Beige Book
The Beige Book
Summary of Commentary on
Current Economic Conditions by
Federal Reserve District
January 2025
FEDERAL RESERVE SYSTEM
i
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 ........................................................................ 37
Federal Reserve Bank of Dallas .................................................................................. 41
Federal Reserve Bank of San Francisco .................................................................... 45
ii
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.
iii
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.
1
National Summary
Overall Economic Activity
Economic activity increased slightly to moderately across the twelve Federal Reserve Districts in
late November and December. Consumer spending moved up moderately, with most Districts
reporting strong holiday sales that exceeded expectations. Vehicle sales grew modestly. Construction activity decreased overall, with several Districts indicating that high costs for materials and
financing were weighing on growth. Manufacturing decreased slightly on net, and a number of Districts said manufacturers were stockpiling inventories in anticipation of higher tariffs. Residential
real estate activity was unchanged on balance, as high mortgage rates continued to hold back
demand. Commercial real estate sales edged up. The nonfinancial services sector grew slightly
overall, with Districts highlighting growth in leisure and hospitality and transportation, notably air
travel. Truck freight volumes, however, were down. Financial service providers reported modest
growth in lending and little change in asset quality overall, though lenders and community organizations voiced concerns about delinquencies among small businesses and lower-income households. Nonprofit social service agencies faced high demand amidst uncertainty about future
funding levels. Agricultural conditions remained weak overall, with generally lower farm incomes
and weather-related struggles in some areas. The spread of avian flu reduced egg supplies and
pushed up prices. Energy activity was mixed. More contacts were optimistic about the outlook for
2025 than were pessimistic about it, though contacts in several Districts expressed concerns that
changes in immigration and tariff policy could negatively affect the economy.
Labor Markets
Employment ticked up on balance, with six Districts reporting a slight increase and six reporting
no change. Contacts in several service industries, notably healthcare, continued to see job
growth. Construction employment increased slightly, while manufacturing employment was flat.
Contacts across multiple sectors noted difficulty finding skilled workers, and reports of layoffs
remained rare. However, contacts in some Districts expressed greater uncertainty about their
future staffing needs. Wage growth picked up to a moderate pace in most Districts, though there
were some reports that wage pressures had eased.
Note: This report was prepared at the Federal Reserve Bank of Chicago based on information collected on or before
January 6, 2025, and thus, before the wildfires in the Greater Los Angeles area started. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of
Federal Reserve officials.
2
The Beige Book
Prices
Prices increased modestly overall, with growth rates ranging from flat to moderate. Contacts in
most Districts reported modest increases in selling prices, though there were instances of flat or
decreasing prices as well, particularly in the retail and manufacturing sectors. Input costs also
rose, with contacts highlighting higher insurance prices, particularly for health insurance. However,
as with selling prices, there were several mentions of flat or lower input costs, particularly for fuel.
Contacts expected prices to continue to rise in 2025, with some noting the potential for higher tariffs to contribute to price increases.
Highlights by Federal Reserve District
Boston
Economic activity increased slightly, with modest increases in tourism activity and home sales,
slight increases in retail sales, and relatively flat activity otherwise. Prices were mostly steady
despite slight cost pressures for some firms. Employment was stable, and wages increased modestly. Expectations were optimistic on balance, although some contacts remained uncertain about
the outlook.
New York
Economic activity in the Second District increased slightly during the reporting period. Employment
in the region grew slightly. Consumer spending increased moderately, with stronger-than-expected
holiday retail sales. Commercial real estate markets improved slightly, with growth in demand in
New York City office markets. Selling prices continued to rise at a modest pace, although manufacturers reported that prices largely held steady.
Philadelphia
Business activity continued to grow slightly in the current Beige Book period. Auto sales led consumer spending with a modest increase. Manufacturers reported a slight decline in activity. Real
wages and prices continued to rise modestly, and employment rose slightly. Inflation expectations
rose over concerns about deficits, tariffs, and immigration. On average, firms expect moderate
economic growth over the next six months.
Cleveland
District business activity grew modestly in recent weeks, and contacts expected activity to
increase further in the months ahead. Retailers noted higher-than-anticipated sales, while manufacturers said that demand remained soft. Employment levels were generally flat. Overall, contacts
indicated that wages and nonlabor input costs grew moderately, and prices increased modestly.
National Summary
Richmond
The regional economy continued to grow modestly this cycle. Consumer spending and travel grew
moderately over the holiday shopping and travel season. Financial services firms reported modest
growth while demand for nonfinancial services was subdued. Manufacturing activity slowed slightly
this cycle and port activity was mixed. Employment levels were unchanged, and price growth was
moderate.
Atlanta
Economic activity in the Sixth District expanded modestly. Employment was steady and wages
grew slowly. Input costs and prices increased modestly. Consumer spending grew moderately.
Demand for housing increased modestly. Transportation activity grew slightly. Loan growth was
moderate. Manufacturing declined slowly. Energy activity grew modestly, but agriculture
demand fell.
Chicago
Economic activity increased slightly. Consumer spending increased modestly; employment
increased slightly; construction and real estate was flat; nonbusiness contacts saw little change in
activity; and manufacturing and business spending decreased slightly. Prices increased modestly,
wages rose moderately, and financial conditions loosened some. Farm incomes in 2024 were
below those of 2023.
St. Louis
Economic activity has continued to expand slightly since our previous report. Reports on holiday
sales were positive and generally better than expected. Reports from other sectors generally
reflected the typical seasonal slowdown. Many of these contacts shared a positive outlook for the
year ahead.
Minneapolis
District economic activity grew slightly. Employment increased slightly while wage growth was moderate. Prices increased slightly overall with greater pressure on input prices. Retail contacts were
generally upbeat about holiday sales, with some seeing sales surpass pre-pandemic levels. Manufacturing contracted modestly but contacts were somewhat optimistic for the year ahead.
Kansas City
Economic activity expanded slightly in the Tenth District, led by consumer spending. Contacts indicated consumers are increasingly using longer-term financing and consolidating debt to manage
household cash flows. Contacts broadly reported expectations that economic growth, hiring
3
4
The Beige Book
activity and price growth will all accelerate in coming months, but also expressed concerns over
potential policy changes.
Dallas
The Eleventh District economy expanded moderately over the reporting period. Growth resumed in
the manufacturing sector and revenues rose in nonfinancial services and retail. In addition, bank
loan volume and demand expanded. Home sales increased slightly but energy activity was flat.
Employment rose slightly, and wages and prices grew moderately. Outlooks continued to improve
although concerns about anticipated changes in domestic policy remained elevated.
San Francisco
Economic activity expanded slightly. Employment levels and overall price levels were generally
stable. Wages rose slightly. Activity in services sectors was steady to slightly up. Retail sales grew
modestly. Activity in manufacturing and commercial real estate were varied, while the housing
market and lending activity were steady. Conditions in agriculture softened slightly.
