Beige Book
For use at 2:00 PM EDT
Wednesday
July 12, 2023
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
June 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 Minneapolis based on information collected
on or before June 30, 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 ■ June 2023
Overall Economic Activity
Overall economic activity increased slightly since late May. Five Districts reported slight or modest growth, five noted
no change, and two reported slight and modest declines. Reports on consumer spending were mixed; growth was
generally observed in consumer services, but some retailers noted shifts away from discretionary spending. Tourism
and travel activity was robust, and hospitality contacts expected a busy summer season. Auto sales remained unchanged or exhibited moderate growth across most Districts. Manufacturing activity edged up in half of the Districts and
declined in the other half. Transportation activity was down or flat in most Districts that reported on it, as some contacts
reported reduced demand due to high inventory levels and others noted continued challenges from labor shortages.
Banking conditions were mostly subdued, as lending activity continued to soften. Despite higher mortgage rates, demand for residential real estate remained steady, although sales were constrained by low inventories. Construction for
both residential and commercial units was slightly lower on balance. Agricultural conditions were mixed geographically
but softened slightly on balance, with some contacts expecting further softening for the remainder of 2023. Energy
activity decreased. Overall economic expectations for the coming months generally continued to call for slow growth.
Labor Markets
Employment increased modestly this period, with most Districts experiencing some job growth. Labor demand remained healthy, though some contacts reported that hiring was getting more targeted and selective. Employers continued to have difficulty finding workers, particularly in health care, transportation, and hospitality, and for high-skilled
positions in general. However, many Districts reported that labor availability had improved and that some employers
were having an easier time hiring than they were having previously. Employers also reported that the unusually high
turnover rates in recent years appear to be returning to pre-pandemic norms. Wages continued to rise, but more moderately. Contacts in multiple Districts reported that wage increases were returning to or nearing pre-pandemic levels.
Prices
Prices increased at a modest pace overall, and several Districts noted some slowing in the pace of increase. Consumer
prices generally increased, though reports differed in the extent to which firms were able to pass along input cost increases. Contacts in some Districts noted reluctance to raise prices because consumers had grown more sensitive to
prices, while others reported that solid demand allowed firms to maintain margins. Input cost pressures remained elevated for services firms but eased notably in the manufacturing sector. Freight rates continued to decrease, along with
the prices for many construction inputs, though concrete prices increased. Price expectations were generally stable or
lower over the next several months.
Highlights by Federal Reserve District
Boston
New York
Business activity expanded at a slight pace. Employment
gains were small and prices were stable. Consumer
spending increased by a small margin. Manufacturers
reported moderate revenue growth. Home sales were
disappointing and life sciences leasing activity slowed
dramatically. The outlook was optimistic outside of real
estate, but remained neutral or became increasingly
pessimistic among real estate contacts.
Regional economic activity stabilized after a period of
weakness. Labor market conditions were strong, with
some firming in recent weeks. Inflationary pressures
eased noticeably. Consumer spending grew steadily.
Housing markets were solid but low inventory continued
to restrain sales activity.
1
National Summary
Philadelphia
St. Louis
Business activity continued to decline slightly during the
current Beige Book period. Consumer demand ticked
down, although elevated profit margins buoyed overall
sales figures. Employment fell slightly despite improved
labor availability. Wage growth and inflation subsided but
continued at a modest pace. Expectations for economic
growth remained subdued.
Economic conditions have remained unchanged since
our previous report. Employers continued to struggle
finding skilled workers, but turnover slowed and wage
pressures lessened. Consumer spending was largely
steady, but contacts reported a shift away from discretionary goods. Homebuying activity increased, but the
commercial real estate sector saw worsening conditions.
Cleveland
Minneapolis
The Fourth District economy was generally stable in
recent weeks as high interest rates continued to constrain households’ big-ticket goods purchases and businesses’ project plans. Bankers and transportation firms
cited these effects as contributing to weaker demand for
their own services. Nevertheless, contacts were generally more optimistic about the near-term outlook and less
concerned that a U.S. recession would occur in 2023.
Economic activity in the region grew slightly in recent
weeks. Employment rose moderately as labor availability
improved. Price pressures were mild and wages rose
moderately. Consumer spending was flat. Professional
services reported solid activity and a positive outlook.
Residential construction and real estate remained low.
Dry conditions have lowered the farm outlook. Minorityand women-owned firms reported steady activity.
Richmond
Kansas City
The regional economy grew slightly in recent weeks.
Consumer spending on retail goods, as well as on travel
and tourism, picked up modestly. Manufacturing and
transportation sectors noted a slowdown in demand.
Residential real estate was constrained by a lack of
inventory. Commercial real estate activity and lending
declined. Employment increased moderately and price
growth eased slightly but remained robust, overall.
Total economic activity across the Tenth District
changed little during June. Though hiring was flat, expected employment levels at most businesses continued
to point downward. Businesses predominantly reported
they are relying on natural turnover and attrition to reduce their headcounts, rather than layoffs. Concerns
about credit quality and credit access rose broadly,
including among micro-businesses, consumers, and
commercial real estate.
Atlanta
Dallas
Economic activity grew slowly. Labor markets became
less tight, and wage pressures eased. Nonlabor costs
moderated, on balance. Discretionary retail sales softened. Auto sales remained strong. Domestic leisure
travel softened, and international and business travel
rose. Housing demand remained strong. Transportation
activity slowed. Energy demand was steady. Agriculture
conditions softened.
Modest expansion continued buoyed by gains in the
service sector and single-family housing. Factory output,
drilling activity and loan demand declined, and credit
conditions tightened further. Employment rose moderately, and wage growth remained high. Price pressures
evaporated in manufacturing but stayed elevated in the
service sector. Uncertainty continued to rise, and contacts cited diminishing demand, higher labor costs, rising
interest rates, and inflation as their primary outlook concerns.
Chicago
Economic activity was little changed. Employment increased moderately; nonbusiness contacts saw little
change in activity; consumer spending was flat; business
spending and construction and real estate activity declined slightly; and manufacturing decreased modestly.
Prices and wages rose moderately, while financial conditions tightened slightly further. Expectations for farm
incomes in 2023 decreased some.
San Francisco
Economic activity softened modestly. Labor availability
improved across sectors. Wage growth slowed notably
while price increases persisted. Retail sales moderated,
and activity in the services sectors eased somewhat.
Manufacturing activity was solid but weakened slightly,
while conditions in the agriculture and residential real
estate sectors were mixed. Commercial real estate
activity fell, and financial sector activity was largely unchanged.
2
Federal Reserve Bank of
Boston
The Beige Book ■ June 2023
Summary of Economic Activity
Business activity expanded at a slight pace in recent weeks, with modest increases in employment and roughly even
prices. Consumer spending increased by a small margin, as retail sales increased modestly and tourism was flat. Manufacturers reported mixed results but sales growth was moderate on average. Software and IT services firms enjoyed
stable demand and modest revenue gains. Residential home sales increased slightly in May from the previous month
but remained below seasonal norms. Commercial real estate markets weakened further, with abrupt declines in life
sciences leasing and financial distress showing up for office properties. The outlook was mostly optimistic among contacts outside of real estate. Residential real estate contacts expected sales to remain muted and commercial real estate
contacts braced for declines in activity and property values moving forward.
output prices were flat. Manufacturing contacts reported
a very benign pricing environment, with one even mentioning the possibility of deflation. Prices were slightly
higher among IT contacts, but with no further price increases anticipated. Hotel room rates in Greater Boston
increased in excess of seasonal patterns, rising 12 percent on a year-over-year basis. Cape Cod rental prices
increased yet again, but at a much more modest pace
than in recent years. The outlook called for further moderation of pricing pressures moving forward.
Labor Markets
Employment increased modestly and wage growth continued to moderate as labor market imbalances eased
further. Among retail and tourism contacts, labor demand
remained healthy but showed signs of moderating, and
there were modest improvements in the available labor
supply. Some airline contacts continued to struggle to fill
positions but said that hiring and training were underway
to improve the situation. A clothing retailer noted that it
had taken several months to fill 200 warehouse jobs, but
they were nonetheless able to fill all positions. Following
two summers of worker shortages on Cape Cod, some
restaurant and hotel owners there have achieved efficiencies enabling them to operate with a smaller staff. In
manufacturing, the labor market remained tight, although
contacts said that it had improved over last year, and
headcounts increased modestly. Headcounts at software
and IT firms were up slightly, and hiring plans were
mixed. Contacts noted that turnover had either stabilized
(albeit at above-average rates) or decreased in recent
months, and reductions in turnover and absenteeism
reduced the need for hiring at some firms. Wage pressures were described as stable or, in most cases, declining, as wage growth rates continued to fall back to more
moderate levels.
Retail and Tourism
First District retail contacts reported a modest uptick in
sales relative to earlier this year, while tourism contacts
saw mixed results that were about flat on average. A
clothing retailer enjoyed a slight uptick in demand this
spring after a soft first quarter. Mainstreet retailers on
Cape Cod experienced a strong start to the high season,
but hospitality contacts on the Cape said that occupancy
rates for hotels and especially short-term rentals were
down by modest to large margins from their record highs
of the past two years, though still above 2019 levels.
Airline passenger traffic through Boston further increased in recent months, reaching 96 percent of prepandemic levels in the first quarter of 2023, and international passenger traffic alone reached 99 percent of prepandemic levels, although travel to and from Asian markets remained depressed. The Greater Boston hotel
occupancy rate increased relative to seasonal trends,
Prices
Prices were mostly stable, with some exceptions, as cost
pressures abated further. A clothing retailer said that
input cost growth had ceased altogether and that their
A-1
Federal Reserve Bank of Boston
with occupancy climbing ever closer to 2019 levels.
Scheduled convention activity and cruise bookings for
the remainder of the year are set to increase further,
exceeding 2019 levels.
of venture capital and other funding sources to would-be
tenants. Contacts reported a somewhat quieter industrial
market than in the past two years, although industrial
rents remained high and vacancy rates historically low.
Grocery-anchored retail continued to perform well, but
other retail vacancies ticked up due to the failure of
some non-grocery chains. Across sectors, contacts’
expectations turned more pessimistic. High borrowing
costs are expected to continue to deter investment,
sales, and construction. Multiple contacts expected the
market to fare better in New England than in other regions of the country, but nonetheless expected activity in
the region to slow and property valuations to fall accordingly.
Manufacturing and Related Services
Manufacturing contacts were generally positive, reporting moderate gains in sales on balance. A pharmaceutical company reported lower sales that were nonetheless
in line with their expectations, owing to increased competition from generics. A frozen fish producer said that
sales were down year-on-year due to higher prices.
