further during the second half of the year.
The reported expectations of moderate wage growth in
coming months were a marked downshift compared to
the beginning of the year, when businesses had indicated they expected robust wage growth at the same levels
they experienced last year.
J-1
Federal Reserve Bank of Kansas City
Community Conditions
Community and Regional Banking
Organizations serving low-to-moderate income (LMI)
communities reported increased demand for their services compared to six months ago. The growth in demand was noted across food assistance, housing assistance, and care economy segments of the non-profit
space. As consumer prices have increased, organizations noted clients were more likely to be experiencing
depleted savings and high credit card utilization, suggesting LMI populations are struggling to accommodate
the recent growth in the costs of living. Non-profit leaders
indicated they anticipate adverse effects of tightening
credit availability on the communities they serve over
coming months.
Loan demand weakened modestly in the past month as
higher interest rates and the uncertain economic environment deterred loan growth, particularly for commercial real estate. Contacts expected loan demand to remain at current levels over the next six months. Rate
pressures remained elevated in the deposit market.
Customers continued to diversify account balances
among multiple banking institutions in response to volatility in the banking industry. Overall, deposit levels were
stable across the District during the past month, with
continued rotation of balances toward time deposits.
Given that funding costs are growing faster than new
loan growth, net interest margins were projected to compress. Credit standards remained unchanged, and contacts noted stable credit quality and low past-due levels.
However, contacts expected credit standards to tighten
somewhat further due to concerns about future deterioration in asset quality, as higher borrowing costs adversely affect repayment capacity.
Manufacturing and Other Business Activity
Manufacturing contacts reported little change in overall
production volumes. However, most contacts indicated
the number of new orders and the length of their production backlogs declined modestly over the past month. In
characterizing the downshift in new orders, one contact
stated, “things are slowing, but no cliff in demand seems
to be coming.” Certain premium and specialty manufacturing activities, namely high-tech manufacturing and
agricultural equipment production, reported ongoing
strength in demand. The majority of contacts at manufacturing businesses indicated little difficulty in securing
financing for their operations and planned capital expenditures. Services contacts broadly reported a moderate increase in business activity, with leisure and hospitality and health care establishments indicating especially strong sales growth over the past month. Although
activity among services businesses picked up, expectations for growth over the next six months declined modestly. Some contacts at services businesses suggested
access to credit slightly worsened over the last few
weeks, primarily for funding large capital spending projects, but most businesses reported no change in their
access to financing.
Energy
Energy activity declined slightly over the last month.
Though oil production increased slightly, and natural gas
production stayed flat, District rig counts declined in the
face of depressed price levels. Still, there was some
divergence among District states. The number of active
rig counts held steady in New Mexico and Colorado but
fell moderately in both Oklahoma and Wyoming. Furthermore, as an additional sign of slowing energy activity,
the number of drilled but uncompleted wells continued to
increase in the District and contacts expect an additional
reduction in well completions going forward. Lastly, while
access to credit is generally not an issue for most energy
firms, companies with a heavy concentration in natural
gas have seen tightening credit conditions due to sustained lower natural gas prices.
Agriculture
Conditions in the Tenth District agricultural economy
remained strong through early May but showed signs of
moderating. Corn and soybean prices declined slightly
since April and were moderately lower than a year ago.
Prices moved down recently based on reports of ideal
planting conditions throughout most states and early
projections that production could hit record levels due to
historically strong yields. Wheat prices increased slightly
since April, but poor yields caused by drought could limit
revenues, particularly in Kansas and Oklahoma. Profits
among cattle producers continued to be pressured by
high feed costs and drought that damaged pasture conditions throughout the region. ■
Real Estate and Construction
Several contacts in commercial real estate reported
worsening conditions associated with higher refinancing
costs over the past month. Heightened requirements for
additional equity to reduce loan-to-value ratios were
making refinancing deals difficult to close. Challenges in
valuing properties reportedly exacerbated headwinds for
refinancing activity. Some office property managers
indicated assessing tenet quality became more difficult
because the large companies that are historically stable
renters have become more footloose, asking for shorter
lease terms, or are reducing their demand for space
altogether.