5
Federal Reserve Bank of
Boston
Summary of Economic Activity
Economic activity increased slightly overall. Prices and employment levels were roughly
unchanged, and wages rose at a modest pace. Air travel was a relative bright spot, as domestic
air passenger traffic through Boston finally surpassed 2019 levels, and passenger traffic through
the Worcester airport increased substantially in the past year. Tourism activity overall increased
only modestly, however, and restaurants in some areas reported softer-than-expected sales. Retail
revenues rose slightly, and consumers remained highly price conscious. Manufacturing sales were
mixed, while software and IT services firms experienced stable and healthy demand. Residential
real estate sales increased modestly, helped by improved inventories in some areas, while commercial real estate activity was flat. The outlook was modestly optimistic on balance, although
some contacts had concerns for 2025 related to how national economic policies might change
and where long-term interest rates would land.
Labor Markets
Employment was roughly steady, and wages increased modestly on average. Contacts in the retail,
tourism, and software and IT services sectors all reported stable headcounts. Among manufacturing contacts, headcounts increased slightly at selected firms, decreased modestly at one in
response to slower sales, and were reportedly unchanged otherwise. Labor supply to retail and
tourism jobs improved modestly, with contacts noting greater ease of hiring and reduced attrition.
Wages increased modestly on average, and contacts reported no elevated wage pressures. However, one manufacturing contact experienced a significant increase in health insurance costs that
they partly passed on to employees, while offering a slight wage increase as an incomplete offset.
No contacts mentioned plans for major changes in hiring or wages in 2025. Cape Cod contacts,
whose businesses rely heavily on seasonal worker visas, expressed concerns that potential
changes to visa programs could restrict their labor supply in 2025 or beyond.
Prices
Prices were about flat on balance. An online retailer reported only modest pricing pressures and
remained keenly aware of consumers’ heightened price sensitivity. The same contact was cautiously optimistic that any tariffs would not have a major impact on their prices, owing to changes
6
The Beige Book
made to their supply chain in recent years. Hotel room rates in the Greater Boston area decreased
modestly on a year-over-year basis, but contacts pointed out that the change was in relation to the
record high room prices of November 2023. Manufacturers held output prices steady, even though
most experienced slight to modest increases in input prices. Software and IT services firms
posted modest price increases on average. Contacts did not foresee major changes in pricing
pressures for their businesses moving forward.
Retail and Tourism
First District retail contacts reported slight increases in revenues in recent months, while tourism
activity experienced modest growth on average. An online retailer described fourth-quarter revenues as stable overall but said that promotions had been critical to those results and that
demand for lower-end goods remained weak. On Cape Cod in the fourth quarter, hotel occupancy
rates and retail sales met expectations and were roughly on par with the fourth quarter of 2023,
but restaurants experienced weaker-than-expected sales. Airline passenger traffic through Boston
increased moderately in the fourth quarter from one year earlier, with domestic travel finally surpassing 2019 levels. Worcester air passenger counts grew 18 percent from the previous year. Like
the change in hotel room prices, hotel occupancy rates in greater Boston were down slightly in
November from one year earlier, when occupancy rates had been at all-time highs. Contacts
expected robust tourism and convention activity for Boston for 2025. The outlook for retail and
restaurant activity was more cautious, as contacts in those businesses expected roughly flat
activity going forward.
Manufacturing and Related Services
Manufacturing sales were flat on average since the last report. Most firms reported no change in
revenues in the fourth quarter from the third, but sales were unexpectedly soft for one manufacturer and unexpectedly strong for another. The strong sales pertained to a frozen fish producer
who speculated that retailers were accumulating inventories in anticipation of tariffs. A semiconductor maker with flat sales said that demand for their products was softening and that they
would adjust employment downward moving forward. Capital expenditures largely stayed within
forecast ranges. The outlook for 2025 was modestly positive on balance, as most firms expected
sales to increase at least slightly in the new year, but one semiconductor manufacturer expected
moderate declines in sales relative to 2024.
IT and Software Services
First District IT and software services contacts described demand as stable at healthy levels, and
one firm’s total revenues for 2024 exceeded expectations. Capital spending was constant, and
physical investments were described as minimal given firms’ reliance on cloud computing ser-
Federal Reserve Bank of Boston
vices. Contacts expected revenues to increase strongly in the first quarter of 2025, based on a
combination of organic growth in demand and, in one case, the recent acquisition of another company. Considering the longer-term outlook, most contacts expressed confidence that demand for
their products would continue to rise, even in an environment of heightened political and macroeconomic uncertainty. Nonetheless, one firm said that increased competition from China affecting
its clients could either boost its business, as client firms invested in new technologies to keep up,
or hurt demand if clients were pushed out of the market altogether by such competition.
Commercial Real Estate
Commercial real estate activity was mostly flat in the First District. Contacts reported uniformly
that elevated long-term interest rates continued to limit transactions. One contact said that borrowers, hoping that long-term rates would decline, continued to favor extensions for maturing
loans. However, several contacts downgraded the chances of significant rate declines in 2025.
Office leasing activity remained slow, but prime Boston properties continued to experience relatively healthy activity. Contacts described industrial and retail leasing activity as stable. Rents and
occupancy rates were unchanged across all asset classes. One contact said that a recent Massachusetts law intended to promote multifamily construction was yielding tangible results in some
areas of the state. Around half of contacts were cautiously optimistic that the first quarter of 2025
would bring more robust commercial real estate activity, while others expected current activity
levels to persist or, more pessimistically, that interest rates would stay higher for longer than previously expected and exert negative impacts on the market.
Residential Real Estate
Home sales in the First District rose modestly on a year-over-year basis in November 2024, the
most recent month for which data was available. Supporting the increase in sales, home inventories were up moderately from a year ago overall, with very large increases in Maine and Vermont,
although inventories declined moderately in Massachusetts from a year earlier. However, the
typical number of days homes spent on the market increased, as multiple contacts mentioned
that some buyers were waiting until after the presidential election to make purchasing decisions.
Considering changes since November 2023, prices of single-family homes increased at a brisk
pace, while condo prices increased moderately on average in Massachusetts and Rhode Island
but decreased modestly in the northern New England states. Multiple contacts expressed optimism that more sellers would put their homes on the market in early 2025 and that this would
lead to increased sales activity.
For more information about District economic conditions visit: https://www.bostonfed.org/in-theregion.aspx.
7
8
Federal Reserve Bank of
New York
Summary of Economic Activity
Economic activity in the Second District continued to increase slightly during the reporting period.
Employment in the region grew slightly, on balance, and wages continued to grow moderately.
Selling prices continued to rise at a modest pace, although manufacturers reported that prices
largely held steady. Input price increases remained moderate. Manufacturing activity declined moderately, after strong growth during the previous reporting period. Consumer spending increased
moderately since the last report, and New York City tourism was robust. Retail contacts indicated
stronger than forecasted holiday sales, with stores in the District slightly outperforming the nation
overall. The housing market remained strong at the end of the year, and commercial real estate
markets strengthened slightly, marking the first increase after a long stretch of decline. The broad
finance sector contracted slightly. Optimism about the outlook continued to improve.
Labor Markets
Employment in the region continued to grow slightly, on balance. Manufacturing firms reported
little change to headcounts since the last report, while contacts in the education and health,
wholesale, and finance industries saw increases. Contacts in transportation and warehousing,
construction, information, and business services reported modest to moderate declines. Still,
there were no mentions of major layoffs in the District.