Other contacts reported very strong sales. A furniture
producer recorded its best second-quarter results ever,
up markedly from a weak first quarter. A semiconductor
manufacturer said that, despite an industrywide slump,
their own sales were up 12 percent from a year earlier,
an outcome attributed to the firm’s heavy exposure to the
automotive industry and the transition to electric cars.
One contact said they had revised their capital expenditure plans to take advantage of tax credits, although this
mostly involved moving existing projects forward rather
than adding investments. The outlook was positive
across the board. The semiconductor manufacturer in
particular expected that 2024 would bring demand increases linked to upgrades of phones and PCs as well
as from the diffusion of AI products.
Residential Real Estate
First District home sales increased a bit in May from the
previous month on average, and some areas reported a
healthy uptick in activity, but May’s sales were nonetheless described as weak relative to historical norms.
Across markets, home sales continued to post very
steep declines on a year-over-year basis, for singlefamily dwelling as well as condos. According to contacts,
activity was held back yet again by further declines in
inventory (on a year-over-year basis) and persistently
high mortgage interest rates. High rates also exacerbated the low-inventory problem, as current homeowners
were reluctant to swap their existing, low-rate mortgages
for higher-rate loans, leading to fewer homes going up
for sale. Despite tepid sales, the dearth of inventories
relative to demand meant that prices continued to rise,
even as the pace of appreciation slowed gradually in
recent months. Median prices for single-family homes
rose modestly relative to May 2022, by six percent or
less depending on the area. However, median condo
prices increased by double-digit margins in some states,
as buyers priced out of the single-family market looked
increasingly to condos. Contacts expected no meaningful changes in market dynamics until interest rates declined.■
IT and Software Services
Contacts in IT and software services posted modest
revenue gains on average, and demand was steady over
the first two quarters of 2023. Profits and margins were
up slightly, although Q2 expenses increased above
expectations at one firm. Capital and technology spending was unchanged or down somewhat. One firm expected to slow its capital spending further moving forward amidst an ongoing transition to the cloud. Outlooks
were generally optimistic, with expectations of ongoing
stability in demand. One contact expressed confidence
that their business would hold up well moving forward
even if the broader economy turned down. However, one
contact was concerned the presidential election might
disrupt the stability of the business environment.
Commercial Real Estate
Commercial real estate activity in the First District was
moderately weaker in recent months. Office leasing was
stable or down slightly, with very few leases signed.
Office rents were roughly stable and vacancy rates were
said to be either flat or rising slowly. A contact in Connecticut reported a high-quality urban office building
being forced into foreclosure due to tenants giving back
space upon lease expiration. Life sciences leasing activity slowed dramatically, a fact attributed to the drying up
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ June 2023
Summary of Economic Activity
Economic activity in the Second District stabilized in recent weeks following a period of moderate weakness. Labor
market conditions were strong, with ongoing modest employment gains and steady wage growth. Inflationary pressures
eased as both input and selling price increases slowed noticeably. Supply availability continued to improve, particularly
for manufacturers, and manufacturing activity edged slightly higher. Consumer spending grew steadily and tourism in
New York City remained strong. While housing markets were solid, exceptionally low inventory remained a challenge
and there were some signs of a pullback in demand in parts of the District. Commercial real estate markets remained
mostly unchanged, with persistently high office vacancies. Conditions in the broad finance sector continued to deteriorate, though at a more subdued pace than in recent months. Regional banks reported ongoing declines in loan demand,
tighter credit conditions, and narrowing loan spreads. Looking ahead, businesses expect economic conditions to improve, though optimism remained muted.
Labor Markets
Prices
Labor market conditions were strong, with several contacts pointing to some firming in recent weeks. On balance, employment increased modestly, though there
were stronger gains reported by personal service providers and wholesalers. While firms in the construction
sector reportedly shed workers, layoffs generally remained concentrated in large firms outside of the region.
A contact from the Adirondacks reported that J-1 visa
seasonal workers have arrived following a pandemic
pause, providing a much-needed seasonal boost to the
strained workforce as the tourism season gets into full
swing. Though it has become slightly easier to hire, finding skilled workers remains a major challenge.
Inflationary pressures eased noticeably in recent weeks.
Businesses reported that the pace of input price increases has slowed considerably, and one construction contact noted softening in the prices of inputs, such as doors
and windows. Still, the high cost of many inputs remains
a major challenge for businesses in the region. The pace
of selling price increases also moderated, especially
among goods producers and retailers, though businesses in leisure & hospitality noted growing price pressures
in travel services and entertainment. Manufacturers
generally expect continued easing in price increases in
the months ahead, while firms in the broader service
sector anticipated more persistence.
While hiring plans remained solid, a few employers pointed to scattered signs of easing in labor demand. Contacts reported that the use of temporary workers has
declined noticeably. Further, attrition rates have continued to fall at many businesses and are in some cases
below normal levels, reducing the need to hire replacements. With signs that the labor market may start to cool,
some employers are beginning to require workers to
come to the office more often. Indeed, a New York City
employment agency focused on financial services noted
that roughly half of open roles were now fully in-person.
Consumer Spending
Consumer spending grew steadily in the latest reporting
period. Consumers have continued to shift their spending away from goods toward experiences, such as travel,
entertainment, and restaurants. Indeed, amid higher
prices and changing preferences, department store
contacts reported sagging sales. Increasingly discerning
shoppers eschewed purchases of seasonal items in
favor of high-quality basics during a cool spring season,
leaving an inventory surplus of certain summer wear.
Still, auto dealers in upstate New York reported that new
car sales have been strong as pent-up demand has
been satisfied by ongoing improvements in inventory,
while used car sales remained subdued.
Wage growth has remained modest and steady since the
last report. Several contacts noted that candidates’ wage
demands have become more reasonable and are now inline with pre-pandemic expectations.
B-1
Federal Reserve Bank of New York
Manufacturing and Distribution
on business activity. New York City’s retail market was flat,
with no change in vacancy rates, rents, or leasing activity
in recent weeks. 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.
Manufacturing activity edged higher. Supply availability
improved, delivery times held steady, and inventories
moved lower. Businesses in transportation & warehousing reported modestly increasing activity, but activity for
wholesalers was unchanged. Manufacturing and distribution firms have become more optimistic about the sixmonth outlook.
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 and upstate New York. Industrial construction activity
was little changed across most of the District. Multi-family
residential starts increased in Long Island and Westchester but were flat elsewhere.
Services
Service sector activity generally edged lower in the latest
reporting period, though businesses in the information
and professional services sectors reported increasing
activity. Looking ahead, businesses in the service sector
anticipated some improvement in the coming months.
Banking and Finance
Tourism activity remained strong in New York City and is
on track to reach pre-pandemic levels this summer. The
recent air quality problems from wildfire smoke had only
minor effects on tourism, with the biggest blows to outdoor attractions. The recovery of business travel has
been slower, hindered by a shift to virtual events and a
budget-driven reduction in attendance at in-person meetings.
Conditions in the broad finance sector continued to deteriorate, though at a more subdued pace than in recent
months. Small to medium-sized banks in the District reported ongoing declines in loan demand across all loan
segments. Credit standards continued to tighten for all loan
types, loan spreads narrowed, and deposit rates moved
higher. Delinquency rates edged up. Contacts cautioned
that the average loan-to-value ratio on outstanding used
car loans has risen to about 120 percent, presenting potential risks to the auto finance market.
Real Estate and Construction
While the home sales market has remained solid, there
has been some cooling in parts of the District. In particular, demand softened in much of upstate New York as
discouraged buyers frustrated by low inventory increasingly stepped aside. Meanwhile, home sales markets in
and around New York City remained resilient as potential
buyers were undeterred by low inventory. Home prices
were steady to up slightly; bidding wars were common
across the District, though at reduced intensity.
Community Perspectives
Contacts noted that shortfalls in community services are
worsening food insecurity, homelessness, and public
safety. Community leaders expressed concerns about the
inadequacy of the region’s mental health care system.
Contacts expressed the need for supportive housing units
that are integrated with social services and medical support for addiction treatment and mental health care. Nonprofits reported working with hospitals that own large real
estate portfolios to develop sites for middle-income and
supportive housing, though elevated construction costs
and strained supply chains have hindered progress on this
front. ■
Residential rental markets have continued to firm, as a
strong economy and relatively high mortgage rates have
continued to boost demand by pushing some potential
homeowners into the rental market. In New York City,
vacancy rates were below historic norms and rents
reached new highs, and rents also edged up in much of
upstate New York.
Commercial real estate markets were mostly unchanged.
Office vacancy rates held steady at elevated levels
across the District and rents were mostly flat, though
some businesses reduced their footprints and opted for
higher-quality office space. Of note, the prolonged weakness in office markets has begun to spillover to architecture and engineering firms, who noted negative impacts
For more information about District economic conditions visit:
https://www.newyorkfed.org/regional-economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ June 2023
Summary of Economic Activity
On balance, business activity in the Third District continued to decline slightly. Consumer demand appeared to tick down
as contacts detailed more cautious spending habits by consumers, including fewer visits and smaller purchases. High
interest rates are continuing to limit listings of existing homes for sale, which has helped new home builders. Employment fell slightly despite improving labor availability. Wages and prices continued to grow at a modest pace. Firms also
continued to indicate that wage and price pressures were subsiding. Overall, contacts reported relatively few supply
chain disruptions – instead noting that the costs of many of their supplies had stabilized. Contacts continued to note
tighter credit standards, although credit quality remained good. On balance, expectations for economic growth over the
next six months remained subdued, as both manufacturing and nonmanufacturing firms expected slight growth.
Labor Markets
Employment appeared to decline slightly after rising
slightly during the prior period. Although contacts noted
relatively few cases of broad-based layoffs, they detailed
targeted layoffs, more selective hiring practices, and fewer
hours for employees. Of the firms looking to hire, most reported that hiring continued to be easier as labor availability improved. However, firms noted that shortages remained for certain positions, especially housekeeping
staff and cooks in the leisure and hospitality industry and
skilled trade workers in the construction and manufacturing industries.
In our monthly surveys, nonmanufacturing firms reported
decreases in both full-time and part-time employment.
The index for full-time employment in the
nonmanufacturing sector turned negative and fell to its
lowest level since June 2020. The share of
nonmanufacturing firms that re-ported a decrease in the
number of full-time jobs rose to over 25 percent.
