Beige Book
For use at 2:00 PM EDT
Wednesday
October 18, 2023
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
October 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 St. Louis based on information collected on
or before October 6 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 ■ October 2023
Overall Economic Activity
Most Districts indicated little to no change in economic activity since the September report. Consumer spending was
mixed, especially among general retailers and auto dealers, due to differences in prices and product offerings. Tourism
activity continued to improve, although some Districts reported slight slowing in consumer travel, and a few Districts
noted an uptick in business travel. Banking contacts reported slight to modest declines in loan demand. Consumer
credit quality was generally described as stable or healthy, with delinquency rates still historically low but slightly increasing. Real estate conditions were little changed and the inventory of homes for sale remained low. Manufacturing
activity was mixed, although contacts across multiple Districts noted an improving outlook for the sector. The near-term
outlook for the economy was generally described as stable or having slightly weaker growth. Expectations of firms for
which the holiday shopping season is an important driver of sales were mixed.
Labor Markets
Labor market tightness continued to ease across the nation. Most Districts reported slight to moderate increases in
overall employment, and firms were hiring less urgently. Several Districts reported improvements in hiring and retention
as candidate pools have expanded and those receiving offers have been less inclined to negotiate terms of employment. However, most Districts still reported ongoing challenges in recruiting and hiring skilled tradespeople. A few
highlighted that older workers are remaining in the labor force, either staying in their existing position or returning in a
part-time capacity. Wage growth remained modest to moderate in most Districts. Contacts across many Districts reported less pushback from candidates on wage offers. There were multiple reports of firms modifying their compensation packages to mitigate higher labor costs, including allowing remote work in lieu of higher wages, reducing sign-on
bonuses or other wage enhancements, shifting compensation to more performance-based models, and passing on a
greater share of healthcare and other benefits costs to employees.
Prices
Prices continued to increase at a modest pace overall. Districts noted that input cost increases have slowed or stabilized for manufacturers but continue to rise for services sector firms. Increases in fuel costs, wages, and insurance
contributed to growth in prices across Districts. Sales prices increased at a slower rate than input prices, as businesses
struggled to pass along cost pressures because consumers had grown more sensitive to prices. As a result, firms
struggled to maintain desired profit margins. Overall, firms expect prices to increase the next few quarters, but at a
slower rate than the previous few quarters. Several Districts reported decreases in the number of firms expecting significant price increases moving forward.
Highlights by Federal Reserve District
Boston
New York
Both business activity and employment expanded only
slightly, and price increases were modest. The rainy
summer yielded mixed results on Cape Cod. Tourism
contacts in Boston expect strong demand in 2024, while
real estate contacts remained rather pessimistic. Hiring
plans were relatively subdued, and so were planned
price increases.
Regional economic activity weakened modestly, though
labor market conditions remained solid. Consumer
spending increased at a slightly slower pace, with declines in spending on experiences offset by increases in
spending on goods. Financial conditions weakened
somewhat. Inflationary pressures moderated slightly.
1
National Summary
Philadelphia
St. Louis
Business activity continued to decline slightly during the
current Beige Book period. Consumer spending declined
overall, as did manufacturing and nonmanufacturing
activity. Employment again rose slightly as labor availability improved further. Wage growth and inflation slowly
subsided but continued at a modest pace. Expectations
for economic growth remained subdued.
Economic conditions have remained unchanged since
our previous report. Labor markets remained tight, and
employers reported that where applications had increased there were frequent difficulties finding the skills
desired. Prices increased modestly due to higher input
costs, though the rate of increases slowed. Businesses
reported softer consumer demand and difficulty passing
on input costs.
Cleveland
Minneapolis
Economic activity in the Fourth District was little changed
in recent weeks. Manufacturers noted an uptick in activity but expressed concerns over potential adverse impacts of the UAW strike. Hiring activity was flat, and
firms more frequently reported holding wages steady
following sizeable increases over the past few years.
Input costs stabilized for many manufacturers, while
service providers reported rising vendor costs.
Regional economic activity increased slightly. Employment grew modestly and labor demand softened. Wage
pressures were stable as job seekers pursued higherpaying jobs. Price pressures eased modestly. Consumer
spending was modestly higher and auto sales rose
moderately. Most contacts said that higher long-term
interest rates had weakened their economic outlooks for
next year.
Richmond
Kansas City
The regional economy contracted slightly this period.
Consumer spending grew slightly but reports varied
across spending categories. Manufacturers noted a
decrease in demand. Transportation volumes remained
steady. Residential real estate was constrained by limited
inventory. Commercial real estate activity and lending
declined. Employment increased moderately and price
growth was unchanged in recent weeks.
Economic conditions softened slightly across the Tenth
District in recent weeks, driven by lower energy, agriculture, and commercial real estate activity. Several bankers characterized their appetite for lending as being on a
“loan diet.” Employment levels were stable, but wage
growth slowed, particularly among entry-level jobs. Prices continued to grow at a moderate pace generally, but
growth in housing rental rates slowed substantially.
Atlanta
Dallas
Economic activity grew slowly. Labor markets improved,
and wage pressures eased. Some nonlabor costs stabilized. Retail sales slowed. New auto sales were strong.
Domestic leisure travel declined, while international and
business travel rose. Housing demand fell. Transportation activity decelerated. Energy demand was flat. Agriculture conditions were mixed.
Modest economic expansion continued, with growth
moderating in the service sector but rebounding in manufacturing and energy. Retail and financial services
activity declined. Employment growth was modest, and
wage growth continued to normalize. Outlooks generally
weakened slightly, with contacts expressing concern
over worsening business conditions, high interest rates
and the political environment.
Chicago
Economic activity was up modestly. Employment increased moderately; consumer and business spending
were up slightly; nonbusiness contacts saw little change
in activity; and manufacturing, construction, and real
estate activity decreased modestly. Prices and wages
rose moderately, while financial conditions tightened
slightly. Expectations for farm incomes in 2023 were little
changed.
San Francisco
Economic activity was stable on net. Labor market tightness eased, and both wage and price pressures moderated. Retail sales were robust, and manufacturing activity remained largely unchanged. Activity in the services
and real estate sectors eased. Financial sector conditions moderated further over the reporting period. Local
communities faced continued challenges with affordable
housing.
2
Federal Reserve Bank of
Boston
The Beige Book ■ October 2023
Summary of Economic Activity
Business activity expanded slightly on balance, as employment edged up by a small margin and price increases were
modest. Retailers reported modest growth in sales, led by strong seasonal sales growth at retailers on Cape Cod. The
summer tourism season yielded a solid increase in air travel and hotel occupancy in the Boston area and relatively mild
growth in lodging on the Cape. Manufacturers reported modest revenue growth on balance. Home sales stayed at very
low levels as mortgage rates reached fresh highs and inventories remained scarce. Commercial real estate activity was
mostly unchanged, with only a slight seasonal uptick in office leasing. The outlook was cautiously optimistic, but risks
were perceived as skewed to the downside.
two preceding summers but remained well above 2019
levels. Regarding input prices, a semiconductor firm said
that memory prices fell slightly, and a frozen fish producer observed somewhat lower pollock prices in response
to looser catch restrictions. Input cost pressures stabilized for an online retailer, who held list prices steady.
Most contacts expected pricing pressures to abate further moving forward, and only one mentioned the possibility of enacting significant price hikes in the near future.
Labor Markets
Employment levels were up slightly on balance, even
though one manufacturer was in the process of enacting
substantial layoffs. Wages were up only marginally, and
few contacts perceived significant further upward pressure on wages. Contacts across sectors reported slightto-modest improvements in hiring and retention in recent
months, but hiring difficulties and elevated attrition persisted for some roles and the labor market was still
described as tighter than average. One online retailer
said that attrition stayed at historically low levels throughout the summer. Airline contacts in Massachusetts said
that despite having sufficient staff locally, lingering labor
shortages in other parts of the US continued to have
negative impacts throughout the air-travel system. Regarding the employment outlook, one firm planned a
modest increase in hiring and otherwise no large employment expansions were expected.
Retail and Tourism
First District retail contacts reported a modest increase in
sales through the end of the third quarter relative to
earlier in the year, while tourism contacts saw mixed
results. An online retailer experienced modest but betterthan-expected growth in sales despite sluggish industrywide performance. Cape Cod contacts reported mixed
results for the summer season, as typical vacation patterns were disrupted by rainier-than-normal weather:
hotel occupancy rates were moderately lower compared
with the record-setting summers of 2021 and 2022, but
retail sales enjoyed a strong seasonal surge as day trips
to the Cape were up and the rain drove visitors into the
shops. Airline passenger traffic through Boston increased further in recent months, reaching roughly 95
percent of pre-pandemic levels, and international passengers slightly exceeded summer 2019 levels. The
Greater Boston hotel occupancy rate surpassed its 2019
levels for the first time since the pandemic started.
Prices
Output prices were up modestly, and cost pressures
were mixed but appeared to ease further on average. A
few manufacturers raised their prices by slight-tomoderate amounts to keep up with earlier cost increases. Software and IT firms held prices steady following
moderate price increases enacted earlier in 2023. Hotel
room rates in the greater Boston area were up moderately on a year-over-year basis but the pace of increase
slowed relative to the spring. Cape Cod average rental
and hotel room rates were down moderately from the
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Federal Reserve Bank of Boston
The outlook for 2024 was very optimistic among greater
Boston hospitality contacts, who expected recordbreaking convention and cruise activity and air travel well
above pre-pandemic levels. The retail outlook was cautiously optimistic but somewhat uncertain, and maintaining profitability was seen as an ongoing challenge.
mand was weak for malls outside the luxury sector. The
industrial market continued to show very low vacancy
rates and elevated rents, but contacts said that demand
was a bit softer recently and leasing activity was light.
High borrowing costs continued to deter investment
across property types. Banks’ appetite to lend to commercial real estate was limited. On balance, contacts
expected the weak status quo to persist, but forecasts
were characterized by significant uncertainty. Risks were
skewed to the downside and included an increase in
commercial property distress in 2024.
Manufacturing and Related Services
Manufacturing firms in the First District reported modest
revenue growth on average, but results were quite
mixed. A precision parts maker said that revenues
reached a 15-year high, while a frozen fish producer
suffered weaker sales after having raised prices earlier
in 2023. One manufacturer adjusted to a permanent
negative (idiosyncratic) demand shock by making significant staffing reductions. No contacts reported major
revisions to capital expenditure plans, although one firm
increased its capital spending earlier than planned to
take advantage of favorable tax treatment. Most contacts
were at least cautiously optimistic for near-term growth,
but some faced regulatory risks that could hurt profitability moving forward and others were watching carefully for
signs of a recession. A semiconductor manufacturer
noted that, while the outlook for their company was
good, the downturn in the industry had been much more
severe than anticipated, and recovery of memory chip
demand was not expected until late 2024 or 2025.