Demand for workers picked up a bit, following an election-cycle pause, despite what is usually a
slower time of the year. A contact at an upstate New York employment agency noted that finding
qualified workers has continued to get easier as labor supply was greater than labor demand. This
contact also reported that demand has remained strongest in the finance industry, but there is
also more need for workers in sales and marketing, an indication that companies are again planning for growth. A contact with insight into employment across a broad array of industries noted
there has been some uptick in firm expansions, though the resulting increase in hiring continued
to be primarily for backfilling existing roles.
Wage growth has remained steady and moderate. Contacts noted that workers are on track to
receive bonuses this year, but bonuses are not expected to be overly generous given the softer
labor market, though Wall Street bonuses are expected to be strong.
Federal Reserve Bank of New York
Prices
Selling price increases continued at a modest pace, although manufacturers reported that their
prices largely held steady. Input price increases remained steady and moderate. One contact
noted sharply rising prices for commodity coffee, while another mentioned high prices for homebuilding supplies. Business leaders across many industries expressed concern that potential
import tariffs would push up prices. More firms expected higher prices in the coming months.
Consumer Spending
Consumer spending increased moderately since the last report. Department store contacts indicated that holiday sales were stronger than forecast, with stores in the District slightly outperforming the nation overall. Higher-end items and brands, as well as beauty and fragrance
items, continued to sell well, although consumers continued to seek value and responded strongly
to discounts during the holiday season. Still, unusually warm temperatures led to sluggish sales
of winter coats and cold weather accessories like hats and scarves. Auto dealers in upstate New
York reported a strong year end. New car sales grew moderately, with manufacturer incentives continuing to spur sales, particularly among high-volume brands. Used car sales grew modestly, as
price gaps between new and used cars have continued to make used cars appealing. Inventory
remained at a healthy level. Generally, retailers and auto dealers are optimistic about sales in the
coming months.
Manufacturing and Distribution
Manufacturing activity declined moderately, after strong growth during the previous reporting
period. New orders and shipments declined. Wholesale and distribution-related firms saw continued modest increases in business activity. Supply availability and delivery times were little
changed. Of note, a shipping industry contact indicated that there was an impulse among
importers to stockpile goods in anticipation of tariffs, but worldwide shipping capacity continued to
be limited due to Red Sea shipping route disruptions. A potential dockworkers strike in January
was also contributing to some of the impulse to get ahead of demand. Manufacturers and
distribution-related firms generally remained optimistic that business conditions will improve in the
months ahead.
Services
Activity in the service sector was little changed. Contacts in the business services and personal
services industries reported modest to moderate declines, while there was a slight increase in
activity among firms in the leisure and hospitality sector, and education and healthcare activity
largely held steady. Optimism among firms in the service sector continued to rise.
9
10
The Beige Book
Tourism activity in New York City was quite strong at the end of the year, with the number of visitors matching 2019 levels for the first time since the pandemic. Hotel room rates hit record highs
in December, though the high cost of hotel rooms detracted from spending on attractions, which
have not recovered as quickly. However, Broadway attendance has been robust, with more shows
open than in the 2019 season. Contacts expect 2025 to be a record year for tourism.
Real Estate and Construction
The housing market remained strong at the end of the year. New signed contracts surged in and
around New York City, and demand remained solid in upstate New York. Sales upstate and in the
New York City suburbs continued to be constrained by tight inventory, although inventory has
improved slightly. With such low inventory, ongoing solid demand continues to push home prices
higher, and bidding wars remained prevalent. Cash purchases continued to be an outsized share
of sales, especially in Manhattan, as mortgage rates were still relatively high.
The rental market remained firm. Rents continued to rise in New York City, while they stabilized at
a high level in upstate New York. Rising mortgage rates continued to push potential buyers to rent,
although the very high end of the rental market softened somewhat.
Commercial real estate markets strengthened slightly, the first increase after a long stretch of
decline. The New York City office market saw a pickup in demand, though the market remains
bifurcated, with strength concentrated in renovated class A buildings in premier areas in midtown
Manhattan. With tourism on the rise, retail markets in New York City have improved. Industrial
markets were mixed, with Long Island’s industrial market seeing growth, but there were declines in
northern New Jersey’s market.
Construction activity continued to decline, albeit at a more modest pace. Rising materials costs
and high credit costs remained limiting factors. Still, construction industry contacts anticipated
growth in business activity in the coming months after an extended period of pessimism.
Banking and Finance
Activity in the broad finance sector contracted slightly, though there were some signs of firming.
Small-to-medium-sized banks in the region reported that demand declined for all loan types,
including business loans, consumer loans, and commercial and residential mortgages, as well as
refinances. For the first time in a while, credit standards eased, and delinquency rates improved.
Deposit rates continued to decline. Contacts in the finance industry remained very optimistic
about the outlook.
Federal Reserve Bank of New York
Community Perspectives
High prices of groceries and housing paired with rising debt service payments have stretched budgets for many consumers in the District. Credit counselors in the region have noted that younger
community members are increasingly seeking assistance with managing debt. Challenges are
more acute in lower-income parts of the District, with some areas of New York City facing unusually high delinquency rates on consumer debt.
For more information about District economic conditions visit: https://www.newyorkfed.org/
regional-economy.
11
12
Federal Reserve Bank of
Philadelphia
Summary of Economic Activity
On balance, business activity in the Third District has continued to increase slightly since the prior
period. Consumer spending also rose slightly, despite price-conscious consumers; auto sales
increased the most. Nonmanufacturing activity edged up, as it did last period, but manufacturing
activity edged down—a reversal of its trend. Employment rose slightly this period—slower than the
modest pace last period. Real wages and prices continued to rise modestly. However, most firms
are expecting inflation pressure to increase because of anticipated fiscal, trade, and immigration
policies. On average, firms expect moderate economic growth over the next six months. Optimism
fell among all firms but remained more widespread among manufacturers than nonmanufacturers—
the index for the latter slipped below its nonrecession average.
Labor Markets
Employment increased slightly, after rising modestly last period. Based on our December surveys,
the indexes for full- and part-time employment narrowed slightly but remained positive for nonmanufacturing firms. The employment index for manufacturing firms also edged lower in
December. The average workweek index edged higher for nonmanufacturers but fell sharply for
manufacturing firms. Notably, for most of our employment indexes, over two-thirds of the firms
reported no change in December.
Staffing contacts reported little change in the demand for their services and noted little wage pressure. Several contacts reported that their clients had imposed wage freezes, layoffs, or cutbacks
on shifts. One contact noted that their firm had imposed a wage freeze on their own employees.
Many firms continued to note that finding skilled workers is a critical challenge. Employee retention has improved for most firms except those offering less than 14 dollars an hour (depending on
the location).
Wages inflation continued to rise at a modest pace—typical of its long-run average. Several contacts noted that nominal wage increases of three percent or less were planned for 2025 (as much
as five percent including benefits). One contact described a 10 to 15 percent increase for wages
Federal Reserve Bank of Philadelphia
and benefits for the first year of a recently negotiated union contract. Planned increases would
drop significantly in subsequent years.