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ May 2023
Summary of Economic Activity
The Eleventh District economy continued to expand modestly. Manufacturing output was flat while revenue in the service and retail sectors grew. Energy reports were mixed with oilfield activity steady, but declines seen on the natural gas
side. Housing contacts noted a decent spring selling season and stable prices. Credit conditions tightened further, and
loan demand continued to decline. Agricultural conditions improved in some areas but remained strained by drought in
others. Local nonprofits cited higher demand for assistance. Overall payrolls rose moderately, and wage growth remained elevated. Outlooks continued to worsen as uncertainty remains on the rise, and contacts voiced concern over
waning demand, rising interest rates, and the overall health of the economy.
contacts noted that continued increases in labor costs
offset any relief in input costs (fuel or otherwise). Several
contacts noted an increase in borrowing costs, in some
cases significant. Selling prices remained elevated in the
service sector. Airlines reported high ticket prices amid
strong demand and constrained supply (pilots and aircrafts).
Labor Markets
Employment growth rebounded slightly to a more moderate pace over the reporting period. Hiring resumed in the
service sector in April after stalling in March, and manufactures continued to add to payrolls at an average pace.
Oilfield services firms were still hiring, though some
layoffs were seen in natural gas regions. Scattered
reports of layoffs also came from transportation services
and manufacturing. In an April Dallas Fed survey of 370
Texas business executives, more than half were currently trying to hire. Forty percent said the availability of
applicants improved over the past month, significantly
higher than the 14 percent share reporting a worsening.
Reports of binding labor constraints continued in the
energy sector, and mentions of worker shortages came
from a few other sectors as well, including healthcare
and retail.
Manufacturing
Texas manufacturing experienced lull in output growth in
April, continuing the pattern seen so far this year of
bouncing between little to no expansion. New orders
continued to fall, though not as fast as the prior couple of
months. One contact said customer inventories were
high from overstocking last year. Durable goods demand
is holding up better than nondurable, led by fabricated
metals and transportation equipment. Reports from
refineries and chemical producers were mixed. Overall,
manufacturing outlooks worsened further, and uncertainty continues to climb.
Wage pressures remained elevated. The notable wage
deceleration seen last year seems to have largely flattened out this year. A few contacts said they were unable to pay the required wage rate to attract workers.
Retail Sales
Retail sales increased modestly in April after holding
steady in March. Auto dealers reported a decline in
sales. They cited low consumer confidence and noted
that higher interest rates were starting to affect profitability due to increased costs to finance new-vehicle inven-
Prices
Input cost inflation remained below average for manufacturers but was still elevated in the service sector. Fuel
costs declined over the reporting period, though a few
K-1
Federal Reserve Bank of Dallas
tories. Wholesalers and pharmacies noted particular
strength over the past six weeks. Overall outlooks were
more pessimistic than other sectors.
said they tightened credit standards and terms over the
past six weeks, the highest share since the survey began in 2017. Loan nonperformance continued to increase slightly. The banking outlook continues to deteriorate, with contacts expecting a further contraction in
business activity and loan demand and an increase in
nonperforming loans over the next six months.
Nonfinancial Services
Service sector activity continued to grow at a fairly modest pace in April. Revenue growth was led by health care
followed by professional, scientific, and technical services. Notable revenue declines were seen in leisure and
hospitality, with contacts citing a slowdown in spending
by customers due to economic uncertainty. Some services firms noted a decreased availability of equity and
debt capital, but the majority continued to note no difficulty obtaining financing for either short- or long-term
use. Staffing firms reported stable demand, with more
optimism for placements of white-collar workers than
manufacturing workers. Multiple contacts said one
source of strong demand is IT workers—connecting
small to mid-size firms with workers laid off by large
firms. Overall outlooks continued to worsen in April,
though pessimism waned slightly.
Energy
Drilling and frac activity for oil wells was essentially flat
over the past six weeks, while natural gas-directed drilling declined amid low natural gas prices that have been
pressured by swelling inventories and mild weather.
Overall, the Eleventh District rig count fell by 14 rigs over
the reporting period. Outlooks were mixed. The industry
is still expected to increase oil-directed drilling and completion activities modestly through year end, while prospects on the natural gas side have worsened.
Agriculture
Recent rainfall improved drought conditions in the eastern part of the district while severe drought persisted in
much of the western part. Grain prices generally decreased over the reporting period, amid a positive outlook for U.S. crop production this year. Drought will
hamper crop production in Texas, however, and, in
particular, contacts expect a below average cotton crop
this year. A bright spot for agricultural producers is on
the livestock side, where cattle prices rose notably over
the past six weeks and are significantly above last year’s
prices, supported by tighter supplies and solid demand
for beef.
