Beige Book
The Beige Book
Summary of Commentary on
Current Economic Conditions by
Federal Reserve District
January 2024
FEDERAL RESERVE SYSTEM
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Contents
About This Publication .................................................................................................... ii
National Summary ........................................................................................................... 1
Federal Reserve Bank of Boston .................................................................................. 5
Federal Reserve Bank of New York .............................................................................. 8
Federal Reserve Bank of Philadelphia ....................................................................... 12
Federal Reserve Bank of Cleveland ............................................................................ 16
Federal Reserve Bank of Richmond ........................................................................... 20
Federal Reserve Bank of Atlanta ................................................................................ 24
Federal Reserve Bank of Chicago .............................................................................. 28
Federal Reserve Bank of St. Louis ............................................................................. 31
Federal Reserve Bank of Minneapolis ....................................................................... 34
Federal Reserve Bank of Kansas City ........................................................................ 38
Federal Reserve Bank of Dallas .................................................................................. 42
Federal Reserve Bank of San Francisco .................................................................... 46
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About This Publication
What is the Beige Book?
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.
What is the purpose of the Beige Book?
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 inforNote: The Federal Reserve officially identifies Districts by number and Reserve Bank city. In the 12th District, the Seattle
Branch serves Alaska, and the San Francisco Bank serves Hawaii. 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. The Board of Governors revised
the branch boundaries of the System in February 1996.
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The Beige Book
mation 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.
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National Summary
Overall Economic Activity
A majority of the twelve Federal Reserve Districts reported little or no change in economic activity
since the prior Beige Book period. Of the four Districts that differed, three reported modest growth
and one reported a moderate decline. Consumers delivered some seasonal relief over the holidays by meeting expectations in most Districts and by exceeding expectations in three Districts,
including in New York, which noted strong holiday spending on apparel, toys, and sporting goods.
In addition, seasonal demand lifted airfreight volume from ecommerce in Richmond and credit card
lending in Philadelphia. Several Districts noted increased leisure travel, and a tourism contact
described New York City as bustling. Contacts from nearly all Districts reported decreases in
manufacturing activity. Districts continued to note that high interest rates were limiting auto sales
and real estate deals; however, the prospect of falling interest rates was cited by numerous contacts in various sectors as a source of optimism. In contrast, concerns about the office market,
weakening overall demand, and the 2024 political cycle were often cited as sources of economic
uncertainty. Overall, most Districts indicated that expectations of their firms for future growth were
positive, had improved, or both.
Labor Markets
Seven Districts described little or no net change in overall employment levels, while the pace of
job growth was described as modest to moderate in four Districts. Two Districts continued to note
a tight labor market, and several described hiring challenges for firms seeking specialty skills,
such as auto mechanics or experienced engineers in the Boston and San Francisco Districts,
respectively. However, nearly all Districts cited one or more signs of a cooling labor market, such
as larger applicant pools, lower turnover rates, more selective hiring by firms, and easing wage
pressures. The pace of wage growth was characterized as moderate in Boston, Richmond,
Chicago, and Dallas; as modest in New York and Philadelphia; and as slight in St. Louis. Firms
from many Districts expected wage pressures to ease and wage growth to fall further over the
next year.
Note: This report was prepared at the Federal Reserve Bank of Philadelphia based on information collected on or before
January 8, 2024. This document summarizes comments received from contacts outside the Federal Reserve System and
is not a commentary on the views of Federal Reserve officials.
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The Beige Book
Prices
Six Districts noted that their contacts had reported slight or modest price increases, and two
noted moderate increases. Five Districts also noted that overall price increases had subsided to
some degree from the prior period, while three others indicated no significant shift in price pressures. Firms in most Districts cited examples of steady or falling input prices, especially in the
manufacturing and construction sectors, and more discounting by auto dealers. Districts also
noted that increased consumer price sensitivity had forced retailers to narrow their profit margins
and to push back in turn on their suppliers’ efforts to raise prices. Premium increases for property
and casualty insurance and for health insurance continue to impact most firms. Three Districts
noted that their firms were expecting price increases to ease further over the next year, while four
Districts’ firms anticipated little change.
Highlights by Federal Reserve District
Boston
Economic activity was down slightly. Employment was stable, and wage growth was moderate.
Manufacturers reported mostly weaker sales but remained cautiously optimistic for 2024. The
Boston area experienced strong growth in tourism and convention activity. Home sales stayed in
the doldrums, but contacts expressed optimism that the market would rebound in 2024 pending a
decline in home mortgage rates.
New York
Regional economic activity declined slightly. Labor market conditions remained solid but continued
to cool as the demand for labor softened. Led by a strong holiday season, consumer spending
increased moderately. Manufacturing activity contracted sharply. Prices rose modestly. Businesses
and households across the District expressed concern about the high cost and reduced availability
of credit.
Philadelphia
Business activity held steady during the current Beige Book period—after falling for most of 2023.
Employment grew slightly, and labor availability improved. Wage and price inflation subsided further, with prices rising at a slight pace as consumers pushed back more on higher prices, especially among lower-income households. Sentiment improved, but firms remained cautious and
expectations for economic growth remained subdued.
National Summary
Cleveland
District business activity edged up. Employment stabilized, and wage increases returned to more
typical levels. Cost and price pressures changed little after easing through much of 2023, though
upward price pressure persisted in certain industries. Retailers reported strong sales for discounted items, and consumers became more reliant on “buy now, pay later” payment options.
Richmond
The regional economy grew mildly in recent weeks as consumer spending was flat to increasing
modestly. Nonfinancial services demand and commercial real estate activity was little changed.
Meanwhile, trade and trucking volumes were down modestly and residential housing sales and
mortgage lending softened. Employment and wages rose moderately and inflation moderated but
remained elevated.
Atlanta
Economic activity grew at a slow pace. Labor markets cooled further, and wage pressures eased.
Some nonlabor input costs moderated. Retail sales were mixed. Travel activity remained strong,
but spending at hotels declined. Home sales slowed, on balance. Banking conditions were mixed.
Transportation activity was sluggish. Energy demand was robust.
Chicago
Economic activity in the Seventh District was up modestly. Employment increased moderately; nonbusiness contacts saw a modest increase in activity; consumer spending was up slightly; construction and real estate and business spending were flat; and manufacturing decreased modestly. Prices and wages rose moderately, while financial conditions loosened modestly. Net farm
incomes were above average in 2023.
St. Louis
Economic activity has remained unchanged since our previous report. Labor markets eased, and
the rate of price increases for many firms has slowed over the past few months. Travel and hospitality firms reported strong leisure travel growth during the holiday season and an optimistic outlook for the upcoming year. Rental prices were flat and residential inventory rose slightly.
Minneapolis
District economic activity was down slightly. Hiring was positive but job postings declined. Wage
pressures continued to moderate, approaching pre-pandemic conditions. Price increases were
mild, with most firms reporting no change in input or final prices. Holiday sales and traffic were
generally strong, but construction and manufacturing activity decreased.
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The Beige Book
Kansas City
Economic activity in the Tenth District declined moderately. Consumer spending fell, even at lowcost quick-serve restaurants. Demand for seasonal employment was low, with few workers converting to full-time. Commercial real estate transactions were suppressed, while CRE loan modification activity was inhibited by lenders’ concerns about credit performance and borrower liquidity.
Dallas
Economic activity expanded at a modest pace over the reporting period, with most sectors holding
steady or experiencing slight growth. Wage growth moderated and input cost and selling price
growth held slightly above average overall. Business outlooks were neutral to pessimistic, with
contacts citing weakening demand as the primary concern going forward.
San Francisco
Economic activity was stable overall. Labor availability improved, and wage and price pressures
eased. Retail sales grew modestly, and demand for services was mixed. Demand for manufactured
products weakened, while conditions in agriculture were solid. Real estate activity varied by property type. Financial sector conditions changed little.
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Federal Reserve Bank of
Boston
Summary of Economic Activity
Economic activity declined slightly on average, employment was roughly flat, and prices increased
at a modest pace since the last reporting period. Retail revenues increased slightly, while tourism
activity grew at an above-average pace. Software and IT services firms reported stable revenues,
while manufacturers experienced slightly weaker sales. Residential real estate sales held steady
at very low levels, although the prospect of lower interest rates in 2024 led to increased optimism
for the housing market. Commercial real estate activity weakened further modestly, and the outlook in that sector remained mostly pessimistic, despite expected declines in borrowing rates. In
sectors aside from real estate, the outlook for 2024 remained cautiously optimistic.
Labor Markets
Employment was flat on average, and wage growth remained moderate. Hospitality and retail headcounts increased slightly, while employment was unchanged at software and IT firms. Manufacturing employment was also mostly stable, with the exception that a drug manufacturer carried out
further large layoffs based on earlier plans. Hiring became easier on balance, and attrition rates
fell to below-average levels. Nonetheless, labor scarcity persisted for auto mechanics and some
highly skilled manufacturing workers. A shortage of restaurant help led one Vermont establishment to reduce its hours, but restaurant worker supply rebounded on Cape Cod. Wage growth was
generally moderate, but some manufacturers and IT firms enacted above-average wage increases
to compensate for price inflation. Contacts were not planning for major changes in employment
moving forward, and wage pressures were expected to ease somewhat.
Prices
Prices increased at a modest pace on average. Among manufacturers, output prices increased at
a slight to modest pace. In contrast, their input prices were mostly flat, except that fish commodities and shipping container costs each fell moderately, and localized flooding created a cost shock
in one case. An online retailer continued to shift away from heavy promotional activity in favor of
more stable pricing strategies; its average output price increased moderately, while its input prices
were stable. Hotel room rates in the Greater Boston area edged up further, maintaining an aboveaverage year-over-year growth pace, while room rates on Cape Cod were down slightly. Automobile
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The Beige Book
list prices were steady, although promotional activity picked up following an increase in inventories. Software and IT services firms reported mostly stable output prices. Across sectors, contacts
expected prices to hold steady or face only limited upward pressure in 2024.
Retail and Tourism
First District retail and tourism contacts on balance reported a modest seasonal upswing in sales
in late 2023, although reports were quite mixed. On Cape Cod, revenues at retailers and hoteliers
were described as “solid” for the fall season. Nonetheless, those revenues, net of typical seasonal fluctuations, were about flat since summer and down modestly relative to the fall of 2022.