Prices
On balance, firms’ prices continued to rise at a modest pace. Contacts noted no relief for middleand low-income families facing unaffordably high prices for houses and motor vehicles; however,
many reported falling prices for food and fuel.
In our monthly surveys, the diffusion indexes for prices paid and prices received were at or above
their nonrecession averages for nonmanufacturers and manufacturers. However, several contacts
noted that their input costs had fallen, particularly for food commodities and for shipping. They
also credit the drop in underlying fuel costs for some of the relief.
In December, manufacturers’ expectations for future price increases over the next six months narrowed for prices paid and broadened for prices received compared with the prior month. However,
both diffusion indexes remained more widespread than their nonrecession averages. Moreover,
most contacts from all sectors continued to express caution about the impact of budget deficits,
tariffs, and immigration policies on future prices.
Manufacturing
Overall, manufacturing activity decreased slightly after increasing modestly in the prior period. The
indexes for new orders and shipments turned negative in December, and the general activity index
fell moderately.
Manufacturers’ expectations for growth over the next six months narrowed substantially for future
activity, new orders, and shipments. Likewise, the indexes for future employment and capital
expenditures fell. However, each of these future activity indexes remained at or above their nonrecession average.
Trade and Services
On balance, firms across a broad spectrum of nonmanufacturing industries continued to report a
slight increase in activity. In December, the monthly index for new orders remained negative, but
the indexes for general activity and sales/revenues remained slightly positive.
Retailers (nonauto) reported a slight increase in real sales—following no change in the prior
period. Lower input costs allowed restaurants and retail grocers to lower retail prices and attract
more customers. Contacts were optimistic that the uptick in demand would carry into 2025.
13
14
The Beige Book
Auto dealers reported a modest increase in motor vehicle sales and that their inventories were
nearing normal pre-pandemic levels. Contacts noted that normal levels also entail normal floor
plan costs—narrowing dealer margins.
Tourism activity was flat to up slightly. Contacts noted that most segments of the travel industry
have normalized following the disruptions from the pandemic. Now, the sector’s demand growth
appears to have reconnected to the rate of general economic growth. Overall, contacts were more
optimistic for 2025.
The share of nonmanufacturers expecting growth over the next six months narrowed, with the
index edging below its nonrecession average.
Real Estate and Construction
Brokers reported little change in existing-home sales but noted a bump up in new listings, steady
traffic, and continued offers despite the holidays.
Homebuilders also reported no significant change in sales of new houses. One contact noted that
December is typically slow but that 2024 had been a great year—adding that they entered 2025
with a large backlog of signed contracts and are already looking out one year and beyond.
Philadelphia area contacts described good demand and positive sentiment in the overall commercial real estate market. The retail and industrial segments were noted as especially strong with
rising rents. Leasing activity for apartments remained resilient; however, the “current wave of new
units will take years to digest.” Contacts noted that the office market was just “marking time.”
Commercial real estate contacts reported that construction activity decreased slightly this period.
The pipeline of commercial projects continues to wane, and most of the federally funded public
infrastructure projects still await groundbreaking.
Credit Conditions
The volume of bank lending (excluding credit cards) held steady for a third consecutive period (not
seasonally adjusted)—weaker than the moderate growth observed during the comparable periods
in 2022 and 2023.
District banks reported modest growth in home equity lines and slight growth in commercial real
estate lending and home mortgages. These gains were offset by modest declines in commercial
and industrial loans and in other consumer loans and by a slight decline in auto loans. Credit card
Federal Reserve Bank of Philadelphia
volumes surged following slight growth during the prior period—typical for the year-end
holiday season.
Banking contacts continued to report sound credit quality and relatively low delinquency rates.
One contact noted that rising home values and larger, more frequent property insurance claims are
driving taxes and insurance premiums higher, thereby triggering more mortgage delinquencies.
However, in the former case, rising home values and the undersupply of housing make it easy for
a delinquent homeowner to pay off the debt from the proceeds of a sale.
Contacts throughout the banking sector and the nonprofit community continued to warn that the
high cost of housing and of automobiles further aggravates credit availability issues for low- and
middle-income households.
For more information about District economic conditions visit: https://www.philadelphiafed.org/
regional-economy.
15
16
Federal Reserve Bank of
Cleveland
Summary of Economic Activity
On balance, business activity in the Fourth District grew modestly in recent weeks, and contacts
expected activity to increase further in the months ahead. Consumer spending increased moderately, with some retailers noting higher-than-anticipated sales. Demand for manufactured goods
remained soft, a situation which some contacts attributed to uncertainty surrounding potential
policy changes. Employment levels generally remained flat. While some manufacturers reported
reducing headcounts because of low demand, some construction contacts added staff to support
planned growth. Overall, wages and nonlabor input costs increased moderately, and prices grew
modestly.
Labor Markets
Contacts reported that employment levels were flat overall in recent weeks, a trend which is
largely unchanged from those seen during the previous four reporting periods. Among firms
that were maintaining flat headcounts, several said that they were fully staffed to meet current
demand, while others were focused on replacing departing workers. Many manufacturers continued to report reducing headcounts by eliminating shifts or by not replacing departing workers,
often because of decreased order volumes. Still, many business services and healthcare contacts
noted that they were hiring to meet increases in demand, while some construction and real estate
contacts were adding staff to support planned business expansions and because of an
anticipated market recovery. Overall, contacts expected modest employment growth in the
months ahead.
Wages increased at a moderate pace on balance in recent weeks. Consumer-facing firms were
among those reporting continued upward pressure on wages. Some of these firms had increased
their hourly rates to attract entry-level workers, citing strong competition for these employees.
Other contacts in manufacturing and business services also continued to increase pay to attract
and retain workers with specialized skillsets such as machinists or accountants. Still, many firms
held wages flat, citing improved labor availability, slowing inflation, or unchanged demand.
Federal Reserve Bank of Cleveland
Prices
Nonlabor input costs increased moderately on balance in recent weeks. Some construction contacts said that their costs have been stable over the last two months, though two contacts
expected materials costs to rise in the months ahead. Contacts across industries continued to
report increases in the costs of healthcare benefits and insurance. Many restaurateurs and food
producers said that costs were increasing for beef, dairy, cacao, and eggs. Overall, contacts
expected costs to grow moderately in the coming months.
Overall, selling prices continued to grow modestly in recent weeks, though over half of contacts
indicated that they had held prices steady. Many business services and construction firms continued to report raising prices, with several doing so based on the market conditions. While some
retailers said that they had raised prices, others offered more discounts to drive sales amid
elevated consumer price sensitivity. Citing softer demand, some manufacturers noted decreasing
their prices to compete for business.
Consumer Spending
On balance, consumer spending increased moderately in recent weeks after a period of decline
over several reporting periods, and contacts generally expected sales to increase modestly in the
coming months. Most reports of stronger sales were centered on holiday shopping, and one
grocer noted that “customers appear[ed] willing to spend more this holiday season.” Reports from
auto dealers remained mixed. Most dealers continued to report soft demand for new and used
vehicles; however, two dealers reported unexpected increases in sales. Some auto dealers were
optimistic about sales in the coming months as loan rates had fallen somewhat for customers
with higher credit scores.