Manufacturing firms reported mostly steady levels of
employment as nearly three-quarters of the firms reported
no change in jobs. Staffing firms con-firmed that the
demand for labor declined from the prior period and that
clients were no longer looking to immedi-ately fill all open
positions.
across sectors indicated that year-over-year wage increases were back to pre-pandemic levels. Construction
and manufacturing contacts noted wage pressures had
not eased as much for specialty trades.
In our monthly surveys, the distribution of nonmanufacturing firms reporting higher or lower wage and benefit costs
per employee was typical of the pre-pandemic era, when
modest wage growth prevailed.
Prices
On balance, firms reported that prices continued to rise
modestly; however, they noted that the rate of price increases appears to be slowly abating. Contacts
continued to report fewer supply chain disruptions but
indicated that their firms were trying to maintain high
profit margins for as long as possible.
In our monthly surveys, reported increases in prices paid
and received were significantly less widespread than one
year ago and were well below their historical averages.
The prices paid and prices received indexes declined for
nonmanufacturers, with the prices received index turning
negative. Among manufacturers, the prices paid index
was little changed, and the prices received index rose.
The indexes for future prices paid and future prices received continued to suggest that firms expect price increases over the next six months. However, both indexes
edged lower and were below their long-run averages.
Firms reported that wage inflation continued at a modest
pace overall but is slowly subsiding. Multiple contacts
C-1
Federal Reserve Bank of Philadelphia
Manufacturing
Manufacturing activity continued to decline modestly in the
current period. The index for new orders was little
changed from the last period and was negative for the
13th consecutive month. The shipments index rose for the
third consecutive month and turned positive for the first
time since February.
Despite the decline in manufacturing activity from the prior
period, nearly half of the firms estimated increased total
production growth for the second quarter of 2023 compared with the first quarter. Most firms reported labor supply and supply chains as slight or moderate constraints to
capacity utilization.
Expectations among manufacturers for growth in the next
six months rose but remained tempered compared with
historical averages. The indexes for future activity and future new orders turned positive, and the index for future
shipments also rose. All three indexes improved to their
highest level in over a year.
Consumer Spending
On balance, consumer spending declined slightly in the
current period – after holding steady, at best, in the prior
period. Contacts indicated consumers became more careful in their spending. One retail contact reported a decline
in the volume of goods sold but noted that year-over-year
sales figures were buoyed by higher prices than last year.
Auto dealers reported little change in sales from the prior
period despite the continued growth of car inventories.
Contacts reported that rising affordability concerns appeared to weigh on demand, keeping year-to-date auto
sales in line with last year when sales were constrained by
low inventories. Softening demand led some dealers to
decrease prices and most dealers to increase incentives.
Tourism contacts continued to report slight growth – noting that the recovery was slowing. Business travel continued to recover, but leisure travel was flattening. Multiple
contacts reported that the amount of money guests spend
at their leisure destinations declined modestly in recent
months. Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the
strongest month for hotel revenue in Philadelphia since
the onset of the pandemic, in large part due to an influx of
guests for the Taylor Swift concerts in the city.
firms reporting decreases exceeded the share reporting
increases for both categories. Expectations for growth
over the next six months remained subdued.
Financial Services
The volume of bank lending (excluding credit cards) grew
modestly during the period (not seasonally adjusted) –
slower than the moderate growth observed in both the
prior period and the same period last year.
During the period, District banks reported strong growth in
home mortgages and moderate growth in auto loans,
other consumer lending, and commercial real estate
loans. Home equity loans were flat. Credit card volumes
grew at a moderate to strong pace after rising modestly
last period, but the growth was slower than during the
same period last year.
Banks reported a moderate decline in commercial and industrial loan volumes after strong growth in the prior period. Most contacts continued to report tightening credit
conditions following recent bank failures and described an
environment of elevated caution in which most banks want
to extend credit only to customers with whom they already
have a relationship. Contacts also continued to report
good credit quality.
Real Estate and Construction
Real estate brokers reported that inventories of existing
homes for sale remained very low because homeowners
have been reluctant to give up their low mortgage rates.
Existing-home sales rose slightly in the current period but
remained well below the sales observed in prior years during the normally busy spring housing market. Homebuilders once again described their modest sales as better
than expected, and noted the industry continued to benefit
from the dynamics of the existing-home market.
Housing affordability remained low, and rents remained
high in the current period. Requests for assistance with
housing and utility bills rose slightly and continued to dominate the share of 211 requests in New Jersey and Pennsylvania. Over 30 percent of all requests in the two states
were related to housing, while 28 percent of the requests
involved utility bills.
According to contacts, construction activity for commercial
real estate held steady, but financing conditions for new
projects became more difficult. Leasing activity continued
to fall moderately as weakness in the office market continued to materialize. ■
Nonfinancial Services
On balance, nonmanufacturing activity continued to decline modestly. However, the decline appeared more
widespread than in the prior period. The indexes for new
orders and sales both turned negative, as the share of
For more information about District economic conditions visit:
www.philadelphiafed.org/regional-economy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ June 2023
Summary of Economic Activity
Overall, Fourth District business activity changed little since the prior reporting period. While consumer spending on
services remained solid, higher interest rates continued to constrain households’ big-ticket purchases. Meanwhile, several contacts suggested that higher interest rates led many businesses to delay projects. Accordingly, bankers reported
lower loan volumes for both household and business loans. Manufacturers reported little growth in orders, but many
continued to work through solid backlogs. Contacts have recently become more optimistic about the near-term outlook
for their firms, and many have lowered their expectations for a US recession in 2023. Still, uncertainty remained elevated and was likely reflected in cautious capital spending plans and slower employment growth. Wage pressures continued to ease somewhat as labor demand lessened and labor availability improved for many firms. Input cost pressures
also eased, and the share of firms reporting increased selling prices dipped to its lowest level since late 2020.
were rising. On balance, these contacts suggested that
costs were “stabilizing.” Manufacturers reported meaningful relief from input cost increases, as well, with one
plastics manufacturer stating that suppliers were raising
prices less often and by a smaller percentage than in the
past. Looking forward, contacts expected further relief
from nonlabor input cost pressures.
Labor Markets
Contact reports suggested modest employment growth
in the Fourth District during the most recent reporting
period, with demand for labor varying by industry segment. Demand was particularly strong among manufacturers that continued to report solid backlogs for their
goods. Still, a few manufacturers (and contacts in other
industries) reported that they were only hiring to fill key
production positions while leaving others unfilled (such
as those in support). The hesitance to fill support roles
was mainly a function of general economic uncertainty
or expectations for weaker demand for goods and services.
Price pressures eased, as well. Less than 40 percent of
firms recently raised selling prices, the lowest share
recorded since the end of 2020. Several goods producers raised prices to maintain margins or to “catch up” to
past cost increases. However, many also said they did
so cautiously. One manufacturer said it couldn’t raise
prices “without hurting demand or damaging customer
relationships.” Similarly, a logistics contact noted that
customers were increasingly resistant to any price increases and that freight prices fell further. Consumer
prices continued to increase on balance, but one discount retailer said that its prices eased somewhat as it
passed along “the disinflation…seen from some suppliers.”
On balance, wage pressures eased slightly during this
reporting period, with the share of contacts holding
wages steady (67 percent) at its highest in more than
two years. Some bankers, transportation firms, and
restauranteurs reported that they did not need to increase wages because workers were more readily available. By contrast, several manufacturing and construction firms reported that wage pressures remained high
amid continued difficulty filling key openings.
Consumer Spending
Consumer spending was mostly unchanged. Warmer
weather and resilient consumers bolstered sales for
restauranteurs and some non-auto retailers. Still, one
large general merchandiser noted that household budgets had tightened because of reduced SNAP benefits
and high inflation. He added that sales for discretionary
Prices
Nonlabor input costs pressures eased since the previous report. About a third of contacts said that costs had
increased in the prior two months, the smallest share
since September 2020. Construction contacts noted that
steel and lumber prices were falling but concrete prices
D-1
Federal Reserve Bank of Cleveland
items, such as televisions and video game systems, had
declined and that some customers had begun to choose
less expensive store-brand food items over national
brands. Some auto dealers said that sales rebounded
despite higher interest rates, while others stressed that
interest rates and elevated vehicle prices remained the
primary deterrents for potential customers. Contacts
generally expected consumer demand to hold steady in
the coming months.
funds. On balance, delinquency rates remained low by
historical standards and were little changed in recent
weeks, with one lender describing the delinquency rate
environment as “benign.” Looking forward, lenders expected further declines in loan volumes and little change
in deposits.
Nonfinancial Services
Demand for nonfinancial business services generally
declined recently. Contacts in professional and business
services noted that demand had flattened. Transportation services firms reported declines in activity, in large
part because firms continued to work down inventories,
some of which had been built up as a hedge against
supply chain disruptions earlier in the recovery. Looking
forward, firms in professional and business services
generally expected demand to rebound in the months
ahead. By contrast, logistics and freight contacts anticipated further declines, though one freight contact was
optimistic that “the bottom is in the not-too-distant future.”
Manufacturing
On balance, demand for manufactured goods was stable. Orders remained strong for aerospace-related products and for heavy trucks and trailers, and strengthening
international markets continued to bolster activity for
some firms. However, orders softened or remained weak
for some firms tied to consumer products as inventory
corrections continued. Steel manufacturers said that
orders were steady or slightly lower compared to those
in recent months, and industry contacts generally expected demand for their products to pick up in the second half of July following an expected seasonal slowdown earlier in the month. Likewise, manufacturers
across industry segments were notably optimistic and
expected demand for their products to increase in the
coming months.
Community Conditions
Community organizations reported a sharp increase in
the number of families seeking food assistance recently,
with one noting that it had seen a 35 percent jump since
March. Multiple contacts said that the loss of pandemicera Supplemental Nutrition Assistance Program (SNAP)
benefits in March, along with elevated food prices, contributed to the increase. One food pantry operator said,
“people are experiencing food insecurity more now than I
have seen in my seven years with the organization.”
Some organizations were forced to limit the frequency of
visits and quantity of food provided to households, exacerbating the strain on struggling families. Looking forward, some contacts expected food insecurity to rise
further during the summer as families whose children
received free and reduced lunches during the school
Real Estate and Construction
Demand for residential construction and real estate
changed little in recent weeks. Contacts reported that
higher interest rates and elevated home prices continued
to hinder demand. One homebuilder noted, “we’re getting sales, but on the slow side.” Going forward, contacts
were optimistic that demand would improve. One homebuilder noted that the limited supply of existing homes
would help to boost demand for new home construction.