Residential Real Estate
Throughout the First District, extremely low inventories
kept residential home sales at very low levels relative to
seasonal norms. As of August 2023, inventories and
closed sales were down sharply from a year earlier in all
markets. The rate of decline in sales was about on par
with that recorded in July, and August’s weak sales were
described as disappointing but not surprising. Multiple
contacts pointed to mortgage rates, which reached a two
-decade high in August, as the key barrier to inventory
growth and sales. Contacts in greater Boston remarked
further that growing uncertainty about the economy
contributed to increased buyer hesitancy, which showed
up as a decline in offers per listing. The inventory drop
was most pronounced in Massachusetts—where the
supply of both single-family homes and condos declined
by more than a third from a year earlier. In Rhode Island
the pace of inventory decline moderated from earlier in
the summer, suggesting that supply and demand might
be moving into balance. Price growth remained robust,
rising to double-digit rates in some markets. Contacts
expected no significant improvement in residential sales
activity until interest rates reversed course.■
IT and Software Services
Demand was healthy and largely unchanged for software
and IT contacts. For one contact, stable demand was
attributed to the fact that they make essential products,
and at another firm sales were supported by a recent
acquisition. Contacts reported moderate-to-robust revenue increases on a year-over-year basis, results that
were at least slightly higher than those recorded in Q2.
Capital spending was flat. Contacts generally expected
demand to hold steady for the rest of 2023 and throughout 2024, based on confidence in their firms’ products
and business models despite what was perceived as a
weakening macroeconomic environment. Regarding
risks to the forecast, one contact was concerned that
customers would rein in their budgets in 2024, and another said that another major COVID outbreak would be
very disruptive.
Commercial Real Estate
Commercial real estate activity in the First District remained limited in recent weeks. Office leasing picked up
slightly for seasonal reasons but was still minimal. Office
vacancy rates remained high but were essentially flat,
while office rents were down slightly, and tenant concessions remained generous. Vacancy rates and rents were
stable on average in the retail sector, but leasing de-
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ October 2023
Summary of Economic Activity
Economic activity in the Second District weakened modestly during the latest reporting period. Still, labor market conditions remained solid with contacts reporting ongoing modest employment gains and steady wage growth. Inflationary
pressures moderated slightly in recent weeks, though supply chain conditions were unchanged after nearly a year of
steady improvement. Consumer spending increased at a slightly slower pace, with declines in spending on experiences
offset by increases in purchases of apparel and home goods. Tourism activity in New York City was strong, as several
events attracted record visitors. Despite rising mortgage rates, home prices have continued to edge up with still-solid
demand and exceptionally low inventory. Commercial real estate markets improved slightly. Conditions in the broad
finance sector weakened somewhat, with loan demand continuing to decline and delinquency rates edging higher.
Looking ahead, businesses in the District expected little improvement in conditions in the coming months.
cated the pace of input price increases was little
changed. The pace of selling price increases slowed
somewhat among both manufacturing and service firms.
Fewer businesses expect rising prices in the months
ahead. Still, inflation remains a significant concern, and
contacts noted that higher prices are taking a toll on
household balance sheets and limiting discretionary
income.
Labor Markets
Labor market conditions have been solid since the last
report. Overall, employment continued to increase modestly, though employment declined among retailers.
Although layoffs were generally not occurring in the region, an upstate New York employment agency pointed
to a slight softening in conditions in recent weeks.
Demand for workers remained solid across the District,
particularly for those with skills in finance, accounting,
and information technology. Many contacts noted that
labor shortages continued to challenge hiring plans. A
contact at a New York City employment agency noted
that candidates are approaching job negotiations with
greater seriousness and realism with regard to wages
and in-person requirements, though these factors remain
persistent challenges in the labor market.
Consumer Spending
Consumer spending increased at a slightly slower pace
in the latest reporting period with some shifts in the
composition of purchases. Spending on apparel, interior
furnishings, home electronics, and appliances grew at a
steady clip after a period of stagnation. Meanwhile,
spending on restaurants, travel, and entertainment
slowed after a strong summer, in part reflecting seasonal
shifts. Auto dealers in upstate New York reported moderate increases in sales, particularly for new cars, as inventory continued to improve. Still, sales remain well
below pre-pandemic levels as limited inventory has
constrained sales despite solid demand. One contact
reported that higher financing costs are pushing some
buyers to opt for more affordable models. Ongoing declines in used car prices have restored the normal gap
between new and used car prices, boosting sales of
used cars.
The pace of wage growth has been steady in recent
weeks, though firms in the wholesale trade sector reported greater wage increases. On balance, businesses
anticipate only modest increases in headcounts in the
months ahead.
Prices
Inflationary pressures moderated slightly in recent weeks.
Service sector contacts reported some slowing in the
pace of input price increases, while manufacturers indi-
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Federal Reserve Bank of New York
Manufacturing and Distribution
activity continued to fall, suggesting that landlords are
opting to retain current tenants amid high turnover costs
and plateauing rents. Further, renters are increasingly
opting for shorter leases, reflecting sentiment that the pace
of rent increases will not be sustained. Going forward,
contacts anticipated that the increased enforcement of
rules restricting short-term rentals in New York City would
likely shift more units into the general rental inventory,
providing some easing of supply constraints.
Manufacturing activity edged down during the latest
reporting period. Supply availability was unchanged after
nearly a year of steady improvement, yet several business contacts described difficulty obtaining high quality
parts and products. These shortages were particularly
noted for auto parts, and some anticipate the UAW strike
will reduce the supply of vehicles in the coming months.
While wholesalers reported solid growth in business
activity, transportation & warehousing contacts noted
declining activity. Manufacturers and distributors generally remained optimistic that conditions would improve in
the months ahead.
Commercial real estate markets improved slightly. In New
York City, office vacancy rates declined since the last
report, the first protracted decline since the pandemic
began, and office rents were essentially flat. The industrial
market worsened slightly, with increases in vacancy rates,
though rents remained firm.
Services
Service sector activity declined modestly in the latest
reporting period. While there was some growth in the
education & health sector, businesses in the information
sector and those providing business services reported
moderate declines, and leisure & hospitality firms noted
more modest declines. Looking ahead, service firms
generally do not expect conditions to improve in the
coming months.
Overall, construction contacts reported sluggish activity
since the end of the summer. Office construction was
relatively flat across most of the District. Industrial activity
grew, with high volumes under construction and new
space set to come to market in the fourth quarter of 2023.
Multifamily construction continued apace in the New York
City area and in northern New Jersey, but such activity
remained fairly weak in upstate New York.
New York City tourism was strong in the latest reporting
period. The overlap of the US Open tennis tournament
and New York Fashion Week boosted visits and demand
for hotel rooms, pushing average daily hotel rates near
historical highs and hotel occupancy rates above 90
percent for several nights in September. Statue of Liberty visitors have surpassed pre-pandemic numbers in
recent weeks, an indicator that the number of international visitors has picked up.
Banking and Finance
After stabilizing, conditions in the broad finance sector
weakened slightly during the latest reporting period. Small
to medium-sized banks in the region reported lower loan
demand across all loan segments, including refinancing.
On balance, credit standards tightened for all loan types
and loan spreads continued to narrow. Most banking contacts reported higher deposit rates. Delinquency rates
edged up.
Real Estate and Construction
Persistently low inventory has remained a limiting factor
in housing markets across the District and continued to
restrain sales activity. Despite rising mortgage rates,
home prices have continued to edge up with still-solid
demand and low supply. One contact noted that bidding
wars are being reported on nearly half of transactions in
the New York City suburbs, where low inventory has
been particularly acute. Real estate contacts in upstate
New York reported an increase in activity with higher
attendance at open houses, boosted by a steady inflow
of people moving from New York City.
Community Perspectives
Community and education leaders around the District
reported significant challenges with staffing shortages in
schools. Teacher vacancies are higher this fall than in past
years, particularly for math, world languages, and English
as a new language. Additionally, key personnel such as
counselors, librarians, school bus drivers, food service
workers, and custodians are in low supply, placing increased pressure on existing staff and reducing the quality
of the services provided. Financial pressures have mounted due to the combination of increased services, rising
educational needs of the children of asylum seekers, and
the winding down of federally provided pandemic relief
funds. ■
Residential rental markets remained tight across the
District. Rents continued to rise in upstate New York. In
New York City, rents were unchanged but at record high
levels, with some scattered signs of cooling. New lease
For more information about District economic conditions visit:
https://www.newyorkfed.org/regional-economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ October 2023
Summary of Economic Activity
On balance, business activity in the Third District continued to decline slightly. Consumer demand appeared to decline
as contacts noted more cautious spending habits by consumers, including fewer visits to stores and substituting toward
lower-priced items. High interest rates continued to constrain the listings of existing homes for sale, which has benefited
new-home builders. Employment again grew slightly as labor availability continued to improve. Wages and prices
continued to grow at a modest pace. Contacts also indicated that wage and price pressures slowly subsided. Overall,
contacts reported a steadier cost of goods for their inputs, as most supply chains had returned to pre-pandemic norms.
Contacts continued to note a tightening of 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
costs per employee remained typical of the prepandemic era, when modest wage growth prevailed.
Employment continued to grow slightly. Contacts described improvements in labor availability and the ability
to hire. A staffing firm noted candidates were more willing to accept positions they may have otherwise turned
down in recent months, highlighting that it had become
easier to recruit employees for night and weekend shifts.
Despite the slight growth in employment overall, a few
firms across various industries reported layoffs and
allowing reductions of their workforces through attrition.
Prices
On balance, firms reported that prices continued to rise
modestly; however, they also continued to note that the
rate of price increases appeared to subside. Contacts
described lower and less widespread price increases
compared with earlier this year but noted that year-overyear price increases remained slightly above the average increases seen before the pandemic.
In our monthly surveys, nonmanufacturing firms reported
increases in full-time jobs and mostly steady levels of
part-time employment. On balance, manufacturing firms
reported a decrease in employment levels. The indexes
for these categories were little changed from the prior
period.