Manufacturing
Demand for manufactured goods was generally stable after declining for several reporting periods,
and most firms reported no change in demand. Still, some manufacturers noted low demand
related to general uncertainty about potential policy changes. By contrast, a small number of
reports indicated higher orders, a circumstance which some contacts attributed to data center
construction and others to greater overall confidence in the economy. Contacts generally expected
demand to increase modestly in the coming months, with some noting that client inquiries and
quotations had increased.
17
18
The Beige Book
Real Estate and Construction
Residential construction activity increased modestly in recent weeks. Over two-thirds of contacts
said that demand was unchanged since the prior reporting period; however, two homebuilders
commented that their consistently strong demand was an improvement compared to the typical
year-end lull. A single-family homebuilder who reported increased activity cited more stable mortgage rates and the resolution of uncertainty regarding the election as factors supporting sales. On
balance, contacts expected demand to decrease slightly in the coming months.
Nonresidential construction and real estate contacts reported a modest increase in demand over
the last two months. Contacts attributed this increase to greater certainty after the election and
additional cuts to interest rates. One builder observed that large projects were moving forward
after previously being on hold. Commercial construction and real estate contacts anticipated modestly increased demand in the months ahead.
Financial Services
On balance, bankers indicated that loan demand rose modestly since the last reporting period.
One banker said that consumer demand for credit increased, while another said that lower interest
rates and the end of election uncertainty increased demand for credit among businesses. Looking
ahead, bankers anticipated that loan demand would increase further, an expectation which one
attributed to continued improvement in consumer confidence. Delinquency rates were relatively
unchanged from the last reporting period, while core deposits grew slightly in recent weeks.
Nonfinancial Services
Professional and business services firms indicated that activity increased modestly in recent
weeks and anticipated that demand would increase strongly in the coming months. However, two
contacts mentioned that some clients held off on new projects because of uncertainty surrounding
the future of federal and state policy decisions. Freight contacts reported an increase in activity
compared to that in the last reporting period, though several contacts noted that freight volumes
remain low. Contacts expected demand to be largely flat over the next couple of months.
Community Conditions
Workers and jobseekers responded to a District survey about their recent labor market experiences. Workers across all education levels indicated that their most important reason for being
employed was access to benefits such as health insurance, while their second most important
reason was wages. Roughly 20 percent of workers reported having multiple jobs; many of these
multiple jobholders were engaged in gig work because of the flexible scheduling. Over the next
Federal Reserve Bank of Cleveland
three months, most employed respondents indicated that they were unlikely to search for jobs,
accept a different job, or stop working altogether. Respondents noted challenges in finding jobs
that offer benefits and provide wages high enough to cover living expenses.
For more information about District economic conditions visit: https://www.clevelandfed.org/en/
region/regional-analysis.
19
20
Federal Reserve Bank of
Richmond
Summary of Economic Activity
The Fifth District economy grew modestly since our previous report. Consumer spending on retail,
travel, and tourism increased moderately to end the year. Nonfinancial services firms reported no
change in revenues amid subdued demand while financial service providers saw a modest
increase in loan demand. Manufacturing activity slowed slightly. Firms across a variety of sectors
voiced concerns and uncertainties around tariffs, port worker strikes, and general economic conditions moving into the new year. Residential real estate experienced a typical seasonal slowdown
while commercial real estate activity picked up slightly. Employment levels were unchanged, on
balance. Prices grew moderately in recent weeks.
Labor Markets
Employment in the Fifth District, on net, was unchanged in the most recent period. Some contacts
continued to report challenges with labor availability. For example, an engineering consultant commented that they would hire five employees right now if they could find qualified candidates.
Despite some labor availability issues, contacts generally expected wage increases to return to
normal in the coming year. A pet groomer planned to scale back employee benefits to realign total
direct labor costs to pre-pandemic levels. A technology-focused recruiter remarked that several
candidates were not able to land a job due to outdated skills and/or AI has led to fewer job openings in their fields. For many of these workers, they expect the candidates will need to accept
lower wages to find work.
Prices
On balance, year-over-year prices grew at a moderate rate. According to our most recent surveys,
prices received by nonmanufacturing firms grew moderately while manufacturing firms continued
to report modest price growth just below two percent. Firms’ expectations for price growth a year
from now increased. Manufacturers expected prices to rise at a faster rate a year from now compared to nonmanufacturers, with several citing tariffs on inputs as a reason for higher expected
price growth in the future.
Federal Reserve Bank of Richmond
Manufacturing
Manufacturing activity in the Fifth District declined slightly in the most recent reporting period. Several contacts reported declines in new orders due to consumer pushback on prices. A premium
wine manufacturer reported that consumers were opting for less expensive brands. A textile manufacturer relayed that customers reduced spending on big-ticket items despite inflation receding,
noting that price levels were up considerably compared to 2019. A boat manufacturer cited high
borrowing rates and consumer spending squeezes leading to declines in new sales. A few contacts reported increases in new orders, especially in areas with growing populations. A
North Carolina based cabinet manufacturer reported increased new orders due to needs for new
office space.
Ports and Transportation
Recent reports on import cargo volumes varied across the Fifth District with some ports seeing
slight increases and others reporting slight decreases. Imports of assembled vehicles dropped by
almost half at one port while another port saw a moderate increase in auto parts. Multiple ports
noted a significant decrease in paper waste products exported to East Asia. Ports attributed lackluster cargo volumes to US big-box retailers cautiously rerouting to the West Coast in advance of
disruptions if contract negotiations with the International Longshoreman Association are not
settled in January. Some customers have begun repositioning empty containers and rail cargo to
the West Coast at extra cost. Ports also described a weakening demand environment pushing spot
prices down even from Asia to the West Coast. The rising cost of union and non-union labor is a
significant concern for ports. One port implemented an eight percent labor surcharge on their base
rate with increases expected in the new year, while others have introduced new incentive structures for their non-union employees.
Trucking contacts noted flat volumes this cycle and disappointing retail peak which continued what
they described as a persistent freight recession this year. A larger firm cited difficulty in balancing
the risk of losing market share over small price increases on contracts. The same firm also
shared that skyrocketing insurance premiums led them to take on more financial risk and quadruple their deductible.
Retail, Travel, and Tourism
Consumer spending grew moderately in recent weeks. Retailers reported increases in sales and
shopper traffic during the holiday shopping season. Many retail businesses expressed concerns
about the next several months due to uncertainties around a potential port worker strike and tariffs affecting their ability to get products and the prices they will have to pay for them. A couple of
businesses serving the District of Columbia market said that they could see an increase in sales
21
22
The Beige Book
and activity in the coming months if more government workers return to working in the office. Food
service and hotel contacts reported a strong end of the year. Contacts in Western North Carolina,
however, said that activity was much softer than usual because the area was still dealing with the
aftermath of Hurricane Helene.