An online retailer saw modest seasonal growth despite sluggish industrywide performance. New
and used automobile sales in New Hampshire were flat on balance despite improvements in inventories. Airline passenger traffic through Boston increased at an above-average pace in recent
months, with the result that traffic surpassed its comparable 2019 levels for the first time since
the onset of the pandemic. Hotel occupancy in greater Boston also increased at a strong pace,
exceeding seasonal norms, fueled in part by robust convention activity. The outlook for tourism
and convention activity for Boston in 2024 remained very bullish. In contrast, retailers around the
First District were only cautiously optimistic for sales in 2024.
Manufacturing and Related Services
On average, manufacturing contacts reported slightly weaker sales. In one exception, a manufacturer of consumer goods experienced strong seasonal sales growth that was buoyed by promotions. A semiconductor manufacturer attributed weaker demand for their products to a general
slowdown in consumer spending on electronics and autos, while a frozen fish producer attributed
flat demand to increasing price sensitivity by consumers. Consistent with previous plans, capital
spending was set to slow on balance moving forward, as a few firms recently completed significant
capital projects and another cited high borrowing rates as an ongoing deterrent. Despite recent
softness in sales, contacts were cautiously optimistic that demand would stabilize or improve
in 2024.
IT and Software Services
First District contacts in the IT and software services industry experienced stable revenue streams
in recent months. Sales increased at a robust pace on a year-over-year basis to the fourth quarter,
and those positive results were attributed to offering products and services that met their clients’
demands for greater operational efficiency. In response to price increases and cost reductions
over the past year, profit margins increased modestly on balance in 2023. Capital and technology
spending was flat for most firms but fell slightly at one that cut its reliance on hardware in favor of
cloud computing services. Contacts expected demand to remain strong and stable moving into
Federal Reserve Bank of Boston
2024, reflecting increased optimism for their own results and for the economy in general, compared with their forecasts from earlier in the year.
Commercial Real Estate
Commercial real estate activity in the First District weakened further modestly in recent months. In
the already-weak office market, vacancy rates increased moderately on average, and Providence in
particular saw the exit of a large downtown tenant. Office rents fell noticeably in the Boston area
in recent months but were reportedly stable (if low) elsewhere. Demand for life sciences space in
greater Boston dwindled further to very low levels. In the retail market, rents and vacancy rates
were mostly steady at moderate levels, although lower-end malls continued to see elevated vacancies. Demand for industrial space slowed further at a modest pace, but rents and occupancy rates
were described as mostly stable at healthy levels. Projections for commercial real estate activity in
2024 were mixed but remained pessimistic on balance. Some contacts predicted an increase in
investment activity driven by declining interest rates. Others remained concerned that office buildings would face rising foreclosure rates even with some decline in interest rates. The industrial
property market faced modest downside risks, and the outlook for Boston’s life sciences properties deteriorated in response to weak recent demand.
Residential Real Estate
Contacts reported weak but mostly stable home sales in November 2023, net of seasonal patterns. However, contacts from the Boston area noted slightly weaker sales in November, adding
that the median home price declined modestly in recent months as a result. Considering year-overyear changes, single-family sales fell by double-digit margins in November in all First District states
except Connecticut (for which no data are available); condo sales fell by moderate-to-steep margins in all states except Maine, which posted a slight increase. Nonetheless, the rate of decline in
home sales moderated on average from earlier in 2023. Median sales prices increased moderately on a year-over-year basis in all reporting states, a development attributed to persistent scarcity of supply and significant pent-up demand. Changes in home inventories were mixed, and
despite modest recent increases in supply in some states, inventories remained historically low.
Looking ahead, contacts expressed growing optimism for a resurgence in residential sales in
2024 given the prospect of lower mortgage rates.
For more information about District economic conditions visit: https://www.bostonfed.org/in-theregion.aspx.
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Federal Reserve Bank of
New York
Summary of Economic Activity
Economic activity in the Second District declined slightly during the latest reporting period, continuing a period of sustained weakness. Labor market conditions continued to cool but remained
solid. Employment growth slowed to a slight pace, as demand for labor softened with economic
uncertainty inhibiting hiring plans. Inflationary pressures were little changed, with prices rising
modestly. Consumer spending increased moderately, with strong holiday spending on apparel,
toys, and sporting goods. Manufacturing activity fell sharply, with notable declines in orders and
shipments. Tourism activity in New York City approached normal pre-pandemic holiday levels.
Housing markets were mostly unchanged since the last report, with low inventory continuing to
restrain sales activity in most of the District, but residential rental markets softened. Commercial
real estate markets mostly held steady. Activity in the broad finance sector declined modestly, with
ongoing weakening loan demand and rising delinquencies. Businesses and households across the
District expressed concern about the high cost and reduced availability of credit. The outlook
improved but remained subdued.
Labor Markets
Labor market conditions continued to cool since the last report but remained solid. Employment
growth slowed to a slight pace, though businesses in information services, manufacturing, transportation, and construction reported declines in employment in recent weeks. Though the availability of workers has improved, contacts noted that demand for workers softened as economic
uncertainty inhibited hiring plans. Indeed, many mid-sized companies have stopped hiring, while
smaller companies have become more selective in who they hire. Contacts across a variety of sectors noted that attrition remains exceptionally low.
Wages grew modestly. As conditions have continued to normalize, contacts reported that labor
demand and supply have come into better balance, reducing the need for outsized wage adjustments seen through the pandemic. Still, a major payroll and human resources firm reported that
bonuses were up in 2023, with more employees receiving bonuses and solid increases in average
bonus percentages. Looking ahead, more firms plan on increasing headcounts in the coming
months than in the previous period.
Federal Reserve Bank of New York
Prices
Inflationary pressures were little changed, with prices rising modestly. On balance, the pace of
input price increases continued to moderate. Contacts reported that prices for some goods, such
as paper, ink, and construction materials have stabilized, while the cost of freight and insurance
continued to rise. The pace of selling price increases rose slightly in the service sector but continued to moderate slightly for manufactured goods. However, construction firm contacts pointed
to declining selling prices. Contacts do not anticipate significant shifts in the pace of selling price
increases in the coming months.
Consumer Spending
Led by strong holiday sales, consumer spending was up moderately during the reporting period.
Spending on apparel, toys, and sporting goods was particularly strong, while spending at restaurants and bars declined somewhat. Despite the higher cost of credit, auto dealers in upstate New
York reported solid sales activity for both new and used cars at the end of 2023. With inventory
continuing to improve, more buyers are able to find their vehicles of choice and ongoing declines
in used car prices continued to boost sales in that segment of the market.
Manufacturing and Distribution
Manufacturing activity fell sharply, with orders and shipments declining. Transportation and distribution firms also reported declining activity. Supply availability continued to improve, with several
contacts reporting that supply chains have returned to pre-pandemic norms. Moreover, an upstate
auto industry contact reported that the shortage of microprocessors that stalled auto production
for much of the pandemic period has largely been resolved. Still, slow delivery times remained a
challenge for some industries. One local business contact reported a four-year lead time for specialty equipment delivery. Inventories increased slightly, while unfilled orders declined. Looking
ahead, while manufacturers expect business conditions to improve modestly, optimism remained
subdued.
Services
On balance, service sector activity declined slightly in the latest reporting period. While businesses providing education and health services reported a modest increase in activity, business
services firms indicated activity declined somewhat, and personal services businesses pointed to
a sharp contraction. Service firms generally expect conditions to improve somewhat in the
months ahead.
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A New York City tourism contact reported that the city was bustling over the holiday season, with
visitor levels at normal pre-pandemic levels, busy pedestrian corridors, and long queues for entry
at museums. Hotel bookings were significantly higher this year compared to the same time last
year, with hotel occupancy rates notably higher than other top U.S. tourism markets. However,
some inventory of hotel rooms has been set aside for emergency housing for asylum seekers,
reducing the stock of available rooms. Despite economic and geopolitical concerns, contacts are
optimistic about a return to normal tourism levels in 2024.
Real Estate and Construction
Housing markets were mostly unchanged since the last report, with low inventory continuing to
restrain sales activity in much of the District. Demand remained solid, with buyers who have been
waiting on the sidelines for a drop in mortgage rates returning to the market. Inventory remained
exceptionally low in the New York City suburbs, while inventory increased slightly in upstate New
York. In general, contacts reported that home prices have continued to trend up. New York City
was the exception, where prices have leveled off as supply has normalized.
Notably, residential rental markets softened after a sustained period of strength. Rents fell across
the District, but particularly in New York City, where new lease activity continued to decline and
rents dropped below last year’s level. A contact in upstate New York noted that some investors
who purchased and converted homes for rental income have started to sell their properties,
reducing options for renters but increasing the supply of homes for sale.
Commercial real estate markets were unchanged for most markets. New York City office vacancy
rates were steady near historic highs and rents declined slightly. Upstate New York office markets
saw continued increases in vacancy rates, but rents were unchanged. In the industrial market,
small improvements were seen in downstate New York while conditions in upstate New York
deteriorated.
Construction contacts reported that activity declined modestly since the last report. Office construction dropped, but industrial construction grew with high volumes under construction and significant deliveries set for 2024 in downstate New York and northern New Jersey.
Banking and Finance
Activity in the broad finance sector declined modestly during the latest reporting period. Contacts
from a variety of sectors expressed concerns about the high cost and reduced availability of credit.
Small to medium-sized banks in the region reported declining loan demand across all loan segments, including refinancing. While banking contacts reported that credit standards were
unchanged for consumer loans and residential mortgages, standards continued to tighten for busi-
Federal Reserve Bank of New York
ness loans and commercial mortgages. On balance, deposit rates were higher, loan spreads narrowed, and delinquency rates continued to rise.
Community Perspectives
Households in the District have experienced greater difficulty meeting financial obligations. Though
credit has become harder to get, many families have accumulated high debt burdens. To help ease
these burdens and protect households, state and city governments have responded with new policies. Notably, New York State has enacted legislation prohibiting medical providers from reporting
medical debt to credit bureaus, preventing the cascading effects of adverse credit reporting on
household finances. Other policies have distributed funds directly to individuals, including one providing funds to cover back rent to residents of public housing managed by the New York City
Housing Authority.