In our monthly surveys, the prices paid and prices received indexes declined for nonmanufacturers, though
the prices paid index remained above its nonrecession
average. Among manufacturers, the prices paid index
rose, and the prices received index held steady, slightly
above its nonrecession average.
Firms reported that wage inflation continued to slowly
abate but remained at a modest pace overall – near prepandemic levels. Contacts noted some ongoing wage
pressure, particularly from skilled trade workers, as the
supply of qualified candidates remained scarce. A contact reported a recent increase in retirements among
trade workers but said many returned almost immediately as part-time employees.
The indexes for future prices paid and future prices
received continued to suggest that firms expect price
increases over the next six months. Both indexes declined relative to last period but remained somewhat
above their long-run averages.
Manufacturing
Manufacturing activity declined modestly during the
period after slight growth in the prior period. The indexes
for new orders and shipments returned to negative
In our monthly surveys, the distribution of nonmanufacturing firms reporting higher or lower wage and benefit
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Federal Reserve Bank of Philadelphia
territory after jumping higher in August. Contacts reported slower orders as customers looked to reduce inventories.
During the period, District banks reported strong growth
in home mortgages, auto loans, and other consumer
loans. Commercial and industrial loans grew moderately,
while home equity loans grew modestly, and commercial
real estate loans were up slightly. Credit card volumes
resumed strong growth following moderate growth last
period. The pace was slightly slower than the comparable period last year.
The share of firms that estimated increased total production growth for the third quarter of 2023 compared with
the second quarter was the same as the share that
estimated a decrease. Most firms continued to report
labor supply as at least a slight constraint on capacity
utilization. Over the next three months, more than onefifth of the firms expect COVID-19 mitigation measures
to be a constraint on capacity utilization, up from zero
percent last quarter.
Expectations among manufacturers for growth in the
next six months rose but remained somewhat subdued
compared with historical averages.
Banking contacts and large service companies continued
to report good credit quality – noting only small upticks in
late payments and loan delinquencies, which remain at
very low levels. Market participants continued to report a
tightening of credit standards and noted that higher
financing costs were especially challenging for smaller
businesses.
Consumer Spending
Real Estate and Construction
On balance, retailers (nonauto) reported a modest decline in overall sales – a faster pace than the slight
decline in the prior period. One retail contact noted that
customers were visiting less frequently and substituting
lower-priced goods when possible. A tourism contact
reported that travelers were becoming increasingly price
sensitive and spending less once they arrived at their
destination. Multiple contacts expressed concern that the
resumption of student loan payments may be a potential
headwind for consumer spending in the coming months.
Existing-home sales rose slightly in the current period
but remained well below the level of sales observed in
prior years. Brokers continued to report that inventories
and rising costs were a significant constraint on sales,
particularly for first-time homebuyers. New-home builders, aided by the dynamics of the existing-home market,
continued to report steady sales. Multiple homebuilders
noted a slowdown in prospective buyer traffic during the
period but highlighted that a larger share of that traffic
turned into sales.
Auto dealers reported mostly steady sales during the
period following a slight decline in the prior period. Contacts continued to report improved inventories, but rising
interest rates and high prices weighed on demand.
Housing affordability remained extremely low, and rents
remained high in the current period. Requests for assistance with housing and utility bills continued to dominate
211 requests in New Jersey and Pennsylvania. Roughly
one-third of all requests in the two states were related to
housing, while 27 percent of the requests involved utility
bills.
Tourism activity continued to decline slightly as overall
demand for leisure travel slowed from high levels
throughout the region. Contacts attributed this slowdown
to increased international travel, as well as weakening
demand for economy hotels and more budget-friendly
destinations. Meanwhile, travel to luxury destinations
remained strong.
According to contacts, construction activity for commercial real estate held steady as financing conditions for
new projects remained difficult. Despite steady construction overall, contacts reported a slight slowdown in multifamily construction activity. Nonresidential leasing activity continued to fall modestly as contacts described ongoing distress in the office market. ■
Nonfinancial Services
On balance, nonmanufacturing activity declined modestly after a slight decline in the prior period. The indexes
for new orders and sales remained negative, as the
share of firms reporting decreases exceeded the share
reporting increases for both. Expectations for growth
over the next six months remained subdued.
Financial Services
The volume of bank lending (excluding credit cards)
continued to grow moderately during the period (not
seasonally adjusted) – comparable with the same period
last year.
For more information about District economic conditions visit:
www.philadelphiafed.org/regional-economy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ October 2023
Summary of Economic Activity
Overall, Fourth District business activity was relatively unchanged in recent weeks. Consumer spending was flat to
down, as discretionary goods spending softened further. Manufacturers noted an uptick in activity but expressed concerns over potential adverse effects of the UAW strike. Bankers reported lower loan volumes for commercial and consumer loans because of higher borrowing costs. Similarly, demand for new and existing homes was dampened by higher rates, with sales of existing homes also constrained by limited inventories. While nonresidential construction activity
was solid, many contacts suggested that new projects were at risk because of higher financing costs. Overall, firms
expected activity to remain flat in the coming months. This will likely impact capital spending plans and hiring, which
were flat in recent weeks. Contacts more frequently reported holding wages steady following sizeable increases over
the past few years. Input costs stabilized for manufacturers, while service sector firms indicated broad cost increases
from their vendors. Price pressures continued to ease, with contacts citing increased competition and greater resistance
from customers to price increases.
input costs have stabilized despite remaining elevated.
Indeed, one manufacturer noted that raw materials’
prices have not gone up since earlier in the year, and he
has found new suppliers offering lower prices. Nevertheless, several service sector firms noted broad cost increases from vendors, in particular for health and car
insurance, software subscriptions, and other technology
services. And construction contacts stated that costs
were increasing for some materials such as cement.
Labor Markets
On balance, contact reports suggested little employment
growth during the most recent reporting period, though
demand for labor varied by industry segment. Some
business services and freight contacts noted increasing
staffing levels to expand operations. One management
consultant said that the “stability of the last year has
allowed for expansion of staff instead of [outsourcing of]
work.” By contrast, some manufacturers and auto dealers reported that weaker profits and slower demand led
them to reduce staffing levels. Still, other firms across
industries reported maintaining staffing levels. Some
firms did so because demand was flat, and others said
they had reached their target staffing level.
Price pressures eased recently, continuing a trend that
began at the start of the year. Contacts noted that they
were not raising prices because of increased competition
and greater resistance from customers to price increases. One retailer said, “We will try our best to hold the line
as consumers seem to be tightening their belts.” Several
manufacturing and construction contacts noted steadying or reducing prices in accordance with input costs.
However, other manufacturers and freight contacts were
able to raise prices during contract renewals.
Wage pressures continued to ease slowly. More firms
across industries reported holding wages steady to
stabilize labor costs after larger-than-normal increases
over the past few years. One manufacturer noted that
his firm plans to offset the cost of its annual wage increase by decreasing the employer’s contributions to
medical coverage costs, a change it had not enacted for
the past two years. Still, some auto dealerships and
manufacturing firms continue to increase pay to compete for technicians and skilled laborers.
Consumer Spending
Consumer spending was flat to down in recent weeks.
One large general merchandiser noted that discretionary
-goods spending had softened further as households
faced continued pressure from higher prices for necessities, adding that many lower-income customers had
increased their reliance on credit cards. Auto dealers
said that sales had slowed because of higher interest
rates and higher vehicle prices. Reports from restau-
Prices
On balance, nonlabor cost pressures changed little in
recent weeks but were down from those earlier in the
year. Many manufacturers reported that many of their
D-1
Federal Reserve Bank of Cleveland
ranteurs were split, with lower-priced establishments
reporting steadier sales than their higher-end counterparts. On balance, contacts expected sales to stay flat in
the coming weeks, and many hoped that the approaching holiday season would help boost demand.
higher interest rates, firms increasingly used cash-onhand to meet their financing needs rather than apply for
additional loans. Lenders reported that delinquency rates
remained at historically low levels for both commercial
and consumer loans. Core deposits declined slightly as
customers sought higher-yield alternatives. In the coming months, bankers expected loan demand to continue
to decline as interest rates remain elevated.
Manufacturing
Overall demand for manufactured goods increased
slightly in recent weeks, though activity varied by industry segment. An aerospace parts manufacturer reported
heightened orders for both civilian and military products,
and a heavy truck and trailer parts producer noted strong
demand. Steel producers reported steady demand but
said some of their customers had been hesitant to place
new orders out of concern about the ongoing UAW
strike. One steel wholesaler said that recent declines in
steel prices had divergent impacts on demand; spot
customers delayed orders in the hope that prices would
fall further, while many contract customers sought to
negotiate next year’s agreements early and lock in low
prices. Manufacturers generally expected demand to
increase modestly in the coming months.
Nonfinancial Services
On balance, freight contacts noted a slight uptick in
activity this reporting period. One hauler indicated that
his firm’s volumes increased in part because the firm
absorbed the clients of a large carrier that closed. Looking ahead, haulers expected conditions to improve slightly as the holiday season draws nearer. Professional and
business services contacts reported relatively flat activity
as uncertainty led some clients to pull back on spending.
However, contacts expected activity to remain relatively
flat outside of some seasonal pickup in demand.
Community Conditions
Nonprofit contacts noted that small businesses and lowand moderate-income households experienced declines
in credit access, while the latter also saw affordablehousing conditions deteriorate over the past six months,
according to a semiannual survey. Several contacts said
higher interest rates and tight credit requirements impacted businesses’ and households’ ability to qualify for
loans. One contact indicated that businesses with longstanding banking relationships had difficulty securing
traditional financing. Rising rents and a shortage of
affordable housing continued to impact low- and moderate-income households’ ability to secure housing. Moreover, some landlords stopped accepting housing choice
vouchers in order to get higher rents in the open market.■
Real Estate and Construction
On balance, residential construction and real estate
activity slowed. Contacts reported that new-home sales
declined slightly as higher interest rates discouraged
potential buyers. Demand for new and existing homes
was dampened by higher rates, with sales of existing
homes also constrained by limited inventories. Residential construction and real estate contacts anticipated
activity will slow in the coming months because of seasonality and higher interest rates.
Nonresidential construction activity increased slightly.
General contractors reported strong activity from ongoing projects, but many contacts across industry segments noted that new deals had been difficult to complete because of higher financing costs and, in some
cases, hesitance on behalf of lenders. Reports on office
demand varied. One commercial property manager said
that many of his customers had surrendered existing,
underperforming office properties to lenders rather than
refinance at higher interest rates. Another contact noted
that the return of in-office work continued to boost his
firm’s leasing activity for office space. Nonresidential
construction and real estate contacts expected activity to
increase modestly in the months ahead.