Real Estate and Construction
Overall, residential real estate activity slowed slightly as expected for the winter season, although
agents in Virginia and South Carolina saw an increase in homes sales listed over one million dollars. Buyers continue to have no issues qualifying for loans but are challenged with limited inventory and mortgage rates. Almost every agent mentioned their optimism for 2025 and the chatter
that sellers are wanting to sell. Multiple contacts, however, voiced concerns about impacts from
potential policy shifts on government workers, immigration, and tariffs.
Commercial real estate activity had a slight uptick as buyers and sellers worked to close out deals
before year end. Vacancy rates remained low in industrial and retail space while rate for lowergrade office space remained elevated. Multiple agents mentioned construction projects were finishing up, but that few new projects were being started because high construction costs mean
that projects don’t “pencil out.” Agents in Virginia and Maryland noted an increase in rental rates
as properties were becoming “turn-key” with virtually no concessions.
Hurricane Helene continued to impact residential and commercial real estate markets. A
North Carolina agent noted Asheville is finally starting to see market activity while the areas
around Boone were not. An agent in the Asheville market noted vacancies in industrial and retail
were dropping as displaced business worked to reopen. Office vacancies in the area were also
quickly dropping as government agencies and national engineering firms mobilize in the area.
Banking and Finance
Financial institutions continued to report a modest increase in loan demand with many noting
this activity was coming from their consumer lending portfolios, including real estate and autos.
Commercial lending, mainly in real estate secured loans, also saw modest increases in demand.
Customers were still showing some restraint due to the current uncertain economic environment.
Loan delinquency levels continued to show modest increases, with the most increases arising
from consumer loan portfolios. Deposit levels continued to remain stable, however, competition
for these balances appear to be easing as rates have started to lower throughout the
marketplace.
Federal Reserve Bank of Richmond
Nonfinancial Services
Nonfinancial services providers reported subdued demand for their services and flat revenues. An
engineering firm reported that there is a continued reluctance for clients to move forward on projects, while a digital services firm, as well as other respondents, echoed a similar sentiment with
an observation that clients are reducing budgets for the coming year. An IT firm reported that they
have been holding onto staff in hopes of an improvement in conditions, but they may have to make
tough decisions if demand for their services doesn’t stay the same or increase into the new year.
For more information about District economic conditions visit: https://www.richmondfed.org/
research/data_analysis.
23
24
Federal Reserve Bank of
Atlanta
Summary of Economic Activity
The Sixth District economy grew modestly since mid-November. Employment remained steady, with
many firms reporting plans to hold employment levels flat in 2025. Wages, input costs and prices
rose modestly, and firms’ pricing power was mixed. Consumer spending and travel and tourism
activity expanded moderately, and auto sales were strong. Home sales increased modestly, and
existing home inventories improved. Demand for transportation services rose slightly. Manufacturing activity continued to decline. Loan growth was moderate. Energy activity increased, but agriculture demand declined.
Labor Markets
Employment was little changed in recent weeks, as firms held headcounts steady. Many contacts
plan to keep staffing levels flat into 2025, although some expect to reduce headcount slightly,
largely through attrition. A few reported they may need to pursue layoffs if demand softens. However, there were a few reports of hiring for growth. Firms continued to report ample availability of
labor, which most contacts expect will continue in the coming months.
Contacts reported modest wage growth. Most said expectations for 2025 wage increases were
roughly in line with pre-pandemic growth rates, and similar to or slightly below those observed in
2024. Easing wage inflation was particularly notable among white-collar workers. Only a minority
of contacts noted continued elevated wage pressures for some roles such as frontline workers,
union employees, or skilled roles that are difficult to fill.
Prices
Input costs and prices increased modestly over the reporting period. Insurance and labor
remained the principal cost concerns for firms. While some contacts reported a slight moderation
in insurance cost increases, even relatively modest increases in insurance costs created cost
pressures for firms. On the health insurance side, many employers planned to pass on cost
increases to employees, but increases in other types of insurance were likely to be passed
through to final prices. Food and shipping costs were described as generally stable. Firms pointed
Federal Reserve Bank of Atlanta
to diversified supply chains as a potential buffer to proposed tariffs. Pricing power was mixed, with
firms utilizing targeted discounting to maintain demand.
Consumer Spending and Tourism
Consumer spending grew moderately in recent weeks. Retailers reported strong holiday sales,
which were characterized as better than expected. Buyers of luxury goods, in particular, continued
to spend. Contacts said promotions remained effective, and customers looking for deals were
willing to spend if the price was right. Spending on entertainment rose from an already strong
level, as contacts reported plays and concerts were sold out. There was some softness in quick
service restaurants, as ticket sizes shrank, or customers opted for value meals, while middle- and
higher-end restaurants saw solid demand. Auto sales were strong, with inventories and days on
the lot declining.
Travel and tourism activity increased at a moderate pace in recent weeks. Many industry contacts
reported stronger holiday travel than last year. Some hotels noted room rates were down slightly,
but many reported strong bookings and increased revenue. Cruising activity, as well as business
and group travel, remained strong.
Construction and Real Estate
In spite of elevated mortgage interest rates and home prices, housing sales increased modestly
over the reporting period. With some exceptions, existing home supply improved significantly
throughout the District. Homebuilders continued to offer incentives and discounts to offset higher
mortgage interest rates. Builders also slowed the pace of speculative inventory starts to allow
existing inventory to be absorbed, in an effort to prevent an inventory buildup of new homes.
Commercial real estate (CRE) conditions remained mixed. With the aid of concessions, multifamily
demand continued to increase, however, already elevated vacancy rates rose further. Contacts
reported growing concern in a stable but slowing industrial sector. Non-bank lenders noted greater
amounts of CRE loan delinquencies. The number of banks returning to the CRE lending market
rose, but rising long-term rates and CRE loan maturities continued to create challenges for all
lender types.
Transportation
Transportation activity grew slightly, on balance, since the previous report. Short-line railroad volumes were described as flat; however, Class I railroads saw solid increases in intermodal freight
and total traffic. Some logistics contacts noted relatively stable volumes and flat revenues. Truckload service providers reported subdued peak season volumes and flat overall van cargo, but an
25
26
The Beige Book
uptick in industrial freight. Inland waterway freight activity picked up. District ports reported continued increases in container volumes and roll-on/roll-off cargo. However, the potential for an east
coast port strike remains a downside risk. Transportation contacts noted uncertainty over future
trade policy, the regulatory environment, and insurance costs.
Manufacturing
With some exceptions, overall manufacturing activity continued to decline modestly. According to
the Atlanta Fed’s Business Inflation Expectations Manufacturing Sector Report, more than twothirds of respondents stated that demand remained the same or had declined over the past
twelve months. Firms facing lower demand reported adjusting by eliminating open positions and/or
laying off staff and reducing hours. Firms with improved demand increased capacity, prices, and
capital investments. Risks to the outlook included labor shortages, concerns over tariffs, and
potential supply chain disruptions at east coast ports that would result from a labor strike.
Banking and Finance
Sixth District financial institutions experienced moderate loan growth, driven by increases in multifamily loans and first-lien mortgages. Construction, land development loans, and auto loans contracted modestly; all other major loan categories increased moderately. Asset quality remained
stable with low levels of nonperforming loans as a percentage of total loans. Both deposit balances and borrowings by banks increased, as loan-to-deposit ratios fell amid rising loan growth.