For more information about District economic conditions visit: https://www.newyorkfed.org/
regional-economy.
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Federal Reserve Bank of
Philadelphia
Summary of Economic Activity
On balance, business activity in the Third District held steady during the holiday season after
declining steadily for most of 2023. Employment grew slightly overall, although manufacturers
reported fewer workers and shorter hours. Wage and price inflation appeared to subside
further—to a still-modest pace for wages, but to a slight pace for prices. Contacts noted increased
consumer resistance to higher prices. Consumer spending held steady across most segments,
although contacts noted an increasing divergence as low-income households spent less yet paid
more on credit, while affluent households continued to spend freely. Ongoing concerns centered
mainly on global issues and the 2024 election, while sentiment improved with the prospect of
falling interest rates. On balance, expectations for economic growth over the next six months
remained mostly positive but were below historical averages.
Labor Markets
Employment slowed to a slight pace of growth—following a modest pace in the prior period. In our
monthly surveys, nonmanufacturing firms reported modest increases in full-time jobs but no
change in part-time employment nor in the average employee workweek. Having fulfilled most of
their backlogs, manufacturing firms reported a slight decrease in employment and a modest
decline in the average employee workweek.
Several contacts noted increased layoffs of midcareer professionals from finance, tech, and highly
leveraged firms in other sectors but observed that most secured new jobs within months. Several
contacts, including staffing firms, noted that businesses were becoming more selective when
hiring. One staffing firm observed that many businesses overhired during the pandemic, then held
steady in 2023—they expect job levels to increase slowly as companies begin to hire again.
One firm that had raised wages competitively in recent years noted good talent among its staff
and a lower turnover rate than in 2019. In 2024 it will add nonwage benefits, including mental
health coverage and an employee stock ownership plan. Nonprofits reported that significant wage
increases in 2022 had steadied hiring and retention rates—now wage pressures have lessened,
and hiring is easier.
Federal Reserve Bank of Philadelphia
Overall, wage inflation appeared to continue subsiding but remained at a modest pace. Among
nonmanufacturers, the distribution of firms reporting higher (39 percent) and lower (4 percent)
wage and benefit costs per employee was typical of the mid-2010s, when modest wage growth
prevailed. Most reported no change.
Prices
On balance, price increases appeared to subside to a slight pace of growth after modest growth
last period. Our monthly prices paid and prices received indexes declined for nonmanufacturers.
Moreover, the prices paid index neared its nonrecession average, and the prices received index fell
below average for the fifth time in the past seven months. Several small businesses observed that
customers’ resistance to higher prices increased further. For some firms, profit margins narrowed
as food commodity costs remained volatile.
Most manufacturing firms noted that their input costs steadied; some fell. The manufacturers’
prices paid index rebounded to its average, while the prices received index remained near its
average for a fifth consecutive month; over two-thirds of the firms indicated no change.
Moreover, manufacturers’ price expectations have fallen. The future prices received index fell to
near its long-run average; the future prices paid index fell to half its average. Both indexes were
positive, with over 35 percent of the firms expecting increases in the next six months.
Manufacturing
Overall, manufacturing activity declined moderately during the period following a slight decline in
the prior period. The index for new orders fell sharply, and the shipments index declined for a
second month.
Expectations among manufacturers for growth in the next six months strengthened but remained
below historical averages. More than 40 percent of the firms expected increases in new orders
and in shipments.
Consumer Spending
On balance, retailers (nonauto) reported little change in real sales through the holiday period—an
improvement from the prior period’s modest decline. However, online sales appear to have been
stronger than in Third District brick-and-mortar retailers. Contacts noted continued pullback in
spending from lower-income consumers.
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Auto dealers reported steady sales of new cars following a slight decline in the prior period. Contacts noted that dealers maintained sound profitability but that margins have begun to erode
because supply constraints have eased and inventories have risen. One contact reported that
dealers were lowering margins to move product off their lots. Another observed that the higher
overall price of new cars—especially given the rising mix of electric vehicles—is further bifurcating
the new and used car market, with lower-income households unable to afford new cars.
Tourism continued to edge down from still strong levels. Contacts reported slower bookings and
less spending by tourists, so some hotels have started to lower rates. However, contacts further
observed that as hotel rates are cut, spending at local restaurants and stores has risen. Several
contacts noted that warm weather and excessive rain diminished the early ski season.
Nonfinancial Services
On balance, nonmanufacturing activity appeared to grow slightly—for the first time since our
February 2023 report. The index for new orders was close to zero, while the sales/revenues index
increased to a modest pace. One large firm reported robust growth in the entertainment/
destination sector.
Moreover, firms signaled more positive sentiment. The index of general activity for the region
returned to positive territory just as the index of general activity at the firm level did in the prior
month. Nevertheless, expectations among nonmanufacturers for growth in the next six months
remained about the same—well below historical averages.
Financial Services
The volume of bank lending (excluding credit cards) grew moderately during the period (not seasonally adjusted)—faster than the slight pace observed last period but similar to the same period
last year.
During the period, District banks reported moderate growth in home mortgages, auto loans, and
other consumer loans. The volume of commercial real estate loans, home equity lines, and commercial and industrial loans grew modestly. Credit card volumes surged following no growth during
the prior period—typical for the year-end holiday season.
Banking contacts continued to note generally sound credit quality even as delinquency rates ticked
up from very low levels. Banks and business clients agreed that access to credit had tightened.
Some small businesses reported higher usage of credit cards by customers, and that their customers noted a greater need to rely on credit cards.
Federal Reserve Bank of Philadelphia
Real Estate and Construction
Brokers reported that existing-home sales remained mired at historically low levels through
November. Contacts are waiting until after the seasonal lull to see if consumers respond to lower
mortgage rates, but overall sentiment improved. Meanwhile, the inventory of for-sale properties
remained low, and prices remained high.
One new-home builder reported increased traffic during the holidays, another noted an uptick in
contract signings in December, and all expressed increased optimism that 2024 would be a
stronger construction year, with more closings and more new signed contracts.
In nonresidential markets, leasing activity and transaction volumes continued to decline slightly—
more so in the office market in which existing tenants continued to downsize their space and
upgrade their quality as their leases expired.
In contrast, current construction activity held steady, although many contacts expect that the
project pipeline will shrink before the end of 2024. New projects are slowly emerging in heavy
industry and infrastructure.
For more information about District economic conditions visit: https://www.philadelphiafed.org/
regional-economy.
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Federal Reserve Bank of
Cleveland
Summary of Economic Activity
On balance, reports from contacts suggested that business activity in the Fourth District had
increased slightly in recent weeks. Contacts generally expected business activity to increase
slightly in the months ahead. Consumer spending increased slightly. General merchandisers said
sales were strong for discounted items, and customers increased usage of “buy now, pay later”
payment options. Manufacturers reported a recent increase in demand, and backlogs for 2024
were solid. Residential construction and real estate contacts said that activity was soft, while nonresidential construction activity had reportedly rebounded since the prior period. On balance,
staffing levels were stable, and many firms returned to offering “more typical” annual wage
increases. After easing throughout 2023, nonlabor cost and price pressures changed little in
recent weeks; however, there was some indication of upward price pressure in certain industries.
Labor Markets
On balance, contacts reported that employment was flat to slightly down during the recent
reporting period. Many firms across industries said they were maintaining headcount or hiring only
to replace departing workers or underperforming staff. Some firms reduced staff to “right size” in
the face of lower demand, while others restructured by replacing select roles with automation or
rotating staff among multiple locations. Contacts generally expected little change in employment in
the coming months.
Wage pressures were largely unchanged in recent weeks and many firms returned to offering more
typical annual increases than in the past few years. For example, one manufacturer said
employees would receive an average three percent adjustment this year compared to four percent
to six percent increases in the previous year. Some retail firms opted not to increase wages but
offered year-end bonuses or increased paid time off. While broad wage pressures eased over the
past year, they remained elevated for select workers with specialized skills such as lawyers,
accountants, and auto repair technicians.
Federal Reserve Bank of Cleveland
Prices
Nonlabor cost pressures were relatively unchanged in recent weeks after easing through much of
2023. Some restauranteurs reported that food costs had flattened out, and many manufacturing
and construction contacts suggested that input costs were “leveling off.” One construction contact
noted that “Final pricing for several projects came in about 10 percent less than budget.” However, several manufacturers said that a recent uptick in steel prices was likely to raise costs for
some inputs as contracts renew at the start of the year. Still, many firms across industries
reported continued cost increases for health and property and casualty insurance.
Price pressures changed little from those of the prior period after easing through the second half
of 2023; however, there were some signs of upward price pressures in certain industries. Many
retailers reported holding prices steady. Several auto dealers noted offering “significant discounts” after a long period of not doing so when inventories were severely constrained. Most
manufacturers reported no change to their selling prices, though some were increasing prices to
cover higher costs. Some business services firms said they will be raising rates in 2024 after a
period of holding back, with one saying, “[We] held rates at 2019 levels through 2023.”
Consumer Spending
Consumer spending increased slightly following a decrease during the prior reporting period. Multiple general merchandisers and one apparel retailer cited strong sales centered on discounted
items, while restauranteurs and food retailers reported mostly steady sales through the holiday
season. By contrast, auto dealers continued to report slow sales because of high interest rates
and high vehicle prices. One large general merchandiser said that lower-income households had
become more reliant on credit cards and “buy now, pay later” payment options in recent months
and was skeptical that these customers could sustain their current level of spending once seasonal promotions ended. On balance, contacts expected consumer spending to soften somewhat
in the coming months.
Manufacturing
Demand for manufactured goods increased from that of the prior reporting period, supported by
the end of the UAW strike and ongoing federally funded projects. Contacts generally reported
healthy order backlogs, and one manufacturer of machined parts said that their firm’s 2024
backlog had increased by 30 percent since early November, leading to the highest single-year
backlog in the firm’s history. Reports from steel manufacturers were mostly positive, and one primary steel producer outlined growing confidence about general economic conditions among their
firm’s customers. On balance, manufacturers expected demand and orders to increase modestly
in the near term.