Nonresidential construction and real estate activity remained soft. Several general contractors indicated that
high borrowing costs were dampening demand for construction, and several commercial real estate contacts
noted slowing in the commercial real estate investment
market.
year seek additional support. ■
Financial Services
Lenders reported weaker activity amid economic uncertainty and higher interest rates. Loan demand decreased, with declines noted for both household and
business lending. One banker said that many businesses were putting projects on hold because of economic
uncertainty unless the project is being subsidized by the
government. On the funding side, deposits were generally flat to down as banks continued to face competition for
deposits, particularly from entities such as money market
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 ■ June 2023
Summary of Economic Activity
The Fifth District economy grew slightly in recent weeks. Retailers and food service companies saw steady to increasing
consumer spending, particularly for seasonal goods. Auto sales, however, were down slightly and inventory levels remained very low. Travel and tourism picked up, but travel shifted more towards larger city and international travel. Nonfinancial services firms reported stable demand, but some noted that clients were holding back capital due to economic
uncertainties. Manufacturing activity slowed as new orders declined. District ports echoed that sentiment and noted that
imports slowed as retailers and manufacturers still had elevated inventory levels. Loaded exports, particularly agriculture
products, remained strong. Trucking firms also reported lower freight volumes this cycle. Residential real estate conditions softened as activity was still being restrained by a lack of available inventory. Commercial real estate markets were
mixed as retail and industrial segments remained strong but multifamily activity leveled off and office vacancy rates
rose. Commercial loan demand softened while consumer loan demand was little changed. Employment picked up moderately and wage growth eased slightly but wage pressures remained elevated amid a continued tight labor market.
Price growth continued to ease but remained elevated compared to pre-pandemic inflation rates.
Labor Markets
Manufacturing
Employment grew moderately over the most recent
reporting period. Businesses continued to face challenges finding workers, but those challenges were more
isolated to specific industries and skill-levels. A software
company reported that finding IT workers at reasonable
rates has become easier. Conversely, a company that
offers tour bus vacations struggled to find drivers and
mechanical technicians, which was keeping them from
operating at a higher level. Wage growth eased somewhat but there were some reports that wage pressures
remained high. One contact, for example, reported that
they were closely monitoring inflation and trying to adjust
wages to ensure they were providing a living wage for
their staff while remaining competitive in the market.
Fifth District manufacturing firms reported some slowdown in business activity during the most recent reporting period. Firms reported that rising interest rates and a
pullback in consumer spending on goods led to declines
in new orders. A dental laboratory reported not meeting
their numbers for the past six months due to a significant
slowdown in the dental market. A furniture manufacturer
reported that they were having layoffs for only the second time in their forty-two-year history due to declining
business conditions. Several contacts reported imbalances in inventory levels as finished goods inventories
were creeping upwards. This is especially true in the
retail manufacturing sector as retailers pulled back on
new orders.
Prices
Ports and Transportation
Price growth continued to moderate in recent weeks,
particularly for services. According to our most recent
surveys, prices received by manufacturers declined
sharply in June, falling below four percent year-over-year
growth. Services firms also saw price growth moderate
slightly in June, but the annual growth rate remained just
above five percent. A few businesses remarked that the
increased cost of capital was driving up their expenses
and they were increasing their prices as a result. However, some added that they were not able to push the full
cost through to customers, so margins were tightening.
Fifth District ports stated that loaded import volume was
down this period, but that volume was close to prepandemic levels. Many big retailers still have elevated
inventory levels causing a decrease in imports of consumer goods. However, there was a slight increase in
imports of machinery and parts. Loaded export volumes
were strong mainly driven by agricultural products and
lower value commodities. Spot prices remained low
though still slightly higher than in 2019. Container dwell
times shortened dramatically, and gate turn times were
E-1
Federal Reserve Bank of Richmond
not an issue. In the last month, airfreight was soft compared to recent years but still above 2019 levels and
was driven primarily by imports as exports were down
drastically.
Overall market activity in the commercial real estate
sector was mixed in the last month. Leasing remained
strong for retail and industrial properties with rents escalating this period. In the office market, vacancy rates and
space available for sublease increased due to companies downsizing. Rental rates in the office segment
remained flat; however, landlords were offering more
discounts and/or concessions to potential credit tenants.
In multifamily, lease rates were starting to flatten out.
Respondents stated that tighter credit availability was
starting to negatively impact investments into new projects. Commercial contractors noted a continued lack of
skilled labor, and also that the amount of work out to bid
has slowed substantially.
Trucking firms reported that shipping demand remained
soft this period as customers were still dealing with
elevated inventories and reduced orders. However, food
and pharmaceuticals shipping volumes were holding up
well. Spot shipping rates were at low levels as there was
a lot of excess capacity in the truck load segment. However, respondents indicated that they were able to get
moderate increases with their contract rates despite
customers being very price sensitive. Companies stated
that drivers were more readily available. Trucking firms
also remarked that the higher labor costs, as well as
dramatically higher costs of parts and new equipment,
were impacting profitability.
Banking and Finance
Loan demand slowed slightly across most loan types,
most notably in the commercial real estate and business
loan portfolios. This slowing of demand continued to be
attributed to rising interest rates and uncertain economic
conditions. Consumer loan demand remained stable,
with home equity loans showing moderate growth. Some
banks reported declines in deposits as customers moved
funds to higher yield products. Institutions also noted a
slight degrading of borrower’s credit quality due to their
increased costs of conducting business. Loan delinquency rates remain stable, but institutions have been closely
monitoring their portfolios.
Retail, Travel, and Tourism
Retailers reported steady to modest growth in sales in
recent weeks. Several of the businesses that saw increased sales noted that it was partly due to typical
seasonal patterns as they were geared towards summer
shopping. Restaurants and novelty food services reported strong sales and steady demand. Auto sales, on the
other hand, declined slightly and dealers commented
that limited inventory and elevated interest rates were
impeding sales volumes.
Nonfinancial Services
Travel and tourism increased slightly, on balance, but
several contacts saw some shifts in consumer behavior.
For example, travel picked up in Baltimore and Washington, D.C. while coastal areas of the district reported
slightly lower occupancy and revenues in recent months;
however, the expectation was for beach travel to pick up
going into the summer months. An airport contact said
that consumer travel was steady and saw more people
taking international flights than in recent years.
Nonfinancial service providers continued to report that
demand for their services as well as revenues had remained stable. One respondent noted they felt demand
was still being driven by a pent-up demand for commercial printing services held over from Covid. Others noted
that they have observed more clients preserving capital
in anticipation of economic uncertainty. Labor shortages
have begun to ease in certain industries, but wage pressures remained high. Respondents also noted a renewed focus on expense control at all levels of their
businesses in light of higher wages, higher interest
costs, and economic uncertainty. ■
Real Estate and Construction
Residential real estate respondents indicated that the
inventory of homes for sale remained constrained with
contract prices continuing to appreciate slightly. Overall,
the number of sales decreased primarily due to the low
housing inventory as well as the usual seasonal slowdown. In the last month, buyer traffic was steady and
days on market continued to be low. Prospective buyers
were not having any difficulties obtaining mortgages but
there were some issues with appraisals not coming in at
the escalated sales price. Residential construction firms
noted a decrease in demand for their services as homeowners were less willing to plan for large remodeling or
constructions projects.
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ June 2023
Summary of Economic Activity
The Sixth District economy grew at a measured pace from mid-May through June. Labor availability and retention improved, and wage pressures eased. On balance, nonlabor costs continued to moderate and pricing power was mixed.
Retail sales softened for discretionary items, but consumer spending on essentials remained solid. Auto sales were
strong. Domestic leisure travel declined while business and international travel rose; cruise demand was robust. Housing demand remained durable; home inventories fell, and house prices rose. Commercial real estate conditions were
mixed. Transportation activity slowed. Manufacturing experienced strong demand. Loan volume continued to rise, but
deposit growth slowed. Activity in the energy sector was stable. Agriculture demand slowed.
year-ahead inflation expectations also decreased in June
to 2.7 percent, on average, from 2.9 percent in May.
Labor Markets
The majority of Sixth District contacts reported that labor
availability and retention improved, and most firms continued to hire. However, challenges filling corporate
roles, skilled construction, and healthcare positions were
noted while, for some firms, entry-level hourly service
roles were easier to fill. A number of manufacturers
remained extremely short-staffed and utilized overtime to
run at capacity, while other manufacturing firms reported
stabilized employment levels and reduced overtime to
align with softer demand. Among those firms experiencing weaker demand, most remained reluctant to lay off
staff that they had endeavored to attract and retain, but
several slowed the pace of hiring except for exceptional
candidates or relied on attrition to shrink their workforce.
Consumer Spending and Tourism
Retailers described consumers as more value conscious
since the previous report. Discretionary spending on
items such as clothing, electronics, and recreation has
moderated amid a behavior shift to fewer store visits and
less impulse buying. However, spending on food and
beverages, household essentials and healthcare necessities rose. Retailers expect that demand will stabilize in
the second half of 2023. Automobile dealers reported
that sales remained resilient, although consumers have
begun to trade down to lower price-point models.
Tourism and hospitality contacts reported further softening demand for domestic leisure travel, while international, group, and business travel strengthened year over
year. Hotel occupancy across most destination beach
resorts fell since the previous report and those hoteliers
reported some diminished pricing power. Demand for
cruise travel and on-board spending remained robust.
Overall, wage growth remained higher than prepandemic levels. Most contacts reported that wage
pressures continued to ease, and the majority said the
pace of increases had begun to moderate, in line with
expectations.
Prices
Construction and Real Estate
Nonlabor costs continued to stabilize over the reporting
period. However, several Florida contacts noted significant increases in insurance costs. The cost of food
products moderated, aided by decreases in freight and
overland delivery costs. Construction input costs also
declined, with commodities like steel and lumber falling
to or near pre-pandemic levels. While wholesalers increasingly reported pushback from clients on price increases, consumer prices remained elevated as retailers
saw minimal impact to demand. The Atlanta Fed’s Business Inflation Expectations survey showed year-overyear unit cost growth was 3.1 percent, on average, in
June, down significantly from 3.5 percent in May. Firms'
Housing demand remained strong throughout the District
amid declining existing home inventories. Home sales in
many metro areas rose to near seasonal norms, creating
persistent supply shortages. Home prices experienced
steady upward pressure on a monthly basis as a result
of low supply. Limited existing home inventories drove
demand for new home construction. Though down from
last year, the share of builders offering incentives to
attract homebuyers, such as interest rate buydowns,
remained high. Home ownership affordability throughout
most markets in the District worsened as home prices
and mortgage rates trended higher.