Financial Services
Overall, loan demand continued to soften this reporting
period. Bankers cited higher interest rates as the primary
reason behind the decline in borrowing from households
and businesses. One banker reported that because of
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 ■ October 2023
Summary of Economic Activity
The Fifth District economy contracted slightly in recent weeks. Fifth District manufacturers reported mixed results in the
most recent reporting period. Food service and office supply contacts reported steady growth in sales while furniture,
appliance, and home remodeling and repair stores reporting sales declines in recent weeks. Travel and tourism activity
slowed slightly in recent weeks, but air travel remained strong as business travel picked up. Nonfinancial services firms
noted that demand for their services as well as revenues had remained stable. District ports remarked that demand was
weak this period with not the usual seasonal rebound in volume; imports were lower year-over-year and month-overmonth. Trucking firms reported that underlying demand was flat this period. Residential real estate respondents stated
that the home sales were constrained by both affordability and the lack of inventory. Commercial real estate markets
slowed this period; however, leasing remained strong for retail and industrial properties with rents continuing to escalate. Loan demand continued to slow this period both for commercial and consumer real estate loans. Employment grew
modestly in the most recent reporting period, although finding workers with certain skills remained difficult. Price growth
was unchanged this period but labor costs, on the other hand, continued to rise.
Labor Markets
Manufacturing
Fifth District employment grew modestly in the most
recent reporting period and wages increased moderately.
Some firms reported that it had become more challenging to find frontline workers, while others cited ongoing
shortages of skilled-trades workers such as CDL drivers.
A food manufacturer couldn’t attract or retain associates
for jobs that require work in cold-temperature environments. A pre-planned vacation company continued to
raise wages, but reported that a people shortage, not pay
rates, as the main reason for not finding motorcoach
drivers. Conversely, a staffing firm specializing in placing
executive-level marketers reported too many candidates
for the number of open roles.
Fifth District manufacturers reported mixed results in the
most recent reporting period. A fabric manufacturer cited
declines in demand in consumer related markets due to
retailers having too much inventory. Both the manufacturer and retailer “took haircuts” on margins to clear
inventories. However, a steel manufacturer reported
strong demand for steel construction throughout their
region. Macroeconomic factors were cited by several
firms as reasons for slowdowns. For example, a gaskets
manufacturer was “hunkering down” and halted hiring
and capital expenditures due to fears of a potential economic downturn. A plastics coater reported smaller orders because customers had less money due to increased food and energy costs.
Prices
Ports and Transportation
Price growth remained at an elevated rate, but growth is
lower compared to last year. According to our most
recent surveys, growth in prices received by manufacturers was unchanged while prices received by services
firms slowed marginally. Prices paid for nonlabor inputs
rose slightly for manufactures but declined according to
service providers. Labor costs, on the other hand, continued to rise. Several contacts noted that wage increases
to recruit and retain workers had reduced their margins,
as customers were pushing back on any further price
increases, making it hard to pass along rising costs.
Demand was weak at Fifth District ports this period due
to less than the usual seasonal rebound in volume;
imports were lower year-over-year and month-overmonth. The decline in import volume was mainly due
less consumer goods coming into the port. Exports were
flat this period. Spot shipping rates have continued to
decline and carriers were doing more blank sailings in
recent weeks to limit capacity. Empties were still moving
and containers were flowing smoothly at the ports; turn
times were good and container dwell times had returned
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Federal Reserve Bank of Richmond
to normal. Demand for airfreight was soft this period;
there was an especially sharp decline in international
airfreight, both in terms of exports and imports.
and the cost of capital were the biggest detractor from
commercial real estate projects moving forward. Credit
underwriting was much stricter with higher equity requirements for most commercial real estate deals. However, leasing demand in the industrial and retail sectors
continued to outstrip supply and rents continued to escalate. In the office market, there has been a flight by tenants to better quality space. Net effective rents in the
office segment were lower due to landlords offering more
incentives and/or concessions to potential credit tenants.
Trucking firms reported that underlying demand was flat
this period. However, capacity decreased due to several
trucking companies shutting down. Freight rates were up
slightly as existing capacity exited the market in recent
weeks and customers were looking for new carriers.
Trucking firms noted that they had not seen the usual
seasonal uptick as companies try to more normalize
their inventory and there had not been the usual sequential improvement in consumer product shipments
this month. Trucking companies stated that are not
having any issues hiring or retaining drivers.
Banking and Finance
Loan demand continued to slow with one respondent
noting it was “anemic”. This slowdown was being observed primarily in the real estate portfolios, both commercial and consumer. Increased rates and lower home
inventories were noted as potential causes for this lack
of demand. Home equity lines of credit continued to see
increased demand with borrowers still finding this a
viable lending alternative. Maintaining deposits remained a struggle with continued competition for balances across all sectors. Credit quality as well as delinquency rates remained stable, but institutions continue to
monitor these indicators closely as rates continue to rise.
Retail, Travel, and Tourism
On balance, consumer spending grew slightly this cycle,
but reports varied across spending categories. For
example, food service, grocery stores, and office supply
stores reported steady to increasing sales while furniture, appliance, and home remodeling and repair stores
saw sales decline in recent weeks. One retailer was
concerned that the restart of student loan payments was
going to lead to lower consumer spending going forward.
Nonfinancial Services
Nonfinancial service providers continued to report that
demand for their services as well as revenues had remained stable. Some firms noted that their clients, as
well as themselves, were still putting off large capital
purchases due to uncertainty with the economy and
political environment. Firms reported a loosening in the
job market and found the applicant pools getting larger,
but still far from historical norms. Wage pressure continued as current employees sought higher wages due to
inflation and other employment opportunities available in
their fields. ■
Travel and tourism activity slowed slightly in recent
weeks. Contacts noted that the slowdown was partly
attributable to typical seasonal slowdown; however, a
contact in South Carolina added that the threat of hurricanes led to lower tourism in coastal destinations. Air
travel remained strong as business travel picked up,
which offset some declines in leisure travel.
Real Estate and Construction
Residential real estate respondents indicated that home
sales were constrained by both affordability and the lack
of inventory. The number of new listings in the Fifth
District was down year-over-year. Buyer traffic declined
due to frustration with elevated sales prices, lack of
housing inventory and higher mortgage rates. Days on
market increased slightly but remained below historic
averages. Prices for homes held steady but there were
some price reductions for homes that have been on the
market for over 30 days. Prospective buyers were not
having difficulties obtaining mortgages other than issues
with affordability. Home construction costs stabilized this
period but remained elevated mainly due to higher labor
costs.
In the Fifth District, development and construction of
commercial real estate was significantly reduced this
period. The pace of construction cost increases slowed,
but costs remained historically high. Availability of credit
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ October 2023
Summary of Economic Activity
The Sixth District economy grew at a slow pace from mid-August through September. Labor availability and candidate
quality improved, and wage pressures eased further. Some nonlabor input cost increases stabilized, and pricing power
was mixed. Retail sales slowed somewhat, but new auto sales were strong. Domestic leisure travel continued to decelerate, but business and international travel strengthened. Home sales were subdued compared to year-earlier levels
amid low inventories and rising prices and interest rates. Commercial real estate conditions were mixed. Transportation
activity remained slow. Loan growth slowed, and consumer loan delinquencies rose. Energy demand was flat. Agricultural conditions were mixed.
pressure, largely from rising labor and/or insurance
costs. The Atlanta Fed’s Business Inflation Expectations
survey showed year-over-year unit cost growth decreased to 3.1 percent, on average, in September, from
3.3 percent in August; firms' year-ahead inflation expectations for unit cost growth remained unchanged in September at 2.5 percent, on average.
Labor Markets
Most contacts reported that labor markets continued to
soften. Labor availability, retention, and the quality of
candidates improved by most accounts. However, skilled
labor, particularly in construction, remained in short
supply in several parts of the District, resulting in project
delays. Similarly, agriculture contacts noted that worker
shortages prolonged the planting season. Contacts in
several Florida markets said that the high cost of living
had hurt retention and recruiting efforts. Many firms
backfilled open positions while a few said they were
hiring for growth. Some contacts in retail, manufacturing,
and staffing reduced headcount or hours to align with
weaker demand.
Consumer Spending and Tourism
District retailers reported some slowing in demand as
customers cut back on discretionary spending; however,
this was described as a normalization from the pandemic’s robust pace of growth. Many contacts expect
some deceleration in demand growth through the rest of
the year and view this decline as meaningful but not
overly concerning. Automobile dealers reported healthy
sales of new vehicles.
Wage growth remained elevated as compared with prepandemic levels, but many firms noted that wage pressure continued to ease and further moderation is expected next year. Several contacts had shifted compensation programs to more performance-based models or
were promoting other benefits such as hours or location
flexibility, development, employee events, and other nonwage incentives.
Similar to the previous report, tourism and hospitality
contacts reported slowing demand for domestic leisure
travel. However, cruise activity and business and international travel were robust. Contacts were cautiously
optimistic about the upcoming holiday season, noting
challenges in forecasting future demand due to shorter
booking windows.
Prices
Contacts continued to report stabilizing nonlabor input
cost increases, though fuel costs, particularly fuel surcharges, rose. Supply chains were described as more
predictable; however, delays in the delivery of some
construction inputs raised project costs. Food prices
were generally cited as easing, though increases in
sugar and grain prices persisted. Pricing power was
mixed, and many contacts reported continued margin
Construction and Real Estate
Home sales were suppressed compared to a year ago
due to low supply and declining affordability. House
prices continued their sequential gains and have returned to near peak levels in many District markets. With
both prices and interest rates on the rise, home ownership affordability deteriorated to record lows. Though
F-1
Federal Reserve Bank of Atlanta
increased pressure on net interest margins and earnings.
homebuilders have increased their market share, contacts expressed growing concerns about the lack of
affordability and an inability of some buyers to qualify for
financing. Rate buy downs have emerged as the most
frequent incentive offered to secure new home sales.
Energy
Demand for utilities and petroleum-refined fuels was
described as flat. Rising input and maintenance costs
put pressure on margins across energy sectors. Regulated utilities passed through price hikes to customers with
further increases anticipated. Private companies actively
invested in federal infrastructure-related projects in anticipation of future tax credits and funding distributions.
However, many petroleum refiners noted concerns about
deteriorating infrastructure necessary to support the
transition to renewables, given the lack of investor interest in maintenance or capacity-expanding projects.