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The Beige Book
Real Estate and Construction
Residential construction and real estate contacts reported that activity remained soft in recent
weeks. However, one homebuilder reported an increase in inquiries as mortgage rates declined.
Existing-home inventories remained low and below prepandemic levels, a circumstance which continued to constrain sales. Looking ahead, contacts anticipated activity would increase because
they expected mortgage rates to fall further. One real estate agent expected “buyers who left the
market [when rates peaked] to reenter the market.”
Nonresidential construction rebounded in recent weeks. One commercial builder noted that
declining interest rates and greater optimism about the economic outlook had boosted demand.
Moreover, multiple general contractors reported that customers had elected to move forward with
previously delayed projects. Commercial real estate and construction contacts expected demand
to remain mostly stable in the near term.
Financial Services
Reports from bankers were mixed but were generally less downbeat than during recent reporting
periods. While most lenders reported that consumer and commercial loan demand declined in
recent weeks because of still-high interest rates, a few noted that loan activity had stabilized or
even increased. Looking ahead, bankers anticipated that loan demand would stabilize if interest
rates remained steady or declined. One banker said, “we’re [not] building pipelines like we were
before. Doesn’t seem that strong, [but] doesn’t seem that weak.” Core deposits were flat, and a
few bankers noted that clients continued to move funds into interest-bearing accounts. On balance, bankers reported that delinquency rates remained low.
Nonfinancial Services
Overall, freight activity declined again in recent weeks. However, one transportation contact indicated that year-over-year comparables had recently turned positive, and multiple haulers anticipated freight activity would stabilize in the coming months. Professional and business services
contacts reported steady demand as economic activity remained resilient. One contact mentioned
that an expected “pullback in discretionary marketing expenses for 2024” had not yet materialized. Another added that “interest rate stability and hopes for a soft landing” bolstered demand
for the firm’s services. Looking ahead, professional and business services contacts expected
activity to increase in the coming months.
Federal Reserve Bank of Cleveland
Community Conditions
Nonprofit childcare providers reported that funding had decreased even as demand for childcare
services had increased during the past six months. Pandemic-era funding, such as that from the
Child Care Stabilization Grant program that ended in September 2023, had primarily been used to
pay staff salaries or bonuses. With the loss of government funding, one Cleveland-area provider
said, “We are forced to increase costs for private-pay families as the funds available are not sufficient to provide a living wage to our staff. It has also put a lot of pressure on us to privately fundraise to fill the gap.”
For more information about District economic conditions visit: https://www.clevelandfed.org/en/
region/regional-analysis.
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20
Federal Reserve Bank of
Richmond
Summary of Economic Activity
Economic activity in the Fifth District expanded mildly in recent weeks. Consumer spending on
retail goods, travel, and tourism was steady to growing modestly. Spending on other nonfinancial
services was reported to have been steady. Residential housing market activity and mortgage
lending continued to soften despite some increase in housing inventory. Commercial real estate
was unchanged, overall. Manufacturing activity, trade volumes, and trucking volumes were slightly
to modestly lower this period. Employment and wages rose moderately amid a tight supply of
labor. Price growth continued to moderate but inflation remained somewhat elevated compared to
historical rates.
Labor Markets
Employment in the Fifth District grew at a moderate pace in the most recent reporting period. The
tight labor market led to continued wage pressure, resulting in several contacts making operational changes. A company that manages parking garages reported likely increases in prices and
reductions in services due to all-time high wages. A specialized-software company’s spending on
salaries increased by 15 percent of total revenue, thus, significantly decreasing margins. As a
result of increased wages, this firm expects to cut investment plans in 2024 since they need to
continue hiring workers at higher wages to meet customer demand. Other contacts reported
expanding their talent pools to find workers. For example, an engineering firm hired engineers with
no work experience and spent time training them.
Prices
Price growth continued to slow slightly in recent weeks, but year-over-year inflation remained somewhat elevated. According to our most recent surveys, growth in prices received by service providers fell by about half a percentage point to 3.8 percent. Growth in prices received by manufacturers ticked up slightly but remained moderate, overall, at a rate of 2.8 percent. Looking ahead
six months, both manufacturing and non-manufacturing firms expect growth in prices received to
continue to moderate.
Federal Reserve Bank of Richmond
Manufacturing
Fifth District manufacturing activity slowed somewhat in the most recent reporting period. An HVAC
manufacturer reported an unexpected decline in new orders, resulting in the company curtailing
expense spending to protect earnings. Contacts in some industries tied to discretionary consumer
spending cited declines. A wine producer reported a 30 percent drop in sales as consumer
demand dried-up. A dental laboratory reported a 10 percent drop in new orders as remaining
yearly funds in FSA accounts were not used for dental work. However, some contacts reported
unexpected increases in demand. An automotive fabric manufacturer, whose customers historically pull back on spending in December, experienced an uptick in new orders. Lastly, a paving
equipment manufacturer saw a steady increase in demand due to a resilient housing market in
their area.
Ports and Transportation
Trade volumes were down at Fifth District ports this period; imports were modestly lower year-overyear as wholesalers continued to work down high inventory levels. Loaded exports, however, were
up this period. Spot shipping rates to the East Coast increased as carriers were dealing with
issues at both the Panama Canal and the Red Sea. Empties were lagging but turn times were
normal. Dwell times were fluid and stack occupancy remained low. Demand for airfreight was up
slightly this period mostly due to ecommerce for the holiday season. Air cargo rates fell below
2019 levels due to higher capacity.
Trucking firms reported that freight volumes were slightly lower this period without the usual seasonal uptick. In the truckload segment, the greatest demand for shipping were with food, medical,
automotive, and retail. In the less-than-truckload segment, firms noted some weakness in the
industrial segment. Freight rates declined due to overcapacity in the system. Respondents stated
that drivers were more readily available but there was still some upward wage pressure. Trucking
companies stated that there were no significant backlogs on orders of new equipment but occasional issues receiving certain parts. With firms exiting the trucking sector, used equipment was
more readily available.
Retail, Travel, and Tourism
Retailers reported steady to slightly increasing demand and revenues in recent weeks. One small,
local retailer attributed some of their increased sales volume to customers saying that they preferred to support local businesses rather than shopping online. A few retailers said that they were
looking to expand their business by opening new locations, but due to high interest rates, they
were delaying construction of those sites. Food service and entertainment venues reported no
change in demand but declines in revenues and higher costs were not being passed through to
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22
The Beige Book
customers. Travel and tourism contacts reported steady to increasing sales, hotel occupancy
rates, and passenger air travel.
Real Estate and Construction
In the Fifth District, residential real estate activity declined modestly this period due to the usual
seasonal slowdown. However, buyer traffic increased this period as prospective purchasers were
gearing up for a good spring market amid rising home inventory levels and declining mortgage
rates. Home prices increased moderately and there were still multiple offers on desirable homes.
Days on market increased slightly but remained below historic averages. Builders indicated that
construction costs had moderated but there continued to be a shortage of some building materials and specialty sub-contractor labor. Appraisals were holding up and buyers were not having any
difficulty obtaining mortgages.
Overall market activity in commercial real estate was flat this period. Retail remained strong, especially with fast casual restaurant chains. In the office sector, Class A office space was tightening
with more leasing activity related to firms upgrading their space and moving away from central
business districts. A lack of available financing continued to constrain new development and refinancing within the broader CRE sector. Construction projects were mainly limited to the industrial
and multifamily segments. Contractors noted that due to the high cost of construction there were
few new CRE projects and, as such, their backlog of work was shrinking.
Banking and Finance
Loan demand continued to modestly soften across all loan types, with residential mortgage
lending seeing the biggest slowdown in demand. Respondents were generally in agreement that
the higher rate environment and continued economic uncertainty were the primary drivers in this
continued downward trend. One institution noted customers were “sitting on the sidelines” waiting
for more clarity regarding rates and the economy. Deposit balances remained flat with still a great
deal of competition for any available funds being shopped amongst institutions. Loan delinquency
rates and credit quality metrics remained stable with no movement up or down.
Nonfinancial Services
Nonfinancial service providers continued to report that demand for their services and overall revenues remained stable. One firm noted they saw more of their clients comparing prices when
shopping for their services and were entertaining more offers from competitors. This level of competition put pressure on pricing and maintaining current clients. Wages and workforce availability
continued to be a challenge with low unemployment rates and employees continuing to ask for
Federal Reserve Bank of Richmond
wage increases. Uncertainty was still a theme with both the firms surveyed and their clients, which
made the industry as whole quite cautious going into the new year.
For more information about District economic conditions visit: https://www.richmondfed.org/
research/data_analysis.
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24
Federal Reserve Bank of
Atlanta
Summary of Economic Activity
The economy of the Sixth District grew slowly from mid-November through December. Labor availability and employee retention continued to improve, but hiring slowed for some firms, and wage
pressures eased further. Nonlabor costs moderated for the most part, and pricing power slipped.
Holiday retail sales were mixed; auto sales were strong. Travel activity was healthy, but spending at
hotels continued to slow. Despite declines in mortgage interest rates, the housing market
remained encumbered by the lack of affordability. Commercial real estate activity was sluggish.
Transportation activity remained weak. Lending grew for certain types of loans, but consumer
lending declined. Activity in the energy sector was robust. Agriculture conditions were mixed.
Labor Markets
Labor markets continued to cool, and some employers slowed hiring. Most contacts continued to
report that labor markets had softened from earlier in the year amid more available labor and
stronger retention rates. Many indicated that staffing levels had improved from a year ago; however, hiring in the leisure and hospitality sector remained challenging. Additionally, the lack of
affordable housing was cited as an impediment to attracting workers to some areas. Weaker
demand for products and services caused some employers to reduce hours or slow hiring which
they expected to continue through the first half of 2024. One firm said that they were choosing to
hold positions open and were “slow walking” new hires, as they sought to supplement productivity
with Generative A.I. across all business lines and functions.
Most firms indicated that wage pressures continued to ease, and more modest wage growth is
expected in the coming year.