Construction and Real Estate
Housing demand broadly held up during the reporting
period, though sales continued to be weaker than a year
ago. Contacts noted a decent spring selling season, with
prices largely stable, and builders were able to raise
prices slightly in selected areas. With housing starts
notably below year ago levels, building cycle times and
labor availability has improved. New land and lot development remained subdued. Outlooks were cautious with
some voicing concern about whether demand would hold
up beyond the spring selling season.
Community Perspectives
Activity in the apartment and retail market was little
changed since the last report. Apartment rents were flat,
and a contact noted an uptick in evictions in some areas.
Office markets continued to face headwinds, with rising
vacancy and subdued demand. Outlooks were mixed,
with concern about the uptick in office commercial mortgage-backed securities delinquency and loans coming
up for renewal this year.
Nonprofits continued to see increased demand for their
services. Food insecurity remains a rising concern for
lower-income families, and some nonprofits report record
use of their food pantries. Contacts pointed to inflation
and the cessation of pandemic-era expanded SNAP
benefits in March. Housing affordability was also a primary concern, and one contact said low housing inventory has made their provision of housing vouchers difficult.
The nonprofit has sufficient funding for the vouchers but
cannot find enough landlords willing to accept them,
often because they believe they can get a higher rent
from other perspective tenants. Multiple contacts mentioned consequences of the digital divide—a struggle
with digital literacy and access to technology is a barrier
to employment for lower-income individuals, as well as a
barrier to credit access given the decline in brick-andmortar banks. ■
Financial Services
Loan demand declined for the sixth period in a row amid
further loan price increases and worsening general business activity. Overall loan volumes continued to decline
as well, though at a slower pace. Residential real estate
loan volumes stabilized after falling for several months,
and consumer loan volume declines slowed notably.
Significant volume declines continue to be seen in commercial and industrial and commercial real estate lending. Credit conditions tightened further; 48 percent of
bankers in the Dallas Fed Banking Conditions Survey
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ May 2023
Summary of Economic Activity
Economic activity in the Twelfth District expanded somewhat during the April through mid-May reporting period. Employment levels were stable and overall labor market conditions remained tight, accompanied by wage increases that
showed some signs of leveling off. Price increases persisted, although at a slower pace than in the last reporting period.
Retail sales grew modestly, and activity in the services sectors picked up somewhat. Demand for manufacturing goods
was robust, while conditions in agriculture and resource-related sectors weakened slightly. Activity in residential and
commercial real estate markets eased further. Conditions in the financial sector changed little over the reporting period
and lending standards have tightened. Communities across the Twelfth District were challenged by a shortage of specialized professionals and small businesses’ limited access to credit. Contacts expressed concern over a weaker outlook for the economy and increased overall uncertainty.
Labor Markets
than in the last reporting period. Production costs increased due to higher expenditures on labor, utilities,
and shipping. Firms reported that they generally passed
on these higher costs to consumers. Nevertheless, some
contacts reported some demand pullback, which in some
instances resulted in a reversal of price increases. Prices
of some goods and services were reportedly stable or
down in recent weeks, including those for residential
rentals, lumber, insurance, business services, and banking services. Prices rose for agricultural products such
as apples and seafood.
Employment levels were largely unchanged during the
reporting period. Labor supply remained tight across
several sectors, including health care, hospitality, food
services, and aviation. However, contacts from retail,
manufacturing, transportation, finance, and business
services reported fewer issues filling positions. Although
some employers are still facing difficulties finding skilled
workers, reports across the District indicated improvements in employee turnover and retention rates. Furthermore, contacts from both the agriculture and hospitality
sectors mentioned better success in hiring seasonal
workers this year. One contact from Alaska, however,
expressed concerns over attracting enough seasonal
workers for this summer. Labor market conditions in the
technology and financial services sectors continue to
soften. A report from the Pacific Northwest highlighted a
surge of unionization efforts in the retail and distribution
sectors.
Community Conditions
Conditions in the community support and services sector
were mixed. Some contacts mentioned increased availability of resources for addressing homelessness issues in
areas of the Pacific Northwest, as well as assistance
from philanthropic foundations and online fundraising in
Nevada and California. Nonetheless, reports also highlighted the challenges in meeting the demand for housing services and accessing funds for small businesses.
In addition, contacts reported difficulties hiring specialized professionals, which have contributed to staff burnout and turnover at institutions including those supporting children’s health, education and training, and local
journalism.