Investment costs were cited as prohibitive, resulting in
project delays. Surplus chemical product supplies from
China and Europe lowered demand for U.S. products.
Further chemical product demand erosion is a potential
risk resulting from a protracted auto manufacturing shutdown.
Commercial Real Estate (CRE) contacts reported slowing rent growth, absorption, and sales over the reporting
period. Activity in high-end multifamily units slowed and
owners acknowledged concessions were needed to
finalize leases. Office sector conditions remained mixed
as newer buildings saw healthy activity, while occupancy
in older buildings declined. More contacts reported growing concerns about the availability of financing, as most
lenders strengthened underwriting standards and reduced funding commitments. Some smaller banks, however, continued to actively engage in CRE lending.
Transportation
Transportation activity remained sluggish. While railroads experienced a pickup in domestic intermodal
freight, shipments of imports were soft. Some trucking
firms reported that flatbed freight volumes remained
depressed; others saw slightly stronger export volumes.
This year’s peak shipping season is expected to be
muted as underlying demand remains soft and import
activity subdued; container shipping companies have
reduced capacity in line with expectations for weaker
consumer demand. Warehousing contacts noted that the
decline in freight volumes caused a pullback in industrial
real estate investments. Florida ports and railroads mentioned minor temporary disruptions from Hurricane
Idalia’s landfall in Florida’s Big Bend in late August.
Agriculture
Agriculture conditions were mixed. Demand for butter
increased, but there remained an excess supply of
cheese products. In Louisiana and Mississippi, droughts
led to the liquidation of herds, resulting in an oversupply
of beef. Chicken exports were weak. Soybean and corn
yields were strong, creating surpluses. Domestic cotton
yields were high, but demand for textiles softened. Hurricane Idalia hit Florida’s “timber basket,” causing farmers
to give away downed trees or pay to have them removed, dampening sales of timber.■
Manufacturing
Manufacturing activity was mixed. Several firms reported
increased production while experiencing a contraction in
backlogs, new orders, and finished goods inventories.
Auto manufacturers not impacted by the UAW strike
noted that strong demand was outstripping production of
both luxury and standard models, and some noted robust demand for lower-priced autos. Demand for food
products for at-home consumption and quick service
restaurants softened, though revenues remained above
year-earlier levels due to higher pricing. Some manufacturing contacts reported increasing optimism about activity over the next twelve months.
Banking and Finance
Loan growth slowed across most portfolios. While asset
quality was stable, consumers appeared to experience
increased financial stress as evidenced by an uptick in
consumer loan delinquencies. District financial institutions continued to fund loan growth with large time deposits given heightened competition for core deposits.
However, the higher funding cost of time deposits put
For more information about District economic conditions visit:
www.atlantafed.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ October 2023
Summary of Economic Activity
Economic activity in the Seventh District was up modestly overall in late August and September. 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; consumer and business spending were up slightly; nonbusiness contacts saw
little change in activity; and manufacturing, construction, and real estate activity decreased modestly. Prices and wages
rose moderately, while financial conditions tightened slightly. Expectations for farm incomes in 2023 were little changed.
Labor Markets
Consumer Spending
Employment rose moderately over the reporting period
and contacts expected a similar rate of increase over the
next 12 months. Many contacts continued to have difficulty finding workers, particularly those with higher skills.
Several noted strong, steady demand for workers in the
skilled trades. However, there were also signs that the
labor market was cooling. Some contacts said workers
were job-hopping less and pushing back less on wage
offers. In retail, holiday hiring was down modestly compared with the same time last year. Wage and benefit
costs rose moderately, but there were indications growth
was slowing.
Consumer spending increased slightly over the reporting
period. Nonauto retail sales were up a bit. Contacts
highlighted higher overall grocery sales, though one
noted that lower income shoppers had reduced their
basket size and were trading down in quality. Back-toschool and early holiday volumes met expectations. Led
by declines at hotels and restaurants, leisure and hospitality spending softened slightly. Light vehicle sales
edged up. Multiple contacts said that so far, the UAW
strike was having a negligible effect on sales and inventories but was influencing parts availability.
Prices
Business spending increased slightly in late August and
September. Capital expenditures moved up a bit, with
several contacts reporting purchases of new equipment,
software, or expansions of existing facilities. That said,
several contacts noted that high interest rates were
leading them to delay some acquisitions. In addition, one
manufacturing contact said that increases in operating,
labor, and materials costs were holding back equipment
investment. Demand for industrial and commercial energy increased slightly, while demand for residential energy decreased modestly. Inventories for most retailers
were a little higher than desired. Looking ahead, one
contact reported retailers had ordered less merchandise
Business Spending
Prices rose moderately in late August and September,
and contacts expected a similar rate of increase over the
next 12 months. Nonlabor costs were up modestly, with
several contacts highlighting rising energy costs. Some
contacts noted that while they had fewer supply chain
issues, costs of raw materials remained high. Shipping
prices increased slightly, largely because of higher gasoline prices. Consumer prices moved up moderately due
to solid demand and the passthrough of higher costs.
G-1
Federal Reserve Bank of Chicago
for the holidays than in previous years, with some foregoing the usual seasonal inventory build. In manufacturing, inventories were generally at comfortable levels, and
several contacts noted improved supply chain conditions.
mercial loan demand, particularly for real estate. Asset
quality was down a bit. Business loan rates increased
modestly and standards tightened slightly. Consumer
loan demand also fell slightly overall, with auto and
home equity loan volumes dropping but credit card debt
increasing. Consumer loan quality declined slightly.
Consumer loan rates increased modestly, and lending
standards tightened some.
Construction and Real Estate
Construction and real estate activity decreased modestly
on balance over the reporting period. Residential construction was down modestly and contacts expected the
slower pace of activity to continue for the rest of the
year. There were reports of fewer home remodeling
projects in higher end homes. Residential real estate
activity also decreased modestly. Home prices were up
slightly but rents were unchanged. Nonresidential construction fell slightly. Contacts noted that the building
currently taking place had entered the pipeline 12 to 24
months ago and that permit issuances for future projects
were down noticeably. Land development also declined.
Supply chain issues lingered, with contacts reporting
difficulty finding electrical switch boxes, circuit boards,
transformers, fuses, and HVAC equipment. Commercial
real estate activity decreased modestly, most notably in
office and retail. Prices decreased modestly, and contacts anticipated further declines. Vacancy rates and the
availability of sublease space were up. Rents were down
slightly.
Agriculture
Projected farm income in the District for 2023 remained
well below 2022 levels, as lower crop prices offset positive news from early harvested acres. Notably, corn and
soybean prices continued to fall, while yields were coming in above earlier expectations, which had been pessimistic due to the ongoing drought. Cattle prices moved
higher, but growth slowed some. That said, one contact
reported that with the exception of beef, many animal
operations were experiencing below breakeven prices.
Egg prices were flat, while dairy prices were mostly
higher. Prices for agricultural land showed signs of softening, especially for ground of lesser quality. Rising
interest rates stretched farm finances given high debt
levels of many operators.
Community Conditions
Community, nonprofit, and small business contacts
reported little change in economic activity from a robust
level. State government officials saw some decline in tax
revenues but low demand for unemployment insurance
continued. Small business owners said tight labor markets were hampering growth and that they were reluctant
to pursue expansions, in part because of tighter credit
conditions. Nonprofit contacts reported that a limited
supply of lower end housing was contributing to rising
rents and straining household budgets. In addition, there
were long waiting lists for prospective tenants at some
places. Contacts noted that in some smaller municipalities limited options for housing and childcare were undermining efforts to attract and retain workers. ■
Manufacturing
Manufacturing demand decreased modestly in late August and September. Steel orders were down modestly,
helping push up service center inventories. Fabricated
metals orders decreased slightly, with contacts highlighting lower demand from homebuilding and aerospace.
Machinery sales were steady on balance: while there
was a decline in demand from the auto sector, demand
for machinery used in infrastructure construction was still
strong and plenty of projects are in the pipeline. Motor
vehicle production fell with the UAW strike; at the end of
the reporting period, a little over 10% of U.S. production
was offline. According to one auto supplier, automakers
were willing to pay high prices to get necessary parts
before a work stoppage. This supplier received a large
order soon before workers at a plant they supply went on
strike, and then worked through the weekend and delivered the order via helicopter to meet the automaker’s
deadline. Heavy truck demand remained flat amidst
moderately low inventories.
Banking and Finance
Financial conditions tightened slightly over the reporting
period. Bond and equity market asset values decreased
slightly while volatility ticked up. Business loan demand
fell slightly. Contacts noted a further decrease in com-
For more information about District economic conditions visit:
chicagofed.org/cfsec
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ October 2023
Summary of Economic Activity
Economic conditions have remained unchanged since our previous report. Labor markets remained tight, and employers reported that while applications had increased there were continued difficulties finding candidates with desired skills.
Prices increased modestly due to higher input costs, though the rate of increases slowed. Businesses reported softer
consumer demand and difficulty passing on input costs. Seasonal declines in leisure travel and increases in business
travel moved the market closer to pre-pandemic norms. Rental rates in the residential and commercial real estate sectors were unchanged. Banking contacts saw some signs of consumer finance stress increasing but reported that overall
credit risk remained moderate. Many contacts expressed concern about the economic outlook due to ongoing strikes
and prospects of a government shutdown, but few effects were immediately apparent.
driver was input costs. A couple common cost increases
stood out: rising food prices and rising fuel prices. Although other input costs are rising, multiple contacts
noted that the rate of increase has slowed over the past
few quarters. Firms’ ability to pass costs on to consumers varied, and contacts noted that customers are pushing back on increasing prices. One contact who operates
a bookstore reported that costs are directly passed on to
consumers since their products are essentially prepriced. Another contact from the hospitality industry
noted that while they attempt to pass on costs, the increases are about 15% less than the actual growth in
costs. A manufacturer cut back on non-essential expenditures, such as sponsoring school events, to help profit
margins. A few contacts noted a decrease in prices,
most notably in the used car industry.
Labor Markets
Employment has increased slightly since our previous
report. Despite continued reports of easing, the labor
market remains tight, albeit less so than before. Several
industries reported a mismatch of labor—plenty of applicants, but few with the correct matching of skills. A banking contact in Louisville reported taking more risks with
less-experienced candidates, and several agriculture
contacts in the District reported that it has become harder to find qualified workers. In contrast, some contacts
reported it was easier to find and hire workers. Central
Tennessee manufacturing and shipping contacts reported that labor shortages were no longer their most pressing issue.