Prices
Nonlabor input cost increases moderated over this reporting period. Firms cited improvements in
supply chain predictability, contributing to lower freight and shipping costs. Construction costs
were mixed; lumber costs decreased while concrete increased. Food product costs declined. The
easing of some input costs was offset by persistent growth in labor and insurance costs, and
most firms held consumer prices steady even amid diminishing pricing power. The Atlanta Fed’s
Federal Reserve Bank of Atlanta
Business Inflation Expectations survey showed year-over-year unit cost growth decreased significantly in December to 2.9 percent, on average, from 3.2 percent in November; firms' year-ahead
inflation expectations for unit cost growth remained relatively unchanged in December at 2.4 percent, on average.
Consumer Spending and Tourism
Consumer spending generally continued the trend of normalization from the pandemic’s strong
pace of growth. Holiday sales were mixed. In line with pre-pandemic trends, contacts reported
managing inventories more closely and many offered customary promotions and discounts. Auto
sales remained strong, On average, retailers’ outlook remains positive for the first half of 2024.
Holiday travel activity was characterized as healthy, on balance, by tourism and hospitality contacts. Spending on merchandise, food, and services in hotels, however, decreased compared with
the same time last year. Contacts are cautiously optimistic about travel demand in the first
quarter, but characterize the environment as normalizing back to pre-pandemic levels.
Construction and Real Estate
Although mortgage rates retreated during the fourth quarter of 2023, home sales in the District
were slow to respond, as most markets remained unaffordable for median income earners. Homeowners also faced challenges with other rising costs, such as property insurance. Florida, with
strong demand generated from out-of-state buyers, is the only Sixth District state reporting
increases in existing home sales compared with a year ago. Inventories of homes for sale, though
still tight, were boosted by new construction. Sales strategies varied by homebuilder; smaller
builders focused on reducing home sizes, while larger builders reported buying down interest rates
to generate demand.
The Sixth District’s office market continued to encounter negative absorption rates and diminishing
occupancies. Leasing activity at the end of 2023 dropped to 2020 levels, creating a “tenant’s
market,” where landlords were forced to offer incentives. Market conditions are expected to
remain challenged in 2024 as new construction is delivered. Other property segments experienced
weakening conditions as well; contacts in industrial markets reported that the amount of square
feet in the pipeline is running well ahead of absorption, resulting in higher vacancy levels. Contacts expressed concerns over rising commercial real estate loan maturities in 2024.
Transportation
Transportation activity remained muted over the reporting period. Railroads reported declines in
year-to-date total traffic; intermodal shipments were down significantly. Trucking firms cited con-
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The Beige Book
tinued softness in freight volumes, which is expected to continue well into 2024. Some carriers
anticipate that additional trucking capacity will be taken offline in the next year as small owneroperators fold, and large carriers reduce capacity amid deteriorating demand. A few logistics contacts hinted at re-emerging supply chain constraints resulting from drought conditions in the
Panama Canal, as shippers are forced to deploy to the Suez Canal, extending lead times for products from China and southeast Asia.
Manufacturing
Manufacturing activity slowed slightly. Some contacts reported declines in new orders and backlogs of work, along with rising finished goods inventories and faster supplier delivery times. The
Manufacturing Sector Report of the Atlanta Fed’s Business Inflation Expectations Survey showed
that for the majority of respondents, demand had decreased or was on par with year-earlier levels.
The outlook is cautiously optimistic but concerns such as inflation, interest rates, and geopolitical
uncertainty were mentioned.
Banking and Finance
Lending at Sixth District financial institutions increased since the previous report, especially for
multifamily and home equity loans. Consumer lending contracted overall, alongside a rise in delinquencies in credit cards, auto loans and unsecured personal loans. Demand and large time
deposit balances continued to increase as banks paid higher interest rates on deposits. However,
these higher funding costs have led to earnings concerns. Hence, some banks restructured securities portfolios and reinvested proceeds into higher-yielding securities to protect margins.
Energy
Energy contacts reported historically high levels of crude oil production and record amounts of gas
flow to liquefied natural gas export plants. Contacts also continued to report planning and development of industrial decarbonization and renewable energy projects; however, a few contacts
noted that some of these projects are being delayed by federal approval processes. Utility contacts reported growing electricity demand, especially in the industrial and commercial segments,
attributed to clean energy transitions at production facilities and hospital and healthcare projects,
respectively.
Agriculture
Low cattle supply led to higher cattle prices, but consumers substituting less expensive proteins
prevented full pass-through of prices. Domestic demand for chicken rose, but demand was down
overall as cases of avian flu led to additional export restrictions and lower egg supply. Milk prices
Federal Reserve Bank of Atlanta
rose amid growing domestic demand for dairy, but low export levels continued to depress the
market. There was little change in demand or supply for row crops, but demand for cotton
remained weak.
For more information about District economic conditions visit: https://www.atlantafed.org/
economy-matters/regional-economics.
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28
Federal Reserve Bank of
Chicago
Summary of Economic Activity
Economic activity in the Seventh District was up modestly overall in late November and December.
Contacts generally expected a small decline in demand over the next year. Employment increased
moderately; nonbusiness contacts saw a modest increase in activity; consumer spending was up
slightly; construction and real estate and business spending were flat; and manufacturing
decreased modestly. Prices and wages rose moderately, while financial conditions loosened modestly. Net farm incomes were above average in 2023.
Labor Markets
Employment rose moderately over the reporting period and contacts expected a similar rate of
increase over the next 12 months. While several contacts continued to report difficulty finding
workers—especially in manufacturing—there also were further signs that the labor market was
cooling. Some contacts noted that applicant pools had grown, and contacts in construction, real
estate, and finance reported staffing reductions. Wages rose moderately, and contacts indicated
that wage pressures had eased considerably compared with 6 months ago. Benefits costs
increased as new insurance rates took effect in the new year.
Prices
Prices rose moderately overall in late November and December and contacts expected a similar
rate of increase over the next 12 months. Producer prices moved up moderately. Nonlabor input
costs continued to rise, with contacts reporting increases in raw materials, energy, and shipping
costs. One contact in heavy machinery manufacturing noted greater pushback on price increases
from customers. Consumer prices also increased moderately overall, though several retail contacts noted more modest price growth.
Consumer Spending
Consumer spending increased slightly on balance over the reporting period. Nonauto retail sales
were up slightly. Contacts reported that holiday sales met expectations, which had been for a
small improvement over last year’s level. Apparel and grocery sales were relatively strong, while
Federal Reserve Bank of Chicago
consumer durable goods sales were soft. Leisure and hospitality spending rose modestly, with
contacts highlighting increased sales at restaurants. Light vehicle sales rose slightly. Dealers said
solid overall demand continued to keep prices high, but that many consumers were substituting
toward smaller, more affordable models.
Business Spending
Business spending was flat overall in late November and December. Capital expenditures were up
slightly, with several contacts reporting investments in computers, software, and new vehicles.
However, demand for truck transportation services declined slightly. Inventories were comfortable
for most retailers; auto dealers’ inventories were around desired levels following an extended
period with lower than desired inventory. In manufacturing, many contacts again stated they were
no longer experiencing input shortages, and some even noted that their inventories were a
little high.
Construction and Real Estate
Construction and real estate activity was little changed on balance over the reporting period. Residential construction activity was flat. Contacts said that high labor and materials costs, elevated
interest rates, and slower rent growth were all slowing the pace of new multifamily construction.
Residential real estate activity decreased slightly, with contacts highlighting a decline in multifamily leasing. High mortgage rates continued to put a damper on home sales, though one contact
noted that the recent decline in rates had supported some new activity. Home prices were up
slightly. Rents rose overall, though one contact noted that the percentage of multifamily units
offering concessions had increased. Nonresidential construction activity increased slightly, while
prices were unchanged. One auto dealership group said that the expectation interest rates would
begin falling soon was a factor in their proceeding with a project to increase service-center
capacity. Commercial real estate activity was unchanged. Demand for industrial properties
remained at elevated levels. While prices fell slightly, rents, vacancy rates and the availability of
sublease space were all unchanged.
Manufacturing
Manufacturing demand decreased modestly overall in late November and December. Steel orders
were down modestly, with one contact reporting a decline in sales to the auto sector. Fabricated
metals orders ticked down, led by lower demand from residential construction. Machinery sales
decreased slightly. Auto production returned to levels seen before the UAW strike, according to
contacts. Heavy truck demand remained low amidst weak freight markets and the bankruptcy of a
major carrier.
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The Beige Book
Banking and Finance
Financial conditions loosened modestly on balance. Bond and equity values increased moderately
while volatility fell modestly. Business loan rates were steady, terms tightened slightly, and loan
quality decreased slightly. Business loan demand was flat. One banking contact noted that their
clients in the auto industry weathered the UAW strike well. Consumer loan rates were little
changed overall and terms tightened slightly. Loan demand fell some as did loan quality, with one
contact reporting “normalized levels of past dues” for consumer loans after an extended period of
below average past dues.
Agriculture
District net farm income was above average for 2023 according to contacts, helped by stronger
than expected crop yields. However, expectations for 2024 farm income were lower, as prices
started the year below break-even levels for many commodities. Corn and soybean prices edged
down during the reporting period while wheat prices were up a bit. Cost changes for crop production inputs were mixed. Dairy, hog, and cattle prices decreased. Egg prices were slightly higher and
rising avian influenza cases led to concerns about a repeat of last winter’s large outbreak. Contacts felt District farms generally ended 2023 in strong enough financial positions to weather
whatever 2024 brings.
Community Conditions
Community and nonprofit contacts saw a modest increase in economic activity over the reporting
period. Workforce development agencies said that continued tight labor market conditions were
making it easier than usual for individuals facing barriers to employment to find work, and economic development agency contacts reported the approval of several new projects in their areas.
In contrast, a state government official saw some decline in tax revenues. Contacts at small business development organizations said that high interest rates combined with other rising costs,
such as for insurance, were deterring clients from expanding. While the slowing rate of inflation
was welcome, social service organizations noted that low income consumers were still facing the
challenges of rising housing costs, additional expenses for clothing and heating during the winter
months, and the end of COVID-era government financial support.
For more information about District economic conditions visit: https://chicagofed.org/cfsec.
31
Federal Reserve Bank of
St. Louis
Summary of Economic Activity
Economic activity has remained unchanged since our previous report. Labor markets remained
tight, but contacts reported reduced urgency to hire new workers and stable wage pressures.