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Federal Reserve Bank of Atlanta
or up over the reporting period. While oil and gas production continued, regional output was generally unchanged. Refiners described high utilization to meet
summer demand for gasoline. Chemical producers noted
strong demand for products that support the renewables
sector, which continued to experience considerable
growth in the manufacturing of batteries, solar cells,
turbines, renewable fuels, and more. Utility providers
reported commercial segment growth across the District,
although industrial segment growth was concentrated in
regions that experienced gains from commodity production.
Contacts reported mixed conditions in the commercial
real estate (CRE) sector. While modestly decelerating,
general retail and industrial activity remained at healthy
levels. The multifamily sector cooled as demand for
luxury/higher-priced units deteriorated. While declining
overall, office sector conditions were mixed; activity in
newer buildings was solid, while occupancy in older
buildings declined as tenants vacated to newer structures. Additionally, some older buildings have incurred
sizeable declines in value. More contacts reported concerns regarding financing, as some banks heightened
underwriting standards and reduced funding commitments. Contacts also noted more uncertainty amid declining CRE values.
Agriculture
Agricultural conditions were soft over the reporting period. Oversupplies of cheese kept demand for milk low.
With fewer avian flu outbreaks, chicken exports increased somewhat, but overall demand for chicken
remained down. Citrus growers experienced good returns on sales but weak profits because of low yields.
Row crops were generally healthy, although severe
storms damaged crops in some parts of Mississippi and
Alabama. Demand for cotton continued to fall. The cattle
market remained strong as demand for beef remained
high amid low supply.■
Transportation
Transportation activity slowed further over the reporting
period. Ocean carriers and ports reported declines in
container traffic, owing to inventory destocking by retailers and weaker global demand. District railroads reported significant decreases in year-over-year freight volumes, including double-digit decreases in intermodal
shipments. Logistics firms reported revenues from warehousing were flat compared with 2022; higher prices
helped to offset volume declines.
Manufacturing
Many manufacturers reported healthy business conditions over the reporting period. Some contacts noted a
slight decrease in demand, which many characterized as
a normalization, and most firms reported robust pipelines
of orders. While lead times and availability of many
inputs have improved, firms noted lingering shortages of
some inputs, particularly electrical switchgears. Auto
manufacturers saw strong demand but noted signs of
trade-downs to less expensive vehicles and expect to
see some slowing in the coming months.
Banking and Finance
On balance, growth slowed at District financial institutions, led by a slight decline in the deposit base in recent
months as interest rate increases continued to encourage customers to move deposits into higher-yielding
alternatives. To help offset slowing deposit growth on a
year-over-year basis, institutions steadily increased
interest rates on deposits. Institutions reported continued
loan growth, primarily residential, construction, and
development, which was offset by a decline in securities
portfolios. Many of the financial institutions have yet to
report significant increases in delinquencies, though
performance varied widely. Contacts expect asset quality
to normalize over the coming quarters.
Energy
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
Contacts reported that most energy segments were flat
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ June 2023
Summary of Economic Activity
Economic activity in the Seventh District was little changed overall in late May and June. Contacts generally expected a
small decline in demand over the next year and many expressed concerns about the potential for a recession. Employment increased moderately; nonbusiness contacts saw little change in activity; consumer spending was flat; business
spending and construction and real estate activity declined slightly; and manufacturing decreased modestly. Prices and
wages rose moderately, while financial conditions tightened slightly further. Expectations for farm incomes in 2023
decreased some.
Labor Markets
Consumer Spending
Employment rose moderately in late May and June and
contacts expected a similar rate of increase over the
next 12 months. Many contacts continued to have difficulty finding workers, particularly higher skilled labor,
though many also said that hiring had become easier,
and several noted they were fully staffed. One program
administrator observed that some manufacturers were
managing changing labor needs by briefly laying off
workers and then rehiring them, sometimes repeatedly.
Wage and benefit costs rose moderately. A few contacts
noted wage increases in the 3 to 5 percent range in
recent labor union contract agreements. Some indicated
healthcare costs had risen significantly.
Consumer spending was little changed in late May and
June. Nonauto retail spending was flat overall, with
contacts highlighting increased sales of furniture and
lawn and garden products but declining sales at convenience stores and in the electronics and building materials
segments. Spending further shifted toward essential
items and away from discretionary ones, and for many
products, consumers continued to trade down in quality
or convenience. Light vehicle sales were unchanged but
at a higher level than had been expected earlier in the
year. Leisure and hospitality spending was also flat but
at a strong level, with contacts reporting a small increase
in spending at amusement parks and tourist attractions
but less air travel. Contacts indicated that consumers
were less likely to trade down in their leisure and hospitality purchases compared with other spending categories.
Prices
Prices rose moderately over the reporting period and
contacts expected a similar rate of increase over the
next 12 months. Nonlabor costs were up modestly, with
rising raw materials and energy costs contributing to the
increase. Contacts continued to note that growth in
shipping costs had slowed noticeably. One contact in
finance reported improved margins for his manufacturing
clients, who saw input costs come down but were able to
maintain higher selling prices. Consumer prices generally increased moderately due to the continued elevated
level of demand and the passthrough of higher costs.
Business Spending
Business spending declined slightly in late May and
June. Capital expenditures were unchanged on balance,
with several contacts reporting purchases of new equipment or software. Freight volumes declined further.
Demand for industrial, commercial, and residential energy increased slightly. Inventories for most retailers were
a little higher than desired, with one contact noting ele-
G-1
Federal Reserve Bank of Chicago
vated stocks of apparel, beauty items, and sporting and
outdoor goods. Auto inventories rose slightly but remained below pre-pandemic levels, with contacts noting
that railcar shortages were slowing deliveries of vehicles
to dealers. In manufacturing, inventories increased modestly, and contacts said that supply chain issues, while
still arising at times, had returned to pre-pandemic
norms.
Agriculture
Expectations for Seventh District farm incomes for 2023
deteriorated some as drought expanded throughout the
District. One contact said, “It is time to be concerned, but
too soon to panic.” Crops were behind normal growing
progress. Expectations for this year’s corn crop worsened more than for soybeans because corn is more
sensitive to drought at this growth stage. Crop prices
were volatile during the reporting period; while corn
prices ended down, soybean prices were up, and wheat
prices were about the same. Some input costs were
lower. Prices for milk were down once again, extending
losses for dairy farms. Although hog prices moved up
some, producers continued to struggle to turn a profit.
Egg prices edged up. Cattle prices made further gains,
as drought limited water and forage availability, forcing
farmers to trim their herd sizes.
Construction and Real Estate
Construction and real estate activity decreased slightly
over the reporting period. Residential construction ticked
down, reflecting a slowdown in single-family development. New home sales decreased slightly, while new
home prices increased slightly. Residential real estate
activity was little changed. An Iowa contact said that
cash transactions continued to be a larger proportion of
sales than they have been historically as high interest
rates were pushing borrowers out of the market. Existing
home prices were down some, while rents were flat.
Nonresidential construction activity slowed overall as
high interest rates, elevated cost pressures, and shortages of key inputs such as electrical components weighed
on activity. Nonresidential construction prices remained
at elevated levels. Commercial real estate activity decreased modestly. Prices decreased slightly, rents fell
modestly, and vacancy rates were up slightly.
Community Conditions
Community, nonprofit, and small business support contacts reported little change in activity, which was at a
robust level. That said, there were signs the economy
was cooling. State government officials saw slowing
growth in tax revenues and a small increase in demand
for unemployment insurance. High interest rates were
challenging Community Development Finance Institutions’ efforts to lend at affordable rates to low- and moderate-income borrowers, including small businesses and
prospective homeowners. Contacts offering small business services, in particular to small manufacturers, reported that a lack of workers remained an important
issue and was holding back production. At the same
time, contacts engaged with low wage workers stressed
that wages were too low to meet daily needs in the face
of rising costs, particularly for housing. ■
Manufacturing
Manufacturing demand decreased modestly in late May
and June and backlogs were down moderately. Steel
orders were up slightly, supported by solid demand from
the auto and construction industries. Fabricated metals
orders decreased slightly, in part due to weaker demand
in the aerospace sector. Machinery sales also decreased
slightly, with contacts highlighting less demand from the
auto industry. In contrast, auto industry contacts said
production was steady on balance. Heavy truck orders
increased slightly amidst very low inventories.
Banking and Finance
Financial conditions tightened slightly further on balance
during the reporting period. Bond and equity market
values edged up, while volatility edged down. Business
loan demand decreased modestly, as borrowing rates
rose and standards tightened some. One contact said
weak demand was concentrated among clients in the
consumer discretionary, durable goods, and retail sectors, which were seeing slowing sales. Business loan
quality deteriorated a bit. Consumer loan demand decreased slightly overall, but several contacts noted greater credit card usage. Consumer loan quality decreased
slightly, while borrowing rates rose modestly and lending
standards were somewhat tighter.
For more information about District economic conditions visit:
chicagofed.org/cfsec
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ June 2023
Summary of Economic Activity
Economic conditions have remained unchanged since our previous report. Although employers reported better employee retention, they continued to have difficulties finding workers, especially skilled ones. Wage pressures lessened slightly. Consumer spending was largely steady, though contacts reported a shift away from discretionary goods and declining demand for big-ticket purchases that require financing. The residential real estate sector saw activity increase, but
the commercial real estate sector reported worsening conditions at non-premium office and retail spaces. Banking contacts reported moderate declines in loan demand and compressed net interest margins. Agriculture conditions declined
moderately, and contacts expressed concern about commodity prices falling while input costs remain high. The overall
outlook remains pessimistic but has improved slightly.
Labor Markets
Prices
Employment has remained unchanged since our previous report. Employers continue to report tight labor
markets. Unemployment rates remain low and hiring
workers has remained a burden for several industries.
Many contacts have reported using technology improvements to deal with labor shortages. A healthcare contact
in Little Rock reported they have begun to examine how
AI can help with paperwork to offset persistent labor
shortages. A Louisville transportation contact noted that
while companies are still competing for workers, there is
less job switching than in previous months. A northwest
Arkansas food service company reported receiving
unsolicited resumes which hadn’t happened in “quite
some time.”
Prices have increased modestly since our previous
report. Although respondents’ plans for future price
increases varied, two comments were consistent. First,
nearly all respondents reported higher labor costs. Second, many contacts reported an inability to fully pass on
increased costs to consumers, which has compressed
margins. A contact in the grocery industry reported that
they would pass about 25-33% of higher costs to consumers. The same contact reported decreasing consumer demand and increasing consumer price sensitivity. A
contact in the car industry plans to increase prices, but at
a slower rate than before in order to maintain competition in the market. Other contacts reported little to no
increase in non-labor cost pressures. A contact in the
furniture industry reported that prices may decrease in
the future after recouping previous losses from excess
freight costs.