Wages have grown slightly since our previous report,
with the overall pace of increases slowing. A financial
services firm in Louisville has seen a reduction in wageincrease requests from previous years, while agribusiness contacts noted lower-wage workers were requesting wage increases due to higher cost of living. A transportation contact in Central Kentucky has had to offer
higher wages and retirement benefits to attract drivers.
Consumer Spending
District general retailers, auto dealers, and hospitality
contacts reported mixed business activity and a slightly
negative outlook. A retail contact in Louisville reported
that their sales are starting to ramp up due to Halloween
seasonal merchandise. A St. Louis auto dealer reported
that despite pent-up demand from lack of inventory,
business activity is being affected by decreased savings
and high credit card debt. Their outlook for the next few
months was initially optimistic but has weakened be-
Prices
Prices have increased moderately since our previous
report. Of the firms that reported higher prices, the main
H-1
Federal Reserve Bank of St. Louis
cause of the auto worker strikes, and they now expect
business activity to be impacted until 2024. A Memphis
restaurant contact reported that business activity was
down slightly due to unseasonably hot weather. District
hospitality contacts reported mixed business activity and
a slightly negative outlook.
pandemic. Construction contacts across the District
reported that while financing is available for new projects, it is at such high rates that, when combined with
higher input costs, “the numbers don’t work” on even the
best projects. Contacts report that due to uncertainty,
some developers are buying land to save and develop in
12-18 months, while other developers are donating their
owned land for tax write-offs.
Manufacturing
Manufacturing activity has moderately increased since
our previous report. Firms in both Arkansas and Missouri
reported moderate increases in new orders, production,
and inventories. However, there were moderate decreases in employment. Rising input costs continue to be an
ongoing issue for manufacturers, with labor being a
significant factor. Auto workers went on strike at a St.
Louis-area plant. A St. Louis-area steel manufacturer
announced plans to temporarily idle one blast furnace at
a plant and shift work to other facilities. On average,
firms reported they expect slight decreases in employment in the coming quarter.
Banking and Finance
Banking conditions in the District have remained stable
since our previous report. Commercial and industrial
loan demand has remained steady. The demand for new
housing loans is limited due to few home transactions.
Rising deposit interest rates continue to create a tight
market for deposits, raising the cost of funds and shrinking profit margins. Contacts reported that merger and
acquisition activity of smaller banks has increased, with
investment bankers reaching out for potential buyers.
Demand for consumer loans continued to decline, and
credit card usage remained elevated. While banking
contacts reported that signs of consumer financial stress
are increasing, they believe that overall credit risk remains moderate.
Nonfinancial Services
Activity in the non-financial services sector has cooled
since our previous report. Overall, airport contacts reported leisure travel decreasing and business travel
increasing, marking a return to pre-pandemic norms. A
Memphis airport contact reported shortages due to a
lack of trained pilots. A Memphis freight contact was one
of many facing challenges with finding contractors willing
to bid on smaller projects. Healthcare contacts reported
high staffing turnover rates and uncertainty around the
unwinding of pandemic-era policies and regulations.
Agriculture and Natural Resources
Overall agricultural activity has remained stable since
our previous report, though contacts’ outlook for future
conditions was mixed. Corn and cotton yields across the
District fell slightly below 2022 levels, while rice and
soybean yields hovered slightly above. Corn and rice
production increased relative to this time last year, but
cotton and soybeans decreased. Low water levels meant
that barges needed to float at a lower weight, which
raised shipping costs. Due to elevated storage and
transport costs, some contacts stated they planned to
leave their crop in the field rather than harvest. ■
St. Louis and Memphis trucking contacts reported that
their industry was in a recession, with low demand and
falling profits as consumers shifted spending to services
and necessities. The consensus was that conditions will
worsen, as elevated inflation, high interest rates, and
persistent labor shortages negatively impact business.
Real Estate and Construction
Rental rates in the residential, industrial, and office real
estate market have remained unchanged since our
previous report. Demand in the office market continues
to be a concern. Rental rates in retail spaces have increased since our previous report. Residential real estate median sale prices have remained constant since
our previous report. Total homes sold have dropped over
10% in Little Rock and Louisville, and residential inventory has increased slightly across the District.
Industrial, multifamily, and residential construction have
all slowed since our previous report. Construction contacts reported input costs plateauing in the past three
months, but lead times continue to be longer than pre-
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ October 2023
Summary of Economic Activity
Ninth District economic activity increased slightly since late August. Employment grew modestly and wage pressures
were stable. Inflationary pressures eased modestly. Growth was noted in consumer spending and tourism, and agricultural conditions strengthened, while energy and commercial construction and real estate were flat. Manufacturing as
well as residential real estate activity decreased. Minority- and women-owned businesses reported modestly lower
activity. Most business contacts reported that recent increases in long-term interest rates had diminished expectations
for their businesses in the coming year.
Labor Markets
Prices
Employment grew modestly since the last report.
Contacts overall reported somewhat slower labor
demand and fewer job openings, with the exception of
health care, which continued to exhibit strong labor
demand. Recent surveys showed hiring sentiment was
modestly contractionary in Minnesota and South Dakota,
but positive in North Dakota. Staffing firms reported
lower job orders in September compared with earlier in
the year and one year ago. But they also noted that
filling positions was easier. A Montana staffing contact
said that “things have improved but are still difficult”
regarding labor availability. A northern Minnesota
workforce contact noted that there were “still plenty of
available jobs, but employers were not as desperate as
before.” Candidate quality improved for some contacts.
Turnover was lower or unchanged for most contacts.
Inflationary pressures eased modestly since the previous
report. Most firms responding to a monthly business
conditions survey reported no changes in prices charged
to customers in September from a month earlier, but a
larger share indicated that they decreased their prices
than said that they increased them. Input prices
continued to increase on balance from the previous
month, but were also unchanged for most respondents.
The wholesale prices component of a regional
manufacturing index indicated rising input prices in
September from a month earlier. Following a sharp spike
in early September, retail fuel prices in District states
subsided to a level slightly higher than the previous
report. Prices received by farmers increased in August
from a year earlier for barley, lentils, chickpeas, and
cattle; prices decreased from a year earlier for corn,
wheat, soybeans, hay, potatoes, dry edible beans,
canola, milk, hogs, turkeys, chickens, and eggs.
Wage pressures were stable since the last report, but
ongoing wage growth remained above average. Staffing
contacts noted flattening wage pressure for industrial
and professional positions. A South Dakota retail contact
said that wage pressure had stabilized from higher levels
earlier in the year “though virtually all businesses would
say they are too high.” Some contacts noted a reduction
in sign-on bonuses and other wage enhancements.
Wage pressures remained elevated in health care. A
skilled nursing facility in Minnesota said it was looking to
increase wages for the third time in a year “just to keep
up with competition from other health providers.”
Worker Experience
Job seekers who responded to a survey of workers in
Montana were mainly looking for the opportunity to raise
their income. Most had just begun searching for better
opportunities but faced a variety of challenges reaching
their objectives. Low pay offered by prospective
employers made it unattractive for most to make a
switch. While inflation has softened, most respondents
perceived prices being higher over the last four-week
I-1
Federal Reserve Bank of Minneapolis
period, particularly for groceries and fuel. In a different
survey, North Dakota job fair attendees said the most
important aspects of a job were good pay, fulfilling and
engaging work, having a good boss, and offering a good
schedule. Employers not offering enough pay was also a
barrier to applying for jobs among this group.
speculative development. Residential real estate
remained soft. Inventories of homes for sale remained
exceptionally low. Contacts reported that many potential
sellers remained on the sidelines due to higher financing
costs compared with their existing mortgage.
Consumer Spending
Manufacturing activity in the District fell slightly since the
previous report. Manufacturing respondents to a
September business conditions survey reported
decreased orders on balance relative to a month earlier,
with expectations for a further decrease in the month
ahead. A regional manufacturing index indicated nearly
flat activity in Minnesota and South Dakota in September
from a month earlier, while activity increased in North
Dakota. Several producers of inputs for heavy and
commercial construction reported that demand
weakened further recently. A diversified producer of
industrial inputs noted that regional manufacturers “seem
to be slowing their consumption of contracted
manufacturing sub-components.”
Manufacturing
Consumer spending was modestly higher overall since
the last report. Hospitality and tourism firms across
Minnesota reported revenue increases overall, but foot
traffic was flat; expectations for the coming months
mirrored the recent summer season. Tourism spending
in northern Wisconsin was reportedly “very healthy” at
restaurants, bars, and golf courses. A source in
Michigan’s Upper Peninsula also reported strong tourism
crowds, high hotel occupancy, and busy restaurants.
However, retail contacts in Minnesota and South Dakota
reported that revenues were only slightly higher in
September. Airline traffic has been healthy across the
District. Lodging and accommodation tax collections in
Montana remained at strong levels through September.
Gaming handle in South Dakota was up only slightly
over last year. New vehicle sales remained healthy
thanks to higher vehicle inventories; one dealer with
multiple locations saw sales increase by 30 percent in
August and September, year over year. However, there
were concerns over the impact of the autoworkers strike
on future vehicle deliveries. Recreational vehicle sales
remained lower, but marine and powersport vehicle
sales were on par with last year.
Agriculture, Energy, and Natural Resources
District agricultural conditions strengthened slightly since
the previous report. Drought conditions moderated in
parts of the District but persisted in the eastern and
northern regions. Industry contacts reported that early
indications of crop production were better than expected,
given weather conditions. However, farm incomes
decreased from a year earlier in the third quarter,
according to preliminary results of the Minneapolis Fed’s
survey of agricultural credit conditions. District oil and
gas drilling activity was unchanged since the previous
report.
Construction and Real Estate
Construction was flat overall since the last report, with
mixed activity among subsectors and across regional
markets. Industry data and contacts suggested that
commercial and residential activity remained slower,
while industrial and infrastructure sectors saw healthy
activity. Recent commercial permitting was lower year
over year in Billings, Mont., and Minneapolis; unchanged
at healthy levels in Fargo, N.D., and Eau Claire, Wis.;
and higher in Rapid City, S.D., and Rochester, Minn.
Single-family residential construction was lower overall,
but a few markets saw increased activity. Multifamily
permitting also saw a small increase across the District.
Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned business
enterprises was modestly lower over the reporting
period. Half of contacts reported lower sales, compared
with 20 percent who saw higher sales. Capital
expenditures were mostly unchanged and plans to invest
in the near future edged slightly lower on balance.