Prices increased, but the rate of price increases for many firms has slowed over the past few
months. Travel and hospitality firms reported strong leisure travel growth during the holiday season
and an optimistic outlook for the upcoming year. Rental prices were flat and residential inventory
rose slightly. Banking contacts reported slowing loan demand. Agriculture contacts were negatively
affected by drought conditions.
Labor Markets
Employment levels have remained unchanged since our previous report. Though labor markets
remain tight, reports of easing increased. An Arkansas contact reported weakening of employment
conditions across the state, and noted that, while the urgency to hire has slowed, more firms are
using internships and apprenticeship programs to upskill workers. Construction sources in
St. Louis reported an increase in jobs due to an influx of new projects.
Wages have continued to grow slightly since our previous report. A daycare contact in Northwest
Arkansas reported rising wages in competing sectors have led to challenges retaining workers. A
logistics contact in Louisville reported wages were up about four percent year-over-year, while a
restaurant contact in Little Rock reported wages rising five to seven percent across the industry.
Prices
Prices have continued to increase modestly since our previous report. Multiple contacts noted that
costs have been rising at a slower rate than they were a year ago, and contacts’ ability to pass
costs to consumers varied. A daycare contact reported a 10 percent increase in weekly prices
charged due to increases in the cost of supplies and utility rates. Some businesses are choosing
not to raise prices even though labor and nonlabor input costs continue to increase. A hotel contact reported tighter profit margins due to increased operating costs. Contacts report that prices
of some items, like used cars and event ticket prices, decreased.
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The Beige Book
Consumer Spending
District general retail, restaurant, automotive, and hospitality contacts generally reported mixed
business activity. To take advantage of the growing popularity of resale and thrifting, a St. Louis
retail contact has promoted special seasonal items, participated in pop-up events, and increased
marketing efforts to help spur more consumer spending. An Arkansas brewery stated that while
the volume of beer sold rose over the previous year, their profits fell. A District auto contact stated
that they’ve seen losses over the fourth quarter due to slower consumer spending. A Little Rock
hospitality contact noted that while travel numbers are improving, group business travel does not
seem to be making a post-COVID return. A St. Louis airport contact reported strong leisure travel
demand during the holiday season and projected a return to 2019 passenger numbers in
early 2024.
Manufacturing
Manufacturing activity has slightly decreased since our previous report. Firms in both Arkansas
and Missouri reported modest decreases in new orders and inventories. There were slight
increases in production and delivery lead times in both states. Finding and retaining workers
remains an ongoing issue for manufacturing contacts. On average, firms reported they expect
slight increases in production and delivery lead times in the coming quarter.
Nonfinancial Services
Activity in the nonfinancial services sector has improved slightly since our previous report. Freight
traffic increased slightly, and signals in the transportation sector were generally positive. An
Arkansas airport contact reported strong enplanement numbers, exceeding the previous 2019
heights. St. Louis public transportation reported high demand, and nearby St. Clair County (Illinois)
began construction on connecting two regional commercial airports by light rail. Several industries
experienced labor issues. Memphis air traffic mechanics took steps to unionize, citing “eroding”
pay and pensions, while St. Louis nurses went on strike, demanding better pay and safety.
Real Estate and Construction
Residential real estate rental rates have remained unchanged or dropped slightly in the four major
District metro areas since our previous report. Inventory for residential real estate in the Memphis, Louisville, and Little Rock metro area was up nine percent on average since the previous
year. Year-over-year total homes sold and median sale prices declined in the Memphis and Little
Rock metros. In the Louisville metro area, year-over-year total homes sold have increased one percent, and the median sale price has increased six percent. Commercial real estate rental markets
continue to be stagnant in the office sector for downtown areas. Contacts reported continued com-
Federal Reserve Bank of St. Louis
mercial real estate sales in Northwest Arkansas, including two large multi-family units and a
couple of retail sales. A large multi-family community is expected to start construction in Northwest Arkansas in early 2024.
Banking and Finance
Loan growth has slowed to a modest pace since our previous report, but banking conditions and
lending activity have remained healthy. However, commercial and industrial loan growth decreased
slightly despite the increase in overall loan volume, and demand for loans continues to be lower
than a year prior. There has been an ongoing modest decline in real estate loan growth. Mortgage
banker contacts had an optimistic outlook and expected an increase in activity from buyers who
have been waiting for interest rates to fall. Total deposit growth increased modestly in the District
and was faster than the national rate.
Agriculture and Natural Resources
Agriculture conditions have worsened slightly since our previous report, as ongoing droughts continue to effect crop and livestock conditions. Of the District states reporting data through the end
of December, the percent of winter wheat rated as fair or better was down only two percent relative
to last year. Total wheat acreage in 2023 expanded significantly compared with 2022, returning to
2021 levels.
Conditions in Tennessee, where drought is the most extreme, declined more dramatically; the percent of Tennessee winter wheat rated fair or better fell 22 percentage points during the reporting
period, ending at just 76 percent. While drought conditions improved slightly in Tennessee over the
reporting period, the extent of moderate to severe drought increased throughout the northern
areas of the District at the same time. Cotton and cattle farmers reported feeling the effects;
some reported that they had to ship their cattle to other states as a result. In Arkansas, an energy
firm announced plans to mine and produce lithium for electric vehicle battery production.
33
34
Federal Reserve Bank of
Minneapolis
Summary of Economic Activity
The Ninth District economy contracted slightly since the previous report. Respondents to a
December survey of business conditions reported declining demand and profits from the previous
month. Employment grew modestly, but job openings were flat or lower for most contacts. Wage
pressures continued to moderate, while price increases were mild. Consumer spending increased
and holiday sales traffic was generally strong, while commercial real estate activity, agricultural
conditions, and energy were flat. Construction and manufacturing activity fell, and residential real
estate remained subdued. Minority- and women-owned businesses reported decreased activity.
Labor Markets
Employment grew modestly since the last report. Overall hiring was still positive, but job openings
were either flat or lower for most contacts. In Montana, the number of brand-new job postings fell
notably in December compared with the previous month and year. District staffing contacts also
reported that December job openings were generally flat or lower. Bank surveys showed that
recent hiring demand slowed but future demand was expected to rise. Indexes of hiring sentiment
in Minnesota and the Dakotas were mostly stable; one was modestly expansionary, and the other
slightly contractionary. Contacts widely reported that labor supply had improved somewhat; more
firms reported being closer to fully staffed and being more selective in hiring. A Montana staffing
contact added, “We are seeing more clients settling in with who they have and not hiring unless
the candidate is perfect.” A Wisconsin staffing contact said that businesses were “getting more
selective on who they hire . . . [and] contacting us to do confidential recruiting to replace underperforming employees.”
Wage pressures continued to moderate, nearing pre-pandemic conditions. Staffing contacts in
Montana, North Dakota, and Wisconsin said wage pressures were flattening and one-time wage
enhancements were falling. A mid-sized Minnesota health care provider gave a wage increase of
three percent, its lowest since before the pandemic: “Wage growth is finally slowing.”
Federal Reserve Bank of Minneapolis
Prices
Price increases were mild since the last report. A substantial majority of firms responding to a
monthly survey indicated no change to the prices they charged to customers in December from a
month earlier, though most of the remainder indicated that they increased prices. Input price pressures were slightly greater, but most respondents also reported no change over the month. A
regional manufacturing index indicated modest input price increases in December. Retail fuel
prices in District states fell to their lowest levels in more than two years. Home heating costs were
expected to be significantly lower this winter than last.
Worker Experience
Unemployed workers in Montana shared they were mainly focused on pay, benefits, and upward
mobility as they searched for jobs. The difficulties they faced gaining employment were mostly due
to skills gaps, but they also cited other factors, such as low pay and child care affordability.
Employed workers who were looking for different jobs also faced a range of challenges. A single
mother working in the nonprofit sector who has been trying to switch jobs for almost a year said
that balancing her children’s schedules, her own job, and household chores left her with little time
to search and apply. A labor contact in the Upper Peninsula of Michigan shared that the exodus of
public sector workers to the private sector had slowed. They said that high food prices in the area,
particularly for meat, continued to stretch workers’ budgets. “I am hearing our union members talk
more about starting to raise chickens and ducks . . . I am seeing more self-serve egg stands
along the road,” they added.
Consumer Spending
Consumer spending rose moderately since the last report. Contacts reported that traffic and
spending during the holidays was generally higher. A retail industry contact in Minnesota said this
year’s holiday season exceeded expectations for many and “felt very much like a pre-pandemic
holiday season.” A Minnesota mall contact said December traffic was about 15 percent higher
than last year, with some days exceeding pre-pandemic levels. Sales at movie theatres, restaurants, and other food retailers were reportedly strong. A South Dakota retail contact noted that
traffic was down in many places there, but overall spending was flat or slightly higher. Unseasonably warm weather helped get shoppers out to many stores, but sales of winter gear and equipment were negatively affected. Montana’s lodging sector continued to see strong activity, but occupancy and revenue at Minnesota hotels were down slightly. New car and truck sales were higher in
December at a District dealer with multiple locations.
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The Beige Book
Construction and Real Estate
Construction activity was lower overall since the last report. Among roughly two dozen construction
contacts, recent sales were lower and profits have been particularly hard hit. Recent hiring
demand has fallen somewhat, but sentiment was modestly more positive for the early part of
2024. Among sectors, firms in infrastructure continued to fare better thanks to federal spending.
November and December commercial permitting was generally flat or lower in the District’s larger
markets compared with a year earlier. Residential building was constrained in many markets, but
single-family permitting in Minneapolis-St. Paul saw sustained increases for several months,
including December.
Commercial real estate was flat overall. Vacancy rates for industrial space have ticked higher
thanks to significant speculative building in the last year. Office markets remained soft, and
reports of tenant concessions were rising. Retail vacancy has improved modestly thanks to
stronger foot-traffic trends and lower levels of new construction. Residential real estate remained
subdued, with year-over-year sales continuing to decline in November and December.