Wages have grown slightly since our previous report.
Most contacts across the region reported either slight or
no wage increases. Retail contacts in Little Rock have
reported increasing their minimum wages in the past
month to help fill labor shortages. A workforce contact
noted that wage growth is still strong in construction
trades due to high demand and a shortage of skilled
workers.
Consumer Spending
District general retailers, auto dealers, and hospitality
contacts reported mixed business activity and a slightly
negative outlook. Retailers in St. Louis noted that business activity was mixed over the past month, and they
are expecting interest rates to be a primary factor affecting consumer demand over the next quarter. An Arkansas retailer noted that profit margins had fallen in recent
H-1
Federal Reserve Bank of St. Louis
weeks due to consumers spending more on grocery
essentials and less on higher-margin merchandise. A
Little Rock auto dealer reported that business activity
was down slightly as bank financing continues to tighten.
An Arkansas contact reported that sales of high-end
boats are steady and low-end boats are down slightly,
but sales for middle-market boats have collapsed. Restaurants in Memphis expressed concern that crime might
lead to faltering consumer demand. District hospitality
contacts noted mixed business activity over the past
month but expect to have a typical busy summer.
Arkansas contact noted that home price growth has
decelerated in recent weeks.
Memphis-area real estate and construction contacts
reported spillover effects from a major EV manufacturing
project. Public construction elsewhere in the District has
remained busy since our previous report, while private
projects are starting to press pause for the moment. A
Louisville commercial construction contact reported
having 12-18 months of existing projects to complete but
that some are aging out or being put on hold due to
increased costs. A Louisville commercial real estate
contact reported a trend of tenants moving from class “B”
office spaces to class “A” spaces at reduced rates and
noted that this shows no signs of slowing down in the
future.
Manufacturing
Manufacturing activity has increased slightly since our
previous report. Firms in Missouri and Arkansas have
reported slight upticks in new orders and production.
Congestion with supply chains and transportation continues to ease, while production schedules also remain
steady. A new glass bottle manufacturing facility broke
ground in Bowling Green, Kentucky, creating 140 new
jobs and a capital investment of $240 million. Two furniture manufacturers in Lee County, Tennessee, added
130 new employees, with an increased payroll of $4.5
million. Firms remain optimistic that demand will remain
consistent at least in the near term.
Banking and Finance
Banking conditions in the District have remained stable
since our previous report, even as lending activity continues to soften. Year-over-year loan volume declined
moderately. Contacts reported that small business lending in particular has been slow, due to higher interest
rates. Total deposits growth, on the other hand, has
seen a strong increase since the past quarter. Rising
deposit interest rates continue to create a very competitive market for deposits, which is compressing net interest margins. Customer concerns regarding deposit safety remain relatively low in the aftermath of the Silicon
Valley Bank and Signature Bank failures. Although delinquency rates have continued to rise toward prepandemic levels, contacts maintain a positive near-term
outlook on credit quality. A retailer reported that credit
card usage has risen sharply over the past few months,
bringing credit utilization to its highest levels since 2019.
Nonfinancial Services
Conditions in the nonfinancial services sector have been
largely unchanged since our previous report. Air traffic
rose slightly across the District. Contacts reported that
labor shortages have constrained public transit in St.
Louis, leading workers to look for alternative transportation options. A Louisville contact reported continually
improving conditions in the transportation sector. Little
Rock contacts reported that rising healthcare costs and
labor shortages have put a strain on the industry. The
Little Rock bicycling industry has seen significant growth
in recent quarters, generating more than $150 million in
total economic impact from jobs to tourism to taxes. A St.
Louis workforce contact reported an increase in informal
childcare providers offering small-scale services.
Agriculture and Natural Resources
District agriculture conditions declined moderately relative to the previous reporting period. Between the end of
May and end of June, the percentages of corn, cotton,
rice, and soybeans rated fair or better saw slight to moderate decreases across the board. Compared with this
time last year, overall crop conditions have declined
moderately. Crop conditions both began lower and decreased more over the period when compared with this
time last year. With the exception of cotton, which increased modestly, all other individual crop conditions
were worse compared with last year. Contacts in the
Little Rock region reported some anxiety about the expiring farm bill later this year. While commodity prices
remain high generally, some have begun retreating while
input and fuel costs remain high, leading to profitability
concerns as we enter the second half of the year. ■
Real Estate and Construction
Residential real estate has seen slightly increased activity since our previous report. Median sale prices for residential real estate in the Little Rock, Louisville, and
Memphis MSAs rose slightly in May, while median sale
prices remained unchanged in the St. Louis MSA. Inventory dropped slightly in the Little Rock, Louisville, and
Memphis MSAs in the past month. In the Louisville and
Memphis MSAs, pending sales have jumped by 20%
since our previous report. In the four major District
MSAs, rental rates for residential real estate have seen
small increases since our previous report. A northwest
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ June 2023
Summary of Economic Activity
Economic activity in the Ninth District increased slightly since the previous report. Employment grew moderately, helped
by summer demand. Wage pressures remained moderate, while price pressures were mild. Growth was noted in services, commercial construction, and manufacturing, while consumer spending was flat. Residential construction and real
estate activity remained low, and agriculture weakened due to drought conditions. Energy exploration also fell slightly.
Minority- and women-owned businesses reported steady activity and a positive outlook.
Labor Markets
Prices
Employment grew moderately since the last report.
Labor demand remained high overall, in part because of
normal seasonal increases, according to internal surveys
and most contacts. Labor availability remained tight, but
improved according to some contacts, which had
upsides for both employers and workers. A Minneapolis
workforce development contact noted an increase in
layoffs, but so far they “haven’t seen these layoffs turn
into dislocated workers” because the workers “are doing
OK finding new jobs on their own.” Employers also
continued adjusting their business and labor models. A
restaurant in central Minnesota reported that it bought an
apartment building to provide workers with nearby
housing. A North Dakota staffing firm noted that demand
for contingent work had fallen because “most clients just
want full-time help,” and available workers preferred fulltime jobs to temporary work. Counter-intuitively, he said,
“if the economy softens, we expect demand for temp
staffing assignments to increase.”
Price pressures were mild overall since the previous
report. Half of firms responding to the Minneapolis Fed’s
annual professional services survey reported that the
prices they charged to customers had increased from a
year ago, and nearly two-thirds said their nonlabor input
costs increased. Manufacturing and other contacts
reported that freight rates had declined substantially from
a year ago. “It feels like our vendors are squeezing the
last increases out of us,” said a manufacturer. Retail fuel
prices in District states were little changed since the
previous report. Prices received by farmers increased in
May from a year earlier for barley, chickpeas, potatoes,
hay, cattle, and turkeys; prices decreased from a year
earlier for corn, wheat, soybeans, milk, hogs, chickens,
eggs, dry edible beans, lentils, and canola.
Worker Experience
Most workers who responded to a recent Minneapolis
Fed survey reported job stability. About a fifth were
looking for a different job in hopes of increased income
but were facing difficulties in hearing back from
employers or finding a job that paid enough. A few
professional workers in the Minneapolis-St. Paul area
said they were considering a temporary move out of
state to work remotely while their company's work-fromhome flexibility was still in place. According to a
Minnesota union contact, recently certified nursing
assistants were choosing to work in retail instead of
health care, where wages were similar but stress was
Wage pressures were moderate overall. A monthly
survey of District firms showed persistent but moderate
wage pressures. In Montana, temp jobs in office support
and transportation have seen significant wage increases
so far this year, while wages for construction and
manufacturing temp jobs have been flat. A Minneapolis
tech staffing firm reported that technical positions have
“completely reversed” from a candidate market to a client
market, with job seekers “jumping at the first offer.”
I-1
Federal Reserve Bank of Minneapolis
much higher. A significant number of nurses were
reportedly pulling back from traveling jobs as federal
funding abated, and some hospitals offered up to
$15,000 after taxes for an 18-month commitment to
permanent positions.
property continued to struggle. Increased subleasing
was compounding already-higher vacancy rates. Two
Minneapolis office towers reportedly sold at steep
discounts from their previous sale prices. Residential
real estate sales remained stalled. A few regional
markets showed modest improvement, but most
continued to see much lower monthly sales compared
with last year.
Consumer Spending
Consumer spending was flat overall since the last report.
Gross sales in South Dakota and Wisconsin have
softened for several consecutive months year over year,
and retail contacts have also reported lower sales.
Tourism contacts were generally upbeat about overall
activity levels but noted some pullback in travelers’
average spending. Accommodations and lodging tax
collections in Montana remained strong, and lodging
sources reported strong bookings for the summer. Airline
travel has continued to grow, though monthly increases
have moderated a bit at some airports after steady
double-digit gains. Recent new-vehicle sales have
increased notably at some dealerships, thanks to
stronger inventory from vehicle makers. Used car sales,
however, have fallen. Sales of recreational and
powersport vehicles improved with warmer weather but
remained soft year over year.
Manufacturing
District manufacturing activity increased slightly since the
previous report. A regional manufacturing index
indicated increased activity in Minnesota, North Dakota,
and South Dakota in May from a month earlier.
Sentiment among manufacturing contacts was more
mixed. A metal fabricator reported that recent activity
was strong and could be stronger if they could secure
adequate workers. Reports from heavy equipment
producers indicated orders had slowed significantly as
more customers were choosing to repair rather than
replace equipment due to higher financing costs.
Agriculture, Energy, and Natural Resources
District agricultural conditions weakened slightly since
the last report. Most of the District’s corn and soybean
crop was reportedly in good or excellent condition;
however, wheat crops were in worse shape as the
harvest approached. Persistent drought conditions in the
eastern portion of the District, particularly in South
Dakota, improved slightly with recent precipitation.
District oil and gas exploration activity decreased slightly
since the previous report.
Services
Activity in the professional services sector increased
modestly. Respondents to the annual services survey
reported increased sales and productivity over last year,
while profits declined slightly. Firms’ expectations were
mildly positive for the coming 12 months.
Construction and Real Estate
Minority- and Women-Owned Business Enterprises
Construction activity was slightly higher since the last
report. Construction firms overall reported growth in
recent revenues, with expectations of further growth this
summer. Industry data and contacts suggested that
infrastructure and energy sectors were seeing stronger
activity than other subsectors. But inflated material costs
continue to be a drag. A pavement source in Minnesota
noted that the sector was slower than expected; public
funding for construction projects has been “eaten up by
inflation.” Reports of project cancellations also continued
across different subsectors. A general contractor in
northeastern Minnesota said, “We are busy but there
appears to be less opportunities than usual for this time
of year.” Several contacts noted that subcontractors
remained busy, but projects tended to be smaller jobs.