Higher labor and nonlabor input prices were taking a toll
on profitability; more than half of contacts reported lower
margins and expected that to continue into the fall. Labor
demand was slightly higher on balance, and payroll was
mostly unchanged. Some contacts expected their need
for additional workers to soften somewhat in the
following weeks. ■
Commercial real estate was flat overall. Office vacancy
rates remained high in Minneapolis-St. Paul but have
leveled off. Retail has seen comparatively little new
development, but consumer demand has helped keep
vacancy rates relatively stable. Multifamily vacancy rates
have been rising modestly. Industrial space, in contrast,
has seen strong leasing and new construction activity in
Minneapolis-St. Paul, including a considerable amount of
For more information about District economic conditions visit:
minneapolisfed.org/region-and-community
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ October 2023
Summary of Economic Activity
Economic conditions softened slightly across the Tenth District in recent weeks. Hiring activity and business conditions
were mostly unchanged, but contacts in the energy, agriculture and commercial real estate sectors reported moderate
declines in activity. Several bankers characterized their appetite for lending as being on a “loan diet” – looking for smaller
portions (smaller balances) and only healthy fare (better creditworthiness). Most businesses indicated wage growth
slowed to a moderate pace. In particular, wage growth among entry-level jobs slowed as job hopping became less common. Lower turnover reportedly eased wage competition and led job switching to result in smaller wage gains for workers
compared to earlier in the year. The pace of consumer spending was unchanged. Some contacts noted that household
spending on home renovation activity grew slightly, which they attributed to a “lock-in effect” among homeowners with low
interest rate mortgages. Prices generally grew at a moderate pace. However, several housing property managers reported that rent growth decelerated significantly in recent weeks. Contacts also indicated that rent pressures will subside
further due to a substantial amount of new multifamily housing becoming available over the next eighteen months.
Labor Markets
Prices
Labor market conditions in the Tenth District were unchanged over the last month on average. Though several contacts in manufacturing reported slight job gains
over the last month, they indicated they were filling longvacant positions rather than growing their workforce.
Average hours worked at manufacturing facilities fell
slightly as new staff allowed employers to reduce overtime hours. Service contacts reported a slight contraction
in employment. Labor markets remain tight on balance,
but wage growth slowed to a moderate pace.
Price growth remained moderate across the District.
Services businesses noted ongoing difficulty passing
price increases to their customers. Given these pressures on their margins, most contacts expected to continue raising their prices over the next six months. Several multifamily housing property managers reported that
growth in rent prices stalled in recent weeks, and that
rent growth is down considerably compared to last year.
Contacts expected rent pressures to further subside over
the next year due to a substantial amount of multifamily
housing supply coming online.
Business contacts reported their workforce is less qualified and less productive compared to earlier this year.
They attributed the moderate declines in workforce
effectiveness to high turnover of more skilled and tenured staff in recent years. Most contacts expected these
workforce conditions to persist due to continued difficulty
hiring qualified workers. Many noted new applicants
across job levels and occupations are less skilled, experienced, or educated than applicants earlier this year.
Service contacts mentioned particularly pronounced
issues with new applicant reliability, experience, and
skills – making it difficult to fill open positions.
Consumer Spending
The pace of consumer spending was unchanged in
recent weeks. Spending at restaurants slowed mildly but
other leisure spending maintained momentum. Retail
spending picked up slightly, which some contacts noted
was concentrated among larger retail businesses. Citing
the “lock-in effect” of homeowners with low interest rate
mortgages, some contacts noted that spending on home
renovation activity grew slightly. However, spending on
renovation activity was constrained by the limited availability of contractors willing to take smaller jobs.
J-1
Federal Reserve Bank of Kansas City
Community Conditions
Community and Regional Banking
Contacts reported that low- and moderate-income (LMI)
workers continued to pursue higher wages through job
hopping, but those opportunities were becoming less
advantageous. Entry-level wages have continued to rise,
though at a much slower pace than a few months ago.
Most workforce organizations said they focused on directing clients to seek more career-oriented opportunities
in preparation for a possible recession. However, clients
have been hesitant to pursue such opportunities due to
the time they would need to spend in training, favoring
more immediate employment. Workforce organizations
reported seeing more LMI individuals pursuing work
despite ongoing challenges reaching employer locations
and finding childcare. One organization with a harder-toplace clientele reported placement rates fell to a multiyear low of 30%, citing higher rates of addiction, mental
health issues, and physical disabilities.
Several bankers characterized their appetite for lending
as being on a “loan diet” – looking for smaller portions
(smaller balances) and only healthy fare (better creditworthiness). Although credit quality remained sound
across commercial loan types, pockets of deterioration
appeared in various consumer loan segments. Weakness grew in mortgage loans and consumer installment
debt, in particular. Bankers expected additional deterioration in consumer credit quality over the next six
months. Loan demand was mostly unchanged during the
last month as higher interest rates continued to mute
activity from the commercial real estate and commercial
and industrial sectors. Deposit balances exhibited continued migration from checking accounts into higher yielding time deposits and money market accounts. Contacts
highlighted deposit promotions and maintaining competitive pricing as key strategies for deposit retention.
Manufacturing and Other Business Activity
Energy
Overall business activity was mostly unchanged, with
subtle differences across sectors. Manufacturing firms,
especially durable goods producers, continued to report
broad-based declines in new orders, shipments, and
order back logs – all indicators of future softening in
demand. Service contacts in consumer-facing retail
businesses, healthcare, and education reported strength
in activity. However, several transportation contacts
highlighted broad-based declines in shipments and
freight rates. One contact specifically highlighted a decline in shipments of goods tied to interest rate sensitive
sectors like housing and construction, noting that shipping volumes of carpet and other building materials were
down. Another contact in trucking highlighted a risk
surrounding credit performance of owner-operators who
are facing lower revenues and steeply declining valuations on equipment that was used to collateralize loans.
Tenth District energy activity declined moderately over
the last month. Oil prices rose recently and regional
inventories in the District decreased to multi-year lows.
Yet, the number of active oil rigs declined, with contacts
citing capital discipline as a constraining factor amid
slightly declining profits for District firms. Profitability was
expected to increase as contacts’ six-month oil price
expectations moved up over the last month. Firms also
anticipate a slight increase in productivity over the next
year, further boosting future profit expectations. Accordingly, contacts noted capital expenditures are expected
to increase at a faster pace in coming months, as access
to credit remains steady. District states added gas rigs
recently due to a slight increase in natural gas prices
during the summer months.
Agriculture
Conditions in the Tenth District farm economy softened
alongside further declines in commodity prices and prolonged drought. As harvest began in some areas, at
least one third of corn and soybean acres were in very
poor condition, raising concerns about yields and revenue. Dry conditions across the nation also reduced water
levels in the Mississippi River, disrupting barge traffic
along many gulf port routes and heightening concerns
about freight costs and export activity. Cattle prices
continued to be supported by low inventories, but
drought also constrained hay supply in many areas,
raising costs for ranchers. Interest rates were another
key concern cited by agricultural contacts, as producers
faced significantly higher financing costs. ■
Real Estate and Construction
Contacts across the commercial real estate sector highlighted distinctions in performance across property classes. Newly constructed – or otherwise prime – office,
retail, and industrial spaces continued to perform above
expectations while class B properties faced lower operating incomes and valuations. Most contacts noted funding
for renovation activity was substantially less available
than for new property development. Several contacts
suggested uncertainty about rates inhibited transaction
activity more so than higher rates. They expected revaluation of properties and greater transaction activity would
emerge once rate stability was achieved.
J-2
For more information about District economic conditions visit:
www.KansasCityFed.org/research/regional-research
Federal Reserve Bank of
Dallas
The Beige Book ■ October 2023
Summary of Economic Activity
The Eleventh District economy continued to expand at a modest pace overall. Growth moderated in the service sector
but rebounded in manufacturing and energy. Retail and financial services activity declined. Existing-home sales dipped
while new home sales were mostly solid. High temperatures and insufficient rainfall continued to plague agricultural
conditions. Nonprofits expressed concern over daycare closures in the wake of pandemic era relief funds expiring.
Employment growth was modest, and wage growth continued to normalize. Input cost growth remained slightly elevated
overall, while selling price growth was average or below average. Outlooks generally weakened slightly, with contacts
expressing concern over worsening business conditions, high interest rates, and the political environment.
arrangements, and candidates were willing to ease up
on wage demands to gain that flexibility.
Labor Markets
Employment growth remained modest over the past six
weeks. Hiring decelerated in the service sector but
picked up in manufacturing. In the energy sector, job
growth moderated to a more average pace after two
years of elevated hiring. Layoffs were noted by some
cargo carriers and high-tech companies. Most sectors
reported greater ease in finding workers than in prior
periods. However, oilfield contacts said shortages of high
-skill blue collar workers persist, and hospitality workers
were also in short supply. There were scattered reports
of labor hoarding—businesses saying they ordinarily
would release some workers because of weak sales but
were holding off “just in case.” A staffing firm noted the
labor market is looser than it has been, saying “it’s not a
pool, but at least we’ve got some drops on the ground.”
Another said baby boomers were staying longer in the
workforce because increases in cost of living have left
them without much of a choice but to work.
Prices
Input cost growth showed no signs of easing over the
past six weeks outside of the energy and construction
sectors. Oilfield cost increases moderated, and contacts
reported cost declines in some inputs like sand and
steel. Also, builders said the cost of most construction
materials have stabilized. Meanwhile, airlines and cargo
carriers noted an increase in fuel costs. Selling price
growth remained subdued in manufacturing and energy
but was more moderate in services. A staffing firm reported an increase in payment delinquency due to cash
flow issues among clients.
Manufacturing
Texas manufacturing activity rebounded in September.
Production increases spanned durables and nondurables and were led by machinery and high-tech manufacturing. Chemical production improved amid stabilizing
demand. However, much uncertainty persists, and manufacturers’ perceptions of broader business conditions
worsened overall. Outlooks continued to deteriorate, with
several contacts citing high interest rates as a headwind,
particularly auto manufacturers.
Wage growth continued to normalize, though it was still
somewhat elevated. Homebuilders noted some reprieve
in labor costs, and energy companies said wage pressure lessened from last quarter. Staffing firms said wage
pressure eased over the past six weeks, in part because
firms were pushing back more on hybrid and remote
K-1
Federal Reserve Bank of Dallas
Retail Sales
formance rose, particularly for consumer loans, but
increased delinquency was seen across the board. Credit standards continued to tighten, most notably on the
commercial side. Loan pricing pushed up further, though
at the slowest rate so far this year. Bankers remain
pessimistic, with expectations for increasing loan nonperformance, decreasing loan demand, and worsening
business activity over the next six months.