Cash balances grew, outpacing asset growth.
Energy
Energy activity grew modestly, on net, over the reporting period. Rising demand was largely driven
by data center growth across the U.S. Utility contacts noted that near-term demand will be met
with a combination of natural gas, renewables, battery energy storage systems, and potentially
keeping coal plants running longer than anticipated. Global demand for liquefied natural gas (LNG)
remained strong, thus regional exporters operated near capacity and contacts described renewed
interest in LNG export plant development. Gulf of Mexico deepwater oil and gas production projects continued to ramp up, a trend that is expected to continue into 2025.
Agriculture
Demand for agricultural products declined modestly over the reporting period. Cattle and beef
prices remained historically strong amid limited supply but declined somewhat from recent highs.
Demand for row crops declined further. Domestic demand for dairy was little changed, but global
demand softened, resulting in lower prices in recent weeks. However, seasonal demand and
Federal Reserve Bank of Atlanta
supply constraints from new cases of avian flu drove up the price of table eggs. Demand for
poultry was steady, while demand for timber remained low. Many southeastern farmers struggled
to rebuild after hurricanes.
For more information about District economic conditions visit: https://www.atlantafed.org/
economy-matters/regional-economics.
27
28
Federal Reserve Bank of
Chicago
Summary of Economic Activity
Economic activity in the Seventh District increased slightly overall over the reporting period and
contacts expected a similar increase over the next year. Consumer spending rose modestly;
employment increased slightly; construction and real estate was flat; nonbusiness contacts saw
little change in activity; and manufacturing and business spending decreased slightly. Prices
increased modestly, wages rose moderately, and financial conditions loosened some. Farm
incomes in 2024 were below those of 2023.
Labor Markets
Employment increased slightly over the reporting period and contacts expected growth to continue
at a similar pace over the next 12 months.Some contacts continued to mention difficulty finding
higher-skilled workers. However, there were also signs of softening in the labor market. One
machinery manufacturer noted that labor had been easier to source recently, in part because
nearby competitors were reducing hours or instituting layoffs. A fabricated metals manufacturer
also said it was easier to hire and noted that absenteeism was down, while another planned to lay
off some non-production workers should demand not pick up in the next few months. A retail contact noted that compared with last holiday season, stores were open about the same number of
hours but hired fewer temporary workers and relied on existing staff to work more hours. Wages
and benefits costs continued to rise moderately overall. Many contacts reported an increase in
health insurance costs as new plans take effect in the new year.
Prices
Prices increased modestly overall in late November and December, and contacts expected a
similar rate of increase over the next 12 months. Producer prices moved up slightly. Nonlabor
input costs edged up, driven by increases in energy and overall shipping costs (truck freight rates
were down). While most contacts reported some increases in raw materials prices over the last
year, some highlighted flat or lower prices for certain inputs. Consumer prices again rose modestly
overall. A retail contact indicated that they had not seen any anticipatory price changes in
response to the potential for higher tariffs.
Federal Reserve Bank of Chicago
Consumer Spending
Consumer spending increased modestly over the reporting period. Nonauto retail sales were up
modestly and close to expectations. Apparel, laptops, home entertainment electronics, and jewelry all showed strong sales growth. Retailers indicated that promotional offerings were similar to
last year and that full-price sales were greater than expected. Leisure and hospitality spending
ticked up, boosted by greater demand for air travel and at fast casual restaurants. Both new and
used light vehicle sales rose slightly, as did leasing activity. Subcompact and compact vehicles
continued to gain market share, though at a slower pace as excess inventories of mid- and fullsize vehicles led to larger incentives on these alternatives. Contacts also reported a bump in electric vehicle sales.
Business Spending
Business spending decreased slightly in November and early December. Capital expenditures were
down some, though expectations for spending over the next year moved up. Demand for truck
transportation fell further, contributing to lower truck freight rates. Inventories at both nonauto
retailers and auto dealers were comfortable overall, while manufacturing inventories were slightly
elevated. There were few mentions of materials shortages, though several contacts again noted
long lead times for power supply equipment.
Construction and Real Estate
Construction and real estate demand was unchanged over the reporting period. Residential construction was stable and demand for home renovation projects remained soft. The size of renovation projects continued to shrink. Residential real estate activity decreased slightly, held back by
the recent rise in mortgage rates and ongoing tight inventory levels. Prices were unchanged, while
rents increased slightly. Nonresidential construction activity was flat overall, though project pricing
increased modestly in recent weeks. Commercial real estate activity was unchanged, as were
prices, rents, and vacancy rates.
Manufacturing
Manufacturing demand decreased slightly in late November and December and several manufacturers expected January and February orderbooks to continue to be soft. Demand for steel was at
a low level as sales to the construction and machinery sectors remained subdued. Sales of steel
for renewable energy products were a bright spot in 2024 but slowed toward the end the year. Fabricated metals sales decreased modestly overall, though there were reports of increased demand
from the medical equipment industry. Machinery orders edged down, with several contacts noting
29
30
The Beige Book
decreases from the automotive industry. Auto production slowed some, while demand for heavy
trucks rose.
Banking and Finance
Financial conditions loosened slightly in late November and December. Bond values ticked down,
while equities were flat. Volatility was unchanged on net over the reporting period, though there
was a large spike in mid-December. Business loan demand rose modestly, with several contacts
noting increased M&A activity. Business loan quality remained flat on balance, though one contact
noted deterioration among manufacturers. Business loan rates fell slightly and terms were again
unchanged. Consumer loan demand increased slightly, while loan quality decreased some. Consumer loan rates edged down and terms loosened a bit.
Agriculture
Seventh District farm income for 2024 was down from 2023, despite stronger-than-expected corn
and soybean yields. Compared with an average year, income was about average for agriculture
operations overall, but low for crop farmers. Contacts expected a further decline in income in
2025, with overall input costs expected to be roughly unchanged and product prices expected to
be flat or down. Prices for corn, cattle, and cheese increased over the reporting period, while
prices for soybeans, wheat, and dairy were flat. Hog prices declined. Egg prices jumped along with
flock liquidations due to avian influenza, and there were concerns about avian flu spreading
beyond the poultry sector. Slow farm equipment sales led manufacturers to offers of interest-free
payment plans to entice borrowers. Contacts expected that smaller margins in 2024 and 2025
would require many farmers to borrow more; they also indicated that many loans made three to
five years ago will soon reprice to higher interest rates. The farm sector will receive additional payments from the federal government to help cover disaster losses and lower product prices.
Community Conditions
Community, nonprofit, and small business contacts saw little change in economic conditions over
the reporting period. Contacts were less likely to mention inflation than in prior periods, and more
likely to mention softening in the labor market. State government officials saw mixed growth in tax
revenues. Concerns around the lack of supply of affordable housing remained top of mind for community contacts, especially in the District’s smaller markets, with some observing increases in
homelessness and “couch-hopping.” While nonprofit contacts reported healthy year-end donations,
they also noted significant increases in operating costs, especially for insurance, and persistent
high demand for their services. Higher costs led some nonprofits to close, leaving others to fill the
gap by increasing efforts to find new sources of funding and 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 across the Eighth District has continued to expand slightly since our previous
report. Impacts from the severe weather affecting the District beginning around January 5 were not
captured in this report. Employment was unchanged and contacts were satisfied with their employment levels. Prices continued to increase moderately. Contacts continued to express inflationary
concerns related to potential import tariffs or supply chain disruptions from a dockworker strike.