Residential construction remained low but there were
modest signs of improvement in single-family permitting
in some markets.
Activity among minority- and women-owned business
contacts remained steady, and their outlook for the
following months was positive overall. While contacts still
perceived prices as being high, they expected prices
would remain flat in the coming months. Hospitality and
retail business owners were still able to pass higher
costs down to consumers but were skeptical of their
ability to continue doing so. Demand for workers was
strong, and the ability to hire remained challenging.
While some contacts were making downward revisions
to their planned capital expenditures because of higher
interest rates, many others were reportedly moving
forward with investing. A supplier of restaurant
equipment shared that demand was even higher this
year among minority-owned restaurants because they
tend to rely less on financing. ■
Commercial real estate was down since the last report.
Most subsectors showed little change. However, office
For more information about District economic conditions
visit: minneapolisfed.org/region-and-community
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ June 2023
Summary of Economic Activity
The level of economic activity across the Tenth District changed little during June, with a mix in performance across segments. Although hiring remained flat generally, expected employment levels at most businesses continued to point downward. Businesses predominantly reported relying on natural turnover and attrition to reduce their headcounts, rather than
layoffs. Consumer spending rose, but at a more moderate pace after surging in recent months. Homeowners in several
District states indicated that recent changes to tax assessments of their homes increased their monthly housing expenses, which could persistently impair their ability to spend on more discretionary items. Concerns about the adverse effects
of higher financing costs on credit quality were pervasive, spanning consumer segments, commercial real estate, and
small businesses. Energy activity in the District decreased significantly as weak oil and gas prices continued to squeeze
profitability. Oil and gas contacts noted that capital expenditures are down from this time last year and further declines are
expected, despite steady access to credit. Expectations that dry conditions will reduce crop yields pushed several commodity prices higher, but contacts noted that lower production could still limit revenues for many producers.
Labor Markets
Prices
Labor conditions remained mostly unchanged in the
Tenth District during June, with noticeable differences
across sectors. Manufacturing contacts reported modest
declines in employment amid slowing orders and weakening demand. In contrast, services contacts reported a
slight increase in hiring driven by steady consumer
spending. Despite the more sluggish pace of hiring
recently, wages continued to grow moderately driven
largely by still-tight labor conditions for services firms.
The pace of price growth was mixed across the regional
economy. Manufacturing contacts reported prices grew
at a slight pace, continuing to moderate from historically
high growth. Most non-durable manufacturers even
reported declines in prices for finished products. But
services businesses reported steady price growth at a
moderate pace for inputs and selling prices, and some
expansion of profit margins. Particularly, retail trade and
leisure and hospitality businesses demonstrated improved ability to pass price increases to customers. Most
businesses expected prices to continue to increase
moderately over the next six months.
Although the level of hiring was mostly unchanged,
expectations for job growth and labor utilization over the
next 6 months continued to soften. In fact, contacts
generally expected a slight decline in their employment
levels over the coming months and are reportedly already reducing hours worked. When asked, the overwhelming majority of contacts indicated they are not yet
planning to layoff workers to reach a lower headcount.
Instead, they indicated plans to post fewer positions and
pause hiring activity in lieu of laying off employees. For
example, one contact expressed that “pausing hiring
now and relying on attrition helps to avoid harder decisions later.”
Consumer Spending
Following a surge in spending in recent months, the
pace of spending growth slowed to a moderate pace in
June. Contacts at restaurants and retail establishments
reported ongoing strength, but consumers were reportedly much more sensitive to hotel rates in recent weeks.
Several contacts noted a pickup in business travel during
the weekdays partially offset the moderate decline in
weekend hotel stays by leisure travelers, and that occupancy declined last month after rising steadily for over a
year. Auto purchases remained subdued in most District
states.
J-1
Federal Reserve Bank of Kansas City
Community Conditions
Community and Regional Banking
Small and micro businesses continued to experience
financial difficulties due to the rising cost of inputs and
hiring constraints. Contacts reported recent financial
challenges caused them to increasingly access nontraditional forms of credit with higher interest rates, such
as credit cards and online lending platforms. Moreover, a
growing number of businesses reported paying only their
minimum credit card payment, or missing payments
completely, which has negatively impacted their credit
reports. While distressed financial conditions limited
access to loans from traditional lenders, community
development financial institutions reported strength in
the ability to provide loans with rates below 10% for
qualified borrowers.
Contacts’ views on loan demand were mixed across the
District last month, but concerns about the effects of
rising credit costs, particularly on consumer loan types,
were ubiquitous. Contacts also noted concerns for commercial real estate (CRE) credit quality, particularly
credits backed by office properties, and expected credit
quality to worsen across all loan types over the next six
months. Credit standards remained unchanged, though
some respondents highlighted reduced risk appetite for
CRE deals. Deposit balances declined in June as customers moved to competitors offering higher yields or
invested in U.S. Treasuries after the resolution of the
debt ceiling. Deposit insurance coverage and the desire
for diversification also drove movement of large customer balances and contributed to continued tightening in
banking system liquidity.
Manufacturing and Other Business Activity
Manufacturing activity declined at a moderate pace, but
service contacts reported a moderate increase in activity.
Manufacturing contacts reported broad based declines,
including reduced order demand and shorter order backlogs. Furthermore, manufacturing contacts expect business conditions will soften in coming months, noting
continued weakening in order back logs and a further
deterioration in demand. Despite softening in business
conditions for manufacturing firms, business contacts
expressed a continued willingness invest through capital
improvement projects, albeit at a much slower pace than
a year ago. Service contacts generally indicated much
healthier business conditions with a moderate expansion
in the demand for their services. Despite current favorable business conditions, service contacts expect a softening in activity in the coming months driven by expectations for weaking demand. Contacts in advertising and
marketing were an exception, already feeling a stark
pullback in customer demand. Moreover, advertising
contacts indicated the onset of AI was accelerating the
declines in demand for out-of-house service providers.
Energy
Tenth District energy activity declined moderately last
month. The number of active rigs decreased significantly
as weak oil and gas prices continued to squeeze profitability. District firms reported a substantial decline in revenues, profits, and supplier delivery times since the last
report. Profits and supplier delivery times are expected
to continue declining over the next six months. Accordingly, District firms anticipate further reduction in activity
in the near term. The average price needed for a substantial increase in drilling to occur remains above longterm price expectations for oil and gas, indicating that
future production growth may be constrained for a while.
Contacts noted that capital expenditures are down from
this time last year and further declines were expected,
despite steady access to credit.
Agriculture
Agricultural economic conditions in the Tenth District
were steady through June. The price of most major
commodities increased moderately from the previous
month as drought intensified in many major crop production areas across the nation. Expectations for dry conditions to reduce yields pushed prices higher, but lower
production could limit revenues for some producers.
Through mid-June, an average of about 15% of corn and
soybean acres and nearly 30% of winter wheat acres
were in poor or very poor condition across all District
states. Dry weather also continued to limit grass and
feed supplies, resulting in higher costs for many cattle
producers. Despite concerns about the potential for
reduced profitability ahead, agricultural lenders continued to report strong credit conditions. ■
Real Estate and Construction
Several home builders indicated activity picked up over
the past couple of months. Construction was supported
both by promotional deals offered by builders that mitigated the effects of higher mortgage rates and by a
stabilization in the costs of building materials. Some
contacts suggested that slowing commercial real estate
construction could further boost growth in the supply of
housing over coming months because workers may be
more available and materials prices somewhat lower.
Homeowners in several District states indicated recent
changes to tax assessments of their homes increased
monthly expenses, which may persistently impair their
spending power.
J-2
For more information about District economic conditions visit:
www.KansasCityFed.org/research/regional-research
Federal Reserve Bank of
Dallas
The Beige Book ■ June 2023
Summary of Economic Activity
The Eleventh District economy continued to expand modestly buoyed by gains in the service sector and single-family
housing. Manufacturing output and retail sales fell. Credit conditions tightened further, and loan demand continued to
decline. Drilling activity dipped due to lower oil and gas prices, while recent rains boosted district agricultural conditions.
Local nonprofits continued to cite higher demand for assistance. Employment rose moderately, and wage growth remained high. Input cost and selling price pressures were elevated in the service sector but largely subsided in manufacturing. Perceptions of business conditions continued to worsen as uncertainty rose, and contacts noted that diminishing
demand, higher labor costs, the rising cost of credit, and inflation were weighing on outlooks.
Labor Markets
reported high ticket prices amid strong demand and
constrained capacity.
Employment grew moderately over the reporting period.
Hiring slowed to a crawl in manufacturing, while service
sector firms added to payrolls at an average pace. While
oilfield services firms were still hiring and noted significant challenges in recruiting workers, more layoffs were
seen in natural gas regions due to weak outlooks. Scattered reports of layoffs also came from transportation
services and manufacturing. Recruitment remained a
challenge for several firms. Reports of labor supply
constraints continued in the health care sector and there
were mentions of worker shortages in some other sectors as well, including transportation and retail. In a June
Dallas Fed survey of more than 350 executives, 44
percent of firms noted being understaffed and looking to
hire while 12 percent said they were opting not to hire
despite being shorthanded.
Manufacturing
Texas manufacturing output contracted slightly in June,
following several months of largely flat activity. Output
was flat to down in many industries, though increases
were seen in fabricated metals, machinery and transportation equipment manufacturing. New orders fell at a
fairly similar pace as in the prior reporting period, which
a few manufacturers attributed to customer destocking
and slowing construction activity. Reports from refineries
and chemical producers were mixed. Overall, manufacturing outlooks worsened further, and uncertainty continued to climb.
Retail Sales
Retail sales dipped modestly in May and June after
increasing in April. Auto dealers noted mixed activity,
with some reporting strong demand for new vehicles and
others noting declines. Pharmacies and building material
and garden supply retailers continued to cite higher
sales, while clothing, food and beverage, and nonstore
retailers saw declines. Inventories increased on net.
Overall outlooks were little changed but weak, and some
contacts said it remained challenging to plan for the next
six to 12 months.
Wage pressures were little changed, remaining elevated.
Higher labor costs continued to be a primary concern for
many firms including nonprofits, though there were some
mentions of easing in IT wages.
Prices
Price pressures were mixed; still elevated in the service
sector but fully subsided in manufacturing. Fuel and
construction materials prices were flat to down over the
reporting period. Oilfield services firms reported declines
in day rates for drilling rigs but stable frac fleet costs.