Retail sales declined slightly over the past six weeks,
with notable weakness in auto sales. Some retailers said
the continuation of unseasonably hot weather was a
factor behind the slump. Auto dealers pointed to reduced
affordability spurred by higher interest rates as a major
factor. Meanwhile, contacts along the border noted that
the strong peso was drawing Mexican shoppers to U.S.
stores. Retail outlooks improved slightly, though auto
dealers expressed concern over the impact of the strike.
Energy
Energy activity picked up modestly over the reporting
period. Respondents to the Dallas Fed Energy Survey
indicated a rise in business activity and a sharp increase
in oil and natural gas production in the third quarter.
Drilling and completion activity for oil and gas wells
declined over the past six weeks, though most contacts
expect the rig count to stabilize soon. Outlooks improved
notably, particularly among exploration and production
firms. Contacts expressed confidence that oil prices will
remain conducive for profitability over the next year but
said their natural gas drilling outlook had worsened.
Nonfinancial Services
Growth in service sector activity decelerated to a more
typical pace in September. Professional and business
services remained the top performing industry, and a
pickup was seen in health care. Airlines continued to
report robust demand, particularly for leisure and international travel. A transportation contact noted that the
drought impact on the Panama Canal may increase air
cargo demand as an alternative for moving goods internationally. Reports from staffing services firms were
mixed. One contact said contract business is way down
across the board, as more customers are looking for
permanent hires. Service sector outlooks worsened
slightly overall, with contacts citing inflation and softness
in the real estate market as headwinds. One business
executive said he expects the next twelve months to be
“chaotic,” with uncertainty driven by high interest rates
and the national political landscape.
Agriculture
Drought intensified across much of the District over the
past six weeks and crops continued to suffer from excessive heat. Grain prices fell notably, with wheat hitting its
lowest price in two years. Pasture forage conditions were
poor to very poor, and ranchers were still supplemental
feeding, which is unusual for this time of year. Cattle
prices remained high amid tighter supply, cheaper production costs in feed lots, and strong demand for beef.
Construction and Real Estate
Housing demand generally held up during the reporting
period despite higher mortgage rates, though contacts
noted some seasonal softening. Existing-home sales
dipped in part due to lack of inventory, while builders
said new home sales and buyer traffic were mostly solid
for this time of the year. Incentives such as rate
buydowns remained in place and were buoying sales of
new homes. A shortage of transformers continued to
dampen single-family home completions. Outlooks remained cautious.
Community Perspectives
Demand for nonprofit services remained elevated. Affordable housing was a pressing concern, and one nonprofit said they received additional housing assistance
funding but were constrained by the limited number of
landlords willing to accept housing vouchers. Another
contact noted that inflation continued to squeeze households’ food budgets, putting healthier food options out of
reach. One nonprofit reported they often had a two-tofour-hour line at their food pantry.
Activity in commercial real estate was little changed
since the last report. Apartment leasing was solid,
though rents and occupancy were largely flat as supply
continued to outpace demand. Office markets continued
to face headwinds. Industrial demand softened, though
the overall level of activity remained robust. Investment
sales activity was subdued, and outlooks were mixed.
Several contacts expressed concern over the ending of
pandemic era relief funds, particularly for childcare centers. Multiple daycare centers have already announced
closures, with one nonprofit leader noting that the impact
to affected families is “catastrophic,” as there aren’t other
options in the area. Some local workforce boards were
proactively enrolling childcare centers into the state
childcare subsidy program and mentoring them, with the
hope of providing more options for low-income families.■
Financial Services
Loan demand has been declining for a year, and the
pace accelerated this period. Overall loan volumes declined at a quicker pace this period as well. Loan nonper-
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ October 2023
Summary of Economic Activity
Economic activity in the Twelfth District was stable on net during the mid-August through September reporting period.
Employment levels were little changed, and labor market tightness eased slightly. Prices and wages both rose, but at
slower rates. Retail sales were robust, while activity in the service sectors moderated somewhat. Demand for manufactured products remained largely unchanged, and conditions in agriculture and resource-related sectors strengthened
slightly. Activity in residential and commercial real estate markets eased. Conditions in the financial sector moderated
further over the reporting period. Communities across the Twelfth District faced challenges with the availability of affordable housing and saw continued high demand for support services. Looking ahead, contacts expected weaker economic conditions overall.
Labor Markets
employee demands for higher wages and benefits rising
recently.
Labor market tightness eased slightly over the reporting
period as labor supply and demand came into better
balance. Employment levels were little changed. Across
the District, hiring was somewhat easier with contacts
reporting more job applicants, higher quality candidates,
and lower employee turnover. Still, challenges persisted
in recruiting high-skilled workers in several sectors including nonprofits, financial services, hospitality, construction, and retail. Manufacturing and medical services
providers noted continued investment in labor-saving
technology. While several contacts reported hiring freezes in sectors such as business services and technology,
others took advantage of easing labor market tightness
to fill job vacancies. In the financial services and technology sectors, firms lowered head counts through attrition
and continued layoffs.
Prices
Prices continued to rise, albeit at a more moderate pace
than in the last reporting period. Contacts noted price
increases for inputs, such as business insurance, health
insurance for employees, and raw materials, with particularly higher prices for petroleum-based products and
fuel. Still, prices of some inputs fell, such as wood and
steel products. Retail prices overall for food and gasoline
rose, while one contact in the Pacific Northwest noted
that seafood prices fell. A Southern California restauranteur observed more consumer resistance to menu
price increases, limiting their pricing power.
Community Conditions
Demand for community and support services remained
elevated. In particular, households and community members sought support for house affordability, food assistance, rental assistance, childcare, and mental health
services. Nonprofit organizations continued to report
notable drops in funding and charitable donations, which
further constrained their ability to meet demand for basic
needs. Some contacts highlighted the negative impact
on housing affordability from the ongoing transformation
of many old residential properties to newer upscale units
Wages grew over the reporting period, but at a slower
rate. Several firms reported stable wages for new hires
and annual wage increases for staff normalizing, while
other contacts noted employees’ wage growth expectations remaining elevated. An employer in Northern California reported that employee demands to work from
home eased, and a contact in Washington reported
some firms are less willing to offer nonwage benefits
such as remote work. However, a firm in Oregon noted
L-1
Federal Reserve Bank of San Francisco
in urban areas across the District.
ucts softened somewhat due to a strong dollar and
weaker growth abroad. While input costs remained generally elevated, increased water availability from higher
rain and snowfall helped reduce the costs of irrigation.
Nonetheless, severe weather events had negative impacts on the production of some food crops, including
grapes. Producers expressed concern about the ramifications of geopolitical and extreme weather events on
future food availability. Investment in timberlands rose as
investors continued to seek alternatives to more traditional investment vehicles.
Retail Trade and Services
Retail sales were robust in recent weeks. Demand for
groceries, particularly health-oriented and fresh products, was strong. Retailers reported robust demand for
furniture and some home improvement products. Higher
gasoline prices pushed some consumers to pull back on
discretionary spending. Nonetheless, reports suggested
higher energy prices impacted household spending
decisions to a lesser degree thus far relative to last
summer’s spike in energy prices.
Real Estate and Construction
Activity in the consumer and business services sectors
moderated slightly. Demand for leisure travel was largely
unchanged in recent weeks, while business travel
strengthened somewhat as attendance of in-person
conferences and conventions continued to recover.
International inbound travel activity remained subdued
relative to pre-pandemic levels due to a strong dollar,
brisk competition from foreign destinations, and reportedly longer visa-processing times. Some contacts in the
Pacific Northwest reported demand for restaurants and
regional resorts softened since Labor Day. Production
activity in the entertainment and media industry remained weak as labor contract negotiations continued
between the studios and the actors’ union. Demand for
health-care services and laboratory testing reportedly
rose.
Activity in residential real estate slowed somewhat over
the reporting period. Inventories of single-family homes
remained tight as owners with existing lower-rate mortgages stayed out of the market. Despite high rates for
new mortgages, demand continued to exceed supply,
and prices rose further. Activity in the multifamily sector
was mixed: while some regions, like the Pacific Northwest, reported continued strength, others experienced
softening demand, lower rents, and rising vacancies.
Residential construction activity weakened due to high
interest rates and constrained availability of labor, lots,
and materials. In contrast, one contact observed better
availability of labor and materials in parts of California.
Commercial real estate activity softened on net. Weakness in office leasing activity persisted, and vacancy
rates rose. In contrast, some contacts in Utah and California reported continued solid demand for retail space.
While demand for new industrial construction was
strong, commercial construction activity weakened overall, with builders reporting lower demand from the technology and professional services sectors. One contact
mentioned higher construction demand for public projects from local governments.
Manufacturing
Manufacturing activity remained largely unchanged over
the reporting period. Manufacturers reported generally
stable demand despite a tighter credit environment and
continued labor challenges. Demand for manufactured
wood products softened due to the impact of higher
interest rates on residential construction activity. Capacity utilization remained high in food manufacturing but
weakened somewhat in metal production. Raw materials
availability was steady overall, though electrical supplies
were limited. Supply chain disruptions continued to improve, although some manufacturers mentioned lingering delays.
Financial Institutions
Lending activity moderated further in recent weeks.
Demand for business loans, particularly commercial real
estate loans, was weak, and higher mortgage rates kept
residential lending activity muted. Consumer lending,
particularly for credit cards, remained solid. Deposit
flows were stable on net despite strengthening competition from other depository institutions and money market
funds as people sought higher rates. Lending standards
remained tight, and credit quality was strong. Some
contacts highlighted demand shifting away recently from
large and regional banks to community banks and credit
unions. ■
Agriculture and Resource-Related Industries
Conditions in the agriculture and resource-related sectors strengthened slightly overall. Growers reported
strong demand for fruits, vegetables, and cotton, as well
as steady demand for nuts. Inventories from prior harvests bolstered supply, and the upcoming harvest season is expected to produce large yields. Production at
fisheries was stable. Overall exports of agricultural prod-
L-2
Cite this document
Federal Reserve (2023, October 31). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20231101
@misc{wtfs_beige_book_20231101,
author = {Federal Reserve},
title = {Beige Book},
year = {2023},
month = {Oct},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20231101},
note = {Retrieved via When the Fed Speaks corpus}
}