Manufacturing
District manufacturing activity decreased moderately since the last report. Preliminary results from
a manufacturing survey found a substantial decrease in orders, production, and profits in 2023
from the prior year, though capital investment increased. Expectations for 2024 were mildly optimistic. Manufacturing sector respondents to a monthly survey reported sharply decreased sales in
December from a month earlier. In contrast, a regional manufacturing index increased to levels
indicating an expansion in activity in Minnesota, North Dakota, and South Dakota in December
from a month earlier, though new orders decreased.
Agriculture, Energy, and Natural Resources
District agricultural conditions were unchanged since the last report. Contacts across the region
gave differing reports about farm incomes. Contacts generally agreed incomes were down substantially from a year ago, though some indicated they were stronger than expected. District oil and
gas drilling activity was stable since the previous report, and industry contacts reported that production increased modestly. District iron ore mines continued to operate at capacity.
Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned business enterprises (MWBE) was lower on balance.
Most businesses reported lower sales activity in the recent four-week period. A Minnesota retailer
believed that diminished discretionary income among consumers was the main reason behind
Federal Reserve Bank of Minneapolis
lower sales. Labor and nonlabor costs as well as final selling prices were slightly higher on balance. Some expected price pressures to extend into next month. “It is extremely hard to keep up
with wage and benefit pressures and competition for good, qualified and experienced therapists in
this market,” commented a health care contact. Profits continued to edge lower among half of
MWBEs; a slightly lower share expected profits to remain low over the following weeks.
For more information about District economic conditions visit: https://www.minneapolisfed.org/
region-and-community.
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38
Federal Reserve Bank of
Kansas City
Summary of Economic Activity
Economic activity in the Tenth District declined moderately in recent weeks. Consumer spending
fell across several categories. Contacts noted sales volumes at low-cost quick-serve restaurants,
which had been robust despite pullbacks elsewhere, declined moderately in recent weeks. Community organizations providing food assistance indicated the number of persons seeking aid rose
significantly, particularly among working families and seniors. Job gains were modest in the private
sector, but several reports suggested other measures of labor demand weakened. For example,
the use of seasonal employees was subdued at the end of last year, and businesses were reportedly much less likely to convert seasonal worker to full-time staff than in years past. Expected
wage growth was reportedly much lower for the coming year. Despite the recent softening in
activity, most contacts expressed a favorable outlook for the next six months. Prices grew slightly
on average, but food retail contacts indicated they had no more ability to pass higher prices to
customers. Contacts in commercial real estate (CRE) reported very low transaction volumes as
potential buyers were waiting for, or pricing to, a bottom, creating large spreads between bids and
asks that made price discovery difficult. CRE lenders reported minimal loan modification activity,
citing concerns about future credit performance and lack of borrower liquidity.
Labor Markets
Labor market conditions in the Tenth District were mostly unchanged on balance due to increased
hiring in manufacturing being offset by slight declines in services employment. Despite little
change in hiring, contacts reported a notable reduction in labor utilization, reflected in declines in
hours worked and reduced hiring of temporary and seasonal employees. Additionally, some retail
and delivery businesses reported a shift in their approach to seasonal employment during the
holiday season. While some businesses averted hiring of seasonal employees altogether, others
noted that their conversion of seasonal employees to permanent employees was down relative to
previous years. Business contacts across industries overwhelmingly reported expectations for a
substantial deceleration of wage growth in the coming year.
Prices
Prices grew slightly over the last month on average, with reports mixed across industries. While
manufacturing contacts reported moderate increases prices for finished products, service con-
Federal Reserve Bank of Kansas City
tacts reported a slight decline in prices, which they attributed to limits on their ability to pass still
rising input and labor costs onto their customers. Food retailers were reportedly much less willing
to accept higher input prices from distributors. In particular, grocers pushed back on their suppliers, citing concerns about their ability to pass cost increases onto customers.
Consumer Spending
Consumer spending fell moderately over the past month across several categories. Contacts at
restaurants and other food service companies continued to report a decline in the number of customers served. Furthermore, they emphasized declines in sales volumes extended to quick-serve
restaurants recently, which had previously seen strong demand even as spending at more expensive dining options was falling in recent months. Both new and used auto sales fell modestly.
Spending on other large ticket items like home appliances and retail furniture also fell.
Community Conditions
Food insecurity reportedly worsened across most of the Tenth District as food assistance organizations reported substantial increases in the number of persons served compared to the same time
last year. Most organizations said they were serving more working families and seniors. While high
food prices continued to be an issue, organizations noted that the burdens of other cost-of-living
increases significantly contributed to growing food insecurity. Nearly all organizations reported
declining donations leading some to cut back their services, such as offering families assistance
once every sixty days rather than every thirty days.
Manufacturing and Other Business Activity
Business activity within the District declined modestly over the last month. Manufacturing activity
contracted slightly, driven by weak orders and slowing production. However, sales at service companies declined more severely. Sales of durable goods declined robustly, due to high financing
costs and an unwillingness for consumers to spend on bigger ticket items. Consumer discretionary businesses also saw substantial declines, as consumers were reportedly less willing to
spend on non-essentials like leisure, travel, and eating at restaurants. Despite the recent softening in activity, the majority of contacts within both manufacturing and services sectors
expressed a favorable outlook, with expected demand to be as high, or greater, over the next
six months as compared to the past year.
Real Estate and Construction
Contacts indicated transaction activity for commercial properties was suppressed in recent weeks.
Potential buyers of many office properties, and some multifamily properties, were reportedly
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The Beige Book
waiting for a bottom as loans are set to be repriced over the medium term. Those buyers not
waiting on the sidelines were reportedly pricing to a bottom among distressed sellers, resulting in
large spreads between bid prices and ask prices that made price discovery difficult in most markets. Some contacts suggested that transaction activity may pick up slightly in coming months as
appetites for restructuring loans may increase after year end. Yet, falling rents and rising insurance costs adversely affecting net operating incomes remained widely cited concerns inhibiting
loan restructuring when desired.
Community and Regional Banking
Loan demand weakened modestly across a range of loan types amid the backdrop of elevated
interest rates and continued economic uncertainty. CRE demand was particularly weak due to
rising borrowing costs and cash flow pressures. Coupled with this reduced demand for credit, contacts noted that loan quality worsened compared to this same period a year ago, driven largely by
various consumer loan segments and commercial real estate deals. Bankers stated their credit
standards remained unchanged and noted minimal modification activity for existing CRE borrowers. Concerns around future credit performance and lack of borrower liquidity were perceived
as key barriers for future modifications in CRE deals over the near term. Deposit levels remained
stable despite seasonal balance fluctuations and continued migration from noninterest-bearing
accounts to higher-yielding products.
Energy
After declining significantly in recent months, rig counts rebounded somewhat over the past month
alongside a recent rise in oil and gas prices. District firms’ drilling activity and profits fell, and are
expected to increase only slightly in the next six months as near-term price expectations are below
the price needed for a substantial increase in drilling activity. Despite this, employment levels rose
somewhat, and firms expect either steady or slightly increasing employment in 2024. Capital
expenditures remain steady with mixed expectations heading into the new year, even as most
firms expect steady or increasing input prices and reduced access to credit.
Agriculture
Agricultural economic conditions in the Tenth District were steady through December, but softening
farm income and credit conditions remained a concern. Crop prices were stable over the past
month, ending 2023 considerably lower than a year ago. Profits narrowed the past year alongside
the moderation in prices, particularly in areas where yields were impacted by drought. Corn and
soybean yields increased slightly from last year in Nebraska and parts of Kansas but remained
below the five-year average in all District states. Despite some recent volatility, cattle prices were
strong alongside low inventories and supported profitability for cow/calf producers. Many District
Federal Reserve Bank of Kansas City
contacts cited ongoing pressure from elevated production costs and higher interest rates as major
factors for the outlook of the farm economy in 2024.
For more information about District economic conditions visit: https://www.KansasCityFed.org/
research/regional-research.
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42
Federal Reserve Bank of
Dallas
Summary of Economic Activity
The Eleventh District economy expanded at a modest pace over the reporting period, with most
sectors holding steady or experiencing slight growth. Job growth picked up in the service sector.
Wage growth moderated but high labor costs remained a key concern for many businesses. Overall
input cost and selling price growth held slightly above average. Demand for nonprofit services
remained elevated, and housing affordability and daycare access continued as key issues. Business outlooks were neutral to pessimistic, with contacts citing weakening demand as the primary
concern going forward. Heading into an election year, U.S. political uncertainty was also noted by
many firms.
Labor Markets
Employment expanded modestly over the past six weeks, with services job growth picking up while
manufacturing job growth abated. In a Dallas Fed survey of 365 business executives, around half
reported still being understaffed. While labor availability has improved, many firms noted a mismatch between the skills and experience they desire and those of the job candidates. Some firms
noted they were overstaffed, particularly in financial services and manufacturing, though very few
were laying off workers. One contact said he considered layoffs but held off because he expects a
rebound in business, and rehiring is difficult.
Wage growth was moderate across most sectors but remained slightly elevated in energy. Higher
labor costs remained a top outlook concern for many businesses, particularly in education and
health services and the leisure and hospitality industry. An urgent care center said wages and
salaries were at a dangerously elevated level that is not sustainable in the long term. A December
Dallas Fed survey showed that Texas businesses expect wage growth in 2024 to be 4.3 percent,
on average, down from 5.6 percent in 2023.
Prices
Input cost growth remained slightly elevated overall, though energy firms continued to note strong
rises in exploration and production costs while manufacturing raw materials price growth remained
subdued. Selling price growth picked up a bit in the service sector but prices remained fairly flat
Federal Reserve Bank of Dallas
for manufactured goods. District firms reported declining margins on net, with a manufacturer
noting that maintaining a reasonable profit margin was elusive in 2023, with costs rising faster
than they were able to raise prices. This sentiment was echoed by retail and services firms as
well. Overall, contacts said they raised prices by 3.9 percent last year, on average, and expect to
push through price increases this year on the order of 3.5 percent amid increased consumer price
sensitivity.
Manufacturing
Texas manufacturing activity was flat in December after contracting in November. Year-end weakness came largely from durables, particularly metals manufacturing. Manufacturers generally
reported continued declines in demand, though chemical producers noted a stabilization as the
unprecedented year-long global destocking cycle may have finally run its course. New orders for oil
and gas machinery and equipment continued at a modest pace. Overall, manufacturing outlooks
worsened slightly. More than a third of contacts cited uncertainty heading into an election year as
a primary outlook concern, second only to weakening demand.