Several contacts cited higher borrowing costs. Airlines
Nonfinancial Services
Service sector activity continued to expand albeit at a
K-1
Federal Reserve Bank of Dallas
rather modest pace in June. Revenue growth was led by
transportation and warehousing services followed by
miscellaneous service and professional, scientific, and
technical service firms. Healthcare revenues declined,
and demand for health services, though improving, remained below pre-pandemic levels. Accommodation and
food services firms said revenues continued to weaken
which they attributed to a slowdown in leisure spending
stemming from economic uncertainty. Staffing firms
noted mixed demand, with flat activity in manufacturing
but persistent strong placements of white-collar workers
in the service sector, particularly healthcare. Airlines
continued to report strong demand, mostly for leisure
travel. Business travel activity remained uneven, with
solid demand from the public sector but declining activity
from the technology and energy industries. Overall outlooks were flat, but several contacts said that heightened
business uncertainty had put buying decisions and projects on hold.
Loan nonperformance increased, with the rise led by
commercial real estate loans. Credit standards and
terms continued to tighten, and loan pricing continued to
rise. Bankers’ outlooks remained pessimistic, with contacts expecting a further contraction in business activity
and an increase in nonperforming loans over the next six
months.
Energy
Drilling activity for oil and gas wells declined over the
past six weeks. The Eleventh District rig count fell moderately as lower prices for crude and natural gas made
some projects uneconomical. Well completions were
holding up better than drilling activity. Most contacts
reported that tighter credit conditions since February
have had slight to no impact on their firms, though a few
independent producers said it had considerably reduced
their ability to invest in new projects. Outlooks varied.
The industry is still largely expected to increase oildirected drilling and completion activities modestly
through year end, while prospects on the natural gas
side remained weak due to subdued prices.
Construction and Real Estate
Housing demand rose during the reporting period. Existing-home sales increased, and builders noted solid
demand, particularly of quick move-in or inventory
homes, as buyers were hesitant to deal with the uncertainty surrounding mortgage rates. Dallas–Fort Worth
and Houston were characterized as the strongest markets. Incentives such as rate buydowns remained in
place, and prices were largely stable, though there were
reports of increases in selected areas. Construction
cycle times have improved, though a shortage of transformers was dampening completions. Builders have
reaccumulated their backlogs of build-to-suit homes, and
housing starts are expected to increase in the second
half of the year. Outlooks remained cautious, and contacts noted tighter lending for construction and development loans.
Agriculture
Drought conditions eased substantially over the past six
weeks, with now less than a quarter of the district in
drought. Increased soil moisture broadly improved crop
and pasture conditions, though heavy rains caused
significant disruption to cotton planting in the Texas High
Plains. A sizeable portion of cotton acreage in that area
may not be harvestable this year, either because of
prevented planting or crop flooding. Row crop prices
generally moved up over the reporting period, and cattle
prices increased dramatically, driven by steady demand
for meat but reduced supplies of both cattle and beef.
Community Perspectives
Nonprofits noted increased demand for their services.
Housing instability and affordability remained a top concern, and several contacts said that inflation and gentrification of neighborhoods has made housing costs, including property taxes, unaffordable for low to moderate
income households. As a result, some are doubling up
and living with other families in the same home. Fundraising was a challenge for some nonprofits, and a contact noted that the American Rescue Plan Act (ARPA)
funds were running low. A nonprofit said age restrictions
on certain program funding was making it challenging to
provide services to other age groups. House Bill 8 recently passed by the Texas legislature will add about
$680 million in the state budget for community colleges.■
Activity in commercial real estate was little changed
since the last report. Apartment rents were flat to up, and
leasing activity picked up moderately. Office markets
continued to face headwinds, while industrial markets
generally remained solid. Investment sales activity
stayed subdued, and contacts said banks were raising
the loan-to-value ratios on loans. Outlooks were mixed.
Financial Services
Loan demand declined for the seventh period in a row,
and most bankers expect a further deterioration over the
next six months. Overall loan volumes continued to fall,
with particular weakness seen in consumer lending.
While commercial real estate and commercial and industrial loan volumes continued to see marked volume
declines, residential real estate lending remained stable.
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ June 2023
Summary of Economic Activity
Economic activity in the Twelfth District softened modestly during the mid-May through June reporting period. Labor
availability improved and overall labor market conditions eased moderately. Price increases persisted, while wage
growth slowed notably across several sectors. Retail sales moderated, and activity in the services sectors eased somewhat. Demand for manufacturing goods was solid but weakened slightly, while conditions in agriculture and resourcerelated sectors were mixed. Residential real estate activity was mixed while that of commercial real estate eased further.
Conditions in the financial sector remained generally unchanged over the reporting period and lending standards continued to tighten. Communities across the Twelfth District were challenged by a lack of affordable housing and small businesses’ limited access to credit. Contacts expressed concern over a weaker outlook for the economy and increased
overall uncertainty.
Labor Markets
insurance, used vehicles, health care, pet care, and
some construction materials, such as aluminum, concrete, and electrical equipment. However, prices of some
goods and services were reportedly stable or down in
recent weeks, including those for gasoline, fabricated
materials, and banking services. One manufacturer
reported significant reductions in input costs in recent
weeks but also noted not planning to lower final prices
because of the cumulative cost pressures incurred over
the past three years.
Labor market conditions eased moderately during the
reporting period. Labor availability improved, and employers across sectors reported receiving more job applications in recent weeks. Contacts highlighted that hiring
for permanent, full-time positions was reportedly easier
than for contract-based or part-time roles. In addition,
hiring challenges persisted in health care and hospitality,
where demand for workers continued to outstrip supply.
Employee turnover generally improved but remained
above pre-pandemic levels in retail and consumer services. Layoffs continued, albeit at a slower pace, in the
financial services and technology sectors. Staffing levels
in other sectors were generally steady, but employers
adjusted their future hiring plans in response to overall
economic uncertainty. Employers facing moderating
demand favored reducing staff hours over layoffs.
Community Conditions
Conditions in the community support and services sector
remained mixed. Some contacts in education, housing
services, and community support reported stable or
improving conditions for funding and hiring. At the same
time, representatives from small businesses and community banks mentioned more limited availability of
funds. Contacts across the District reiterated difficulties
meeting the demand for support services, and several
continued to report the persistence of housing insecurity
and homelessness. Contacts in Alaska highlighted ongoing shortages of police services and childcare providers.
Wage growth slowed notably across several sectors.
Improved labor availability led to wage increases closer
in line with historical rates, particularly for entry-level
positions, in construction, manufacturing, retail, financial
services, and technology. In contrast, contacts continued
to report paying above-average salaries for experienced
and skilled workers in consumer and business services.
In addition to higher pay, some employers offered expanded benefits, training, and advancement opportunities to attract and retain workers.
Retail Trade and Services
Overall retail sales moderated in recent weeks. Fading
fiscal stimulus at the state level and reduced excess
savings reportedly weakened retail spending. Consumers continued to trade down to lower cost items and
reduced their spending on nonessential goods. Contacts
from Hawaii and Utah indicated strong demand for retail
and services supported by robust growth in tourism and
population levels. Additionally, online retail demand
Prices
Price increases persisted at a steady pace relative to the
last reporting period. Reports noted elevated inflation
across several industries and products, including utilities,
L-1
Federal Reserve Bank of San Francisco
picked up with higher sales to consumer markets in Asia.
Real Estate and Construction
Activity in the consumer and business services sectors
eased somewhat. Demand for business and leisure
travel in the District moderated despite the number of
visitors and conventions remaining largely unchanged in
recent weeks. Spending on legal and insurance services
declined. Production activity in the entertainment and
media industries remained strained by ongoing collective
agreement negotiations between the writers’ unions and
major studios. Additionally, art galleries and institutions
reported facing significant headwinds due to smaller
audiences and declining donations.
Residential real estate activity was mixed in recent
weeks. Demand for single-family homes was reportedly
strong, but low inventories and high mortgage rates
limited sales. Demand for multifamily housing remained
solid, though a contact in Southern California noted that
it has recently taken longer to rent out apartments. Rental rates edged up. Contacts across the district reported a
slowdown in new construction, particularly for singlefamily homes, citing uncertainty over the economic outlook and high financing costs. The availability of materials continued to improve somewhat, though shortages
persisted.
Manufacturing
Activity in the commercial real estate market was down
on balance. Limited credit availability reduced demand
for commercial space and curtailed construction slightly.
However, contacts in Utah reported strong construction
activity for industrial and retail spaces. Rental rates for
industrial space reportedly plateaued, largely due to
weaker demand amid ongoing economic uncertainty,
while rents for retail space edged up. The office sector
remained weak. One Northern California contact noted
that muted brick-and-mortar sales, high operating costs,
and safety concerns limited leasing demand for downtown office space.
Manufacturing activity weakened slightly but remained
solid overall. New manufacturing orders for apparel,
electronics, and furniture softened, while demand for
capital equipment, aerospace, and wood products
strengthened. Conditions in metal production and the
recycling industry remained largely unchanged. Capacity
utilization inched down, consistent with overall lower
demand. Shipping and some input costs decreased over
the past few weeks as supply chains and availability of
raw materials continued to improve.
Agriculture and Resource-Related Industries
Conditions in agriculture and resource-related sectors
were mixed. Expanded ocean freight capacity and lower
shipping costs supported exports, but lingering backlogs,
the war in Ukraine, and a strong dollar limited access to
some international markets. Domestic retail demand for
agricultural products softened and demand from the food
services sector plateaued. Demand for timber rose.
Produce yields across the District were broadly up, recovering from the wet winter and spring. However, inventories of some foods such as raisins and nuts declined.
Major seafood stocks edged up. Rising labor and insurance costs put upward pressure on production expenses, while past rains somewhat offset irrigation costs. One
contact noted that ongoing capital investments helped
boost productivity and curtail labor costs in the agriculture sector.
Financial Institutions
Conditions in the financial sector remained generally
unchanged over the reporting period. Loan demand was
largely stable but some contacts at regional institutions
reported slower loan origination in recent weeks, especially those focused on the residential and commercial
real estate markets. Banks have reportedly faced less
variance in deposit flows compared to the previous reporting period despite strong competition for deposits.
Lending standards tightened, and credit quality remained
strong despite some observed increase in delinquency
rates. Reports also noted lingering liquidity concerns and
general uncertainty both over the economic outlook and
within the sector. ■
L-2
Cite this document
Federal Reserve (2023, July 25). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20230726
@misc{wtfs_beige_book_20230726,
author = {Federal Reserve},
title = {Beige Book},
year = {2023},
month = {Jul},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20230726},
note = {Retrieved via When the Fed Speaks corpus}
}