Wage growth moderated across many sectors. The
recent layoffs and hiring freezes in financial services and
technology eased wage pressures in these sectors.
Contacts in the health-care, retail, and manufacturing
sectors, as well as non-profit organizations, reported pay
increases that are closer to historical rates. However,
some industries, including the gaming industry and
insurance companies, are continuing to pay aboveaverage salary increases to attract and retain qualified
workers.
Retail Trade and Services
Retail sales grew modestly in recent weeks largely
driven by strong spending on food and beverages and
steady demand for furnishings, appliances, and apparel.
Reports also indicated that elevated inflation and economic uncertainty led consumers to be more selective
Prices
Price increases persisted, although at a slower pace
L-1
Federal Reserve Bank of San Francisco
with their purchasing decisions. Consumers continued to
trade down to lower cost items. Spending at small grocery stores and gas stations in suburban and rural areas
was reportedly up. Conversely, food establishments and
retail stores in downtown urban areas that traditionally
relied on foot traffic from office workers continued to
report weak sales as hybrid work arrangements persisted.
disrupted pollination for tree and vine crops, which is
anticipated to reduce yields. Seafood stocks were reportedly stable in the Pacific Northwest. Contacts noted
lower costs for transportation and irrigation water and
higher costs for other inputs such as for packaging,
fertilizer, and energy.
Real Estate and Construction
Activity in residential real estate slowed further over the
reporting period. Contacts across the District reported
stable demand for single-family homes, although high
mortgage rates restrained prices. Inventories of existing
single-family homes were low, and owners appeared
hesitant to forego their existing low-rate mortgages.
Asking rents were largely stable, and one contact in
Southern California noted that new multifamily construction put downward pressure on rents in some areas.
Despite reported improvement in the availability and cost
of materials, construction of new homes was flat to down
as developers responded to higher financing costs.
Conditions in the services sectors picked up somewhat.
Demand for professional services remained strong,
particularly for consulting, talent acquisition, catering,
and janitorial services. Providers of legal and insurance
services reported mixed conditions by type of service.
Contacts noted weaker demand for elective medical
procedures and surgeries in recent weeks. Consumer
spending on pet care reportedly increased. Major tourist
hubs across the District experienced a pickup in leisure
and business travel as convention attendance and international travel continued to recover. Conversely, smaller
tourist destinations saw lower-than-expected traveler
volumes during spring break and Easter. Activity in the
entertainment and media production industries slowed
significantly due to ongoing collective agreement negotiations between the major studios and writers’ unions.
Conditions in commercial real estate were weaker overall. In the face of changing workplace needs, leasing
activity for downtown office space remained weak, and
new office construction stalled. Demand for retail and
industrial spaces remained stable. Contacts around the
District noted that plans for new projects stalled, which
has led to more competitive construction bids.
Manufacturing
Manufacturing activity was robust during the reporting
period. Demand was notably strong for food manufacturing, metal fabrication, and heavy machinery. Manufacturers generally reported lighter order backlogs, due mainly
to softening demand. Supply bottlenecks, especially
those related to ocean freight, eased significantly in
recent weeks. Nevertheless, contacts continued to highlight limited availability and extended delivery times for
products and equipment that rely on semiconductor
chips.
Financial Institutions
Conditions in the financial sector changed little over the
reporting period, and uncertainty remained high. Contacts cited higher interest rates, tighter lending standards, ongoing uncertainty in the banking sector, and
lower overall confidence as the main dampeners of
activity in the sector. Depository institutions mentioned
tighter competition for deposits. Lending institutions
observed reduced demand for residential loans and
uneven demand for commercial loans. Contacts reported
that recent stresses in the regional banking sector negatively affected access to credit, particularly for smaller
businesses. Reports also noted increasing delinquencies
in consumer loans, including for auto and credit card
debt. ■
Agriculture and Resource-Related Industries
Conditions in agriculture and resource-related sectors
weakened slightly. Reports on exports were mixed as
ocean freight costs eased somewhat, while the war in
Ukraine continued to contribute to shipping disruptions.
Contacts in California noted that wet weather conditions
lowered yields for brassicas and berries. Rains also
L-2
Cite this document
Federal Reserve (2023, June 13). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20230614
@misc{wtfs_beige_book_20230614,
author = {Federal Reserve},
title = {Beige Book},
year = {2023},
month = {Jun},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20230614},
note = {Retrieved via When the Fed Speaks corpus}
}