Retail Sales
Retail sales largely stabilized in December after a few months of declines. Auto dealers noted
stronger sales and increased inventories, though they expressed concern over high interest rates.
High interest rates also remained a top concern for wholesalers and construction-related retailers.
Retail outlooks worsened overall, and uncertainty increased notably.
Nonfinancial Services
Service sector activity increased modestly in December after contracting slightly in November.
Year-end strength was led by revenue growth in health care and leisure and hospitality. Professional and business services exhibited weakness, with some contacts saying new business is
down and backlogs have shrunk. Revenue declines continued in transportation services, and contacts said air cargo volumes over the reporting period fell short of expectations. Passenger air
travel was a bright spot, however, with record traffic and revenues over the Thanksgiving holiday
and expectations for a strong finish to the fourth quarter. Overall, outlooks in the service sector
were stable heading into 2024. Weakening demand remained the top concern, followed by higher
labor costs and elevated inflation. Numerous contacts also cited U.S. political uncertainty, with
one saying it “weighs heavily on business leaders’ minds right now.”
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The Beige Book
Construction and Real Estate
Housing demand improved slightly, as the recent decline in mortgage rates buoyed home sales.
Buyer incentives remained prevalent, however, and outlooks stayed cautious with contacts citing
economic uncertainty, diminished affordability, and tighter credit standards for construction and
development loans as headwinds.
Activity in commercial real estate was little changed. Apartment leasing picked up slightly though
rents remained flat. Office leasing remained weak; vacancy rates were elevated, and concessions
remained widespread. Industrial vacancy rates rose as new supply continued to outpace demand.
Macroeconomic uncertainty, high capital costs, and reduced appetite to lend continued to deter
investment sales and construction starts across property types.
Financial Services
Loan volumes stabilized over the past six weeks after declines, and the pace of credit tightening
decelerated. Loan demand continued to decline, though at the slowest pace since the end of
2022. Loan nonperformance rose again, still largely driven by consumer loans. Loan pricing continued to increase but at a slower rate. Bankers reported that core deposit volumes increased
over the reporting period, following several months of decreases. Although bankers remain pessimistic and expect future business activity and loan demand to decline, the slowdown is anticipated to be milder than prior expectations.
Energy
Oil and gas activity was essentially flat over the past six weeks. Exploration and production firms
continued to report increases in oil and natural gas production, while support services firms continued to report declines in business activity and equipment utilization. The increase in mergers
and acquisitions seen in 2023 continued put a lid on growth in oilfield activity and is expected to
extend into 2024. Production growth this year is expected to be driven by higher productivity more
so than from drilling more wells. Several firms noted elevated uncertainty, citing mounting downside risks to the global demand outlook.
Agriculture
Drought conditions continued to recede, and contacts noted generally good soil moisture and an
expectation for better crop production prospects this year with El Niño conditions forecasted
through the spring. Agricultural prices were down across the board over the past six weeks. While
cattle prices remained higher than a year ago, some grain prices have pulled back to two or three-
Federal Reserve Bank of Dallas
year lows. Contacts noted that farmers will need strong crop yields this year to make the budget
work with high production costs and relatively low grain and cotton prices.
Community Perspectives
Demand for nonprofit services remained elevated. Housing affordability continued to be a top concern, with higher rent outpacing income among many renters, and higher mortgage rates making
home ownership less attainable. Nonprofits noted that families are also struggling with the costs
of healthcare, food, utilities, and transportation. Access to affordable childcare remained a key
barrier to parents’ participation in education and the workforce although some contacts noted that
more work schedule flexibility has been helpful. Contacts said that childcare subsidies, while
helpful, are not immediately available and come with limitations. An executive at a workforce development board said she has never seen so much interest in solving childcare issues, particularly
among employers.
For more information about District economic conditions visit: https://www.dallasfed.org/
research/texas.
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46
Federal Reserve Bank of
San Francisco
Summary of Economic Activity
Economic activity in the Twelfth District was stable overall during the reporting period from midNovember through December 2023. Labor availability improved, and employment levels rose
slightly. Price pressures eased, and wage growth moderated notably. Retail sales grew modestly,
while activity in services sectors was mixed. Conditions in the agriculture and resource-related
sectors were solid, but demand for manufactured products weakened. Residential real estate
activity softened further, while demand for commercial real estate varied by property type. Conditions in the financial sector were largely unchanged. Communities across the Twelfth District continued to report housing affordability issues and elevated demand for support services. Looking
ahead, contacts expressed optimism regarding the economic outlook, and most respondents
expected a pickup in economic activity in 2024.
Labor Markets
Labor availability improved and employment levels rose slightly during the reporting period. Contacts reported a notable uptick in job applications and a drop in employee turnover in recent
weeks. Employers generally found it easier to attract and retain workers in retail, financial services, legal services, skilled trades, and professional services. Hiring challenges persisted, however, in health care, aviation, and logistics, and employers still found it difficult to attract experienced engineers, information technology professionals, and mid-level managers. A workforce
development agency in Southern California highlighted a recent increase in the level of educational
attainment and vocational training among its recruits.
Wage growth moderated notably in recent weeks. Annual pay increases returned to historical averages across sectors and geographies, and several contacts noted that recent pay adjustments
were primarily limited to positions affected by changes to local and state minimum wage levels.
Starting pay reportedly fell for a wide range of positions in the technology and financial services
sectors due to softer overall activity in these sectors. Wage pressures persisted in leisure and
hospitality.
Federal Reserve Bank of San Francisco
Prices
Overall price pressures eased in recent weeks, although price levels remained generally elevated.
Fewer goods and services saw price increases relative to previous reporting periods, and prices
reportedly fell for energy products, construction materials such as wood and cement, manufacturing repair parts, fabricated metal, and plastic resin, as well as for hotel rooms. Still, costs of
utilities and several insurance categories, particularly health and property insurance, continued to
rise. Prices of grocery products were generally stable, and several contacts expected these prices
to drop slightly in coming weeks, in anticipation of input costs moderating.
Community Conditions
Communities across the District continued to confront widespread shortages in affordable housing
and associated increases in homelessness and housing insecurity. Demand for mental health services and food assistance programs remained elevated. Community service organizations continued to face challenges recruiting and retaining skilled workers. Funding availability was mixed,
as some nonprofit organizations struggled to raise money while others benefited from an uptick in
financial support from local governments. One contact observed that some nonprofit organizations
opted to maintain hybrid or fully remote work arrangements to reduce or eliminate office
rental costs.
Retail Trade and Services
Retail sales grew modestly over the reporting period. Retailers reported a solid holiday shopping
season, which exceeded expectations in some cases. Home centers saw an uptick in demand for
wood products, as customers favored home improvement projects over house purchases in a high
interest rate environment. Retail businesses in Hawaii continued to report difficulties retaining
labor in the aftermath of last summer’s wildfire season, when many workers were displaced from
their homes.
Activity in consumer and business services was mixed. Business travel edged up as the number of
conferences and group events continued to recover. Demand for restaurant and bar services was
steady, while activity in other leisure and hospitality sectors, such as lodging, moderated over the
past few weeks. Demand for health-care services grew, and providers reported approaching
capacity. Conditions in the legal services sector were mixed according to type of practice, as
demand softened for mergers and acquisitions and increased for commercial litigation and loan
contract renegotiations.
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The Beige Book
Manufacturing
Manufacturing activity weakened over the reporting period. New orders were down for fabricated
metals, manufactured wood products, and heavy equipment. Several manufacturers in the Pacific
Northwest noted that lower construction activity reduced demand for their products, with one contact lowering production accordingly. Supply bottlenecks improved further, although some manufacturers reported recent delivery delays of critical production components, such as electrical equipment, auto parts, and textiles.
Agriculture and Resource-Related Industries
Conditions in the agriculture and resource-related sectors were solid. Contacts reported robust
yields and inventories of various products, including seafood and some permanent crops such as
tree fruits. The resulting ample supply continued to hold down prices, buoying domestic demand
for agricultural food products overall. International demand was strong, and exports for some
crops rose. One contact in the Pacific Northwest noted that, while overall demand for logs fell due
to slower construction activity, demand for forested land with timber resources continued to grow.
Availability of product transportation services and raw materials used in agricultural production
improved further, and supply bottlenecks eased. Still, producers mentioned elevated production
costs, such as for packaging and labor.
Real Estate and Construction
Activity in the residential real estate market continued to soften. Demand for single-family homes
was sluggish due to limited inventory, high mortgage rates, and greater interest in rental homes.
Construction of single-family homes was solid in some areas, such as Arizona, but reportedly
slowed in others, such as Oregon. The supply of multifamily rental units ticked up as more construction projects were completed recently, raising vacancy rates and causing rents to grow more
slowly or even fall in some regions. In contrast, recent multifamily starts fell due to elevated construction costs and borrowing constraints.
Conditions in the commercial real estate market were mixed. While demand for retail and industrial space was solid, office leasing activity remained weak. Transaction volumes of commercial
property sales were down as sellers’ asking prices exceeded what buyers were willing to pay. Construction activity reportedly slowed for private-sector commercial projects due to financing constraints, while construction of government public and infrastructure projects expanded. Challenges
obtaining some materials, particularly electrical equipment, persisted.
Federal Reserve Bank of San Francisco
Financial Institutions
Conditions in the financial services sector changed little over the reporting period. Demand for
business loans, particularly commercial real estate loans, was subdued. Residential lending
activity remained weak. Demand for auto loans and other consumer credit products remained
steady. A few contacts noted an uptick in consumer loan delinquencies, but overall credit quality
remained high. Demand for deposits remained elevated, and deposit flows were stable. One contact observed some clients moving funds away from liquid accounts into term deposits to lock in
higher interest rates for extended periods.
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www.federalreserve.gov
0124
Cite this document
Federal Reserve (2024, January 30). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20240131
@misc{wtfs_beige_book_20240131,
author = {Federal Reserve},
title = {Beige Book},
year = {2024},
month = {Jan},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20240131},
note = {Retrieved via When the Fed Speaks corpus}
}