Reports on holiday sales were positive and generally better than expected. Reports from other
sectors reflected the typical seasonal slowdown. Many of these contacts shared a positive outlook
for the year ahead.
Labor Markets
Employment has remained unchanged since our previous report. A retailer reported that they were
fully staffed with a seasonal workforce. A manufacturing contact reported that, while they continued to hire workers, overall employment levels were unchanged due to employee turnover. An
engineering firm reported ongoing challenges hiring skilled workers in construction. A Memphis
area contact reported that generative AI technology will “shape their workforce” in the coming
year: They are looking to new technologies to help existing employees and expect new hires will be
prepared to use these technologies. A human resources company said that they expect their clients will experience an uptick in hiring during the first quarter.
Wages have increased at a moderate pace since our previous report. Contacts generally expected
wages to continue increasing at a similar pace in upcoming months, typically between three percent and four percent from the same period one year ago. A professional services firm reported
wage increases were about the same as one year ago. A manufacturing contact reported that
wage growth remained as strong as it has been over the past few years. One contact reported
they will increase the number of part-time employees to better manage their labor costs.
Prices
Prices have increased moderately since our previous report. Contacts reported the price of eggs
has risen sharply with the rise of bird flu cases. A construction contact reported that costs of
32
The Beige Book
lumber and steel have stabilized. Contacts reported the price of trucks and used vehicles has
increased over the past few months. A professional services firm reported they continued to
increase prices to customers; however, price increases were less than one year ago because wage
growth had moderated and they risked losing certain clients from further price increases. A retailer
reported no major pushback on higher prices for seasonal items. Contacts across multiple sectors
anticipate suppliers will announce price increases at some point in January.
Consumer Spending
Consumer spending has moderately increased since our previous report, with contacts reporting
healthy holiday sales. Retailers indicated that December holiday sales were much stronger than in
previous years, with a late Thanksgiving and cyber-Monday falling in December. A consumer electronics retailer reported steady holiday sales. A retailer with multiple locations noted surprisingly
strong holiday sales and foot traffic at their shopping mall location. A lawn and garden contact
reported that 2024 sales had met expectations but that a notable rise in credit card transactions
was a concern, as it may indicate consumers are financially stretched. A home-furnishings retailer
reported a ten percent increase in sales relative to one year ago, with an uptick in rent-to-own
financing.
Manufacturing
Manufacturing activity has improved slightly since our previous report. Contacts expressed concern about discussions related to tariffs and the possibility of a dockworker strike. As a result,
those with overseas supply chains have been negotiating expedited deliveries. Contacts also
expressed concern about the future of recent investments in electric vehicle and battery plants
projects across the District.
Nonfinancial Services
Activity in the nonfinancial services sector has remained unchanged, on balance, since our previous report. Rural hospital contacts reported ongoing challenges around reduced reimbursements
and anticipated reduction in services to control costs. A human resources consulting firm reported
that overall revenue and profitability ended 2024 higher than in 2023. A professional services firm
noted that total revenue and revenue per client have increased in recent months. An insurance
solutions firm reported that higher premiums have caused clients to reduce their coverage but
their profits have been maintained.
Federal Reserve Bank of St. Louis
Real Estate and Construction
Seasonally adjusted home sales have remained flat since our previous report, with transaction volumes and inventories declining due to normal seasonal patterns. A contact in Northwest Arkansas
reported that customers are increasingly relying on home equity and remodeling rather than purchasing a different home. The optimistic outlook among contacts was closely tied to their expectation that mortgage rates will decline in 2025; however, many expect only a slight decline in mortgage rates, which will result in a continuation of the current trend of weak but improving
home sales.
Commercial real estate activity has been generally unchanged since our previous report. Contacts
attributed any slowing in activity to seasonal factors related to the holidays, with demand expected
to rebound to normal levels throughout the first quarter. Business contacts looking to expand or
improve office space reported “sticker shock” from contractors’ estimates, which is causing them
to scale back initial plans.
Banking and Finance
Banking conditions have been generally unchanged since our previous report. Contacts reported a
moderate increase in the demand for new loans heading into the holiday season. The overall cost
of funding has risen due to increased competition for deposits. The volume of past-due loans has
stabilized after increasing modestly over the past year. A private investment company reported a
significant uptick in new leads for 2025, although the cost of capital may be too high to pursue
many of these opportunities. Banking contacts reported an uptick in demand for commercial real
estate loans.
Agriculture and Natural Resources
Agriculture conditions have been unchanged since our previous report and remain historically
weak. With the 2024 row crop cycle complete, producers reported limited profits as strong yields
were unable to offset lower prices and higher input costs. New farm equipment sales remain
weak. Contacts expect conditions to continue to deteriorate in the upcoming months. Banking contacts expect a slight decline in farmland values over the next 12 months. Contacts in Arkansas
pointed to lithium extraction opportunities as a bright spot for rural development that could support higher land values.
33
34
Federal Reserve Bank of
Minneapolis
Summary of Economic Activity
Ninth District economic activity increased slightly since the previous report. Employment grew
slightly and wage growth was moderate, while labor demand was positive but slowing. Overall
prices increased slightly. Growth was noted in consumer spending, construction, and residential
real estate. Energy activity was flat, while manufacturing decreased. Agricultural conditions
remained weak. Activity among minority- and women-owned business enterprises was lower
on balance.
Labor Markets
Employment grew slightly since the last report. Surveys and individual contacts suggested that
labor demand remained positive but also continued to slow, especially for certain sectors. Hiring
in health care, construction, and finance remained healthy. However, staffing contacts mostly
reported that clients were not hiring, particularly in manufacturing. “Orders are down, there’s no
way to sugarcoat it,” said a contact in Michigan’s Upper Peninsula (U.P.). Employers widely
reported that labor availability continued to improve and felt “more normal,” according to one
source. Some staffing contacts reported that there were more candidates than jobs, a flip-flop of
earlier labor conditions. Others noted improvements in job candidates’ reliability. A Minnesota mall
contact reported that holiday labor needs “seem to be less of a challenge this year than the past
few years. I can’t think of one retail tenant that is or was concerned with staffing.”
Wage growth was moderate. Monthly survey respondents reported wage growth roughly on par with
recent months, but slightly lower than the first half of the year. Wage growth was stronger among
construction and finance contacts, but lower for job orders at staffing firms due to sagging
demand. A South Dakota retail contact reported that the rate of wage increase “has slowed and
has been relatively flat for several months now,” but it was still comparatively high and cutting into
profitability.
Prices
Overall prices increased slightly since the previous report. Preliminary results from a District business conditions survey indicated a modest uptick on balance in prices charged to customers in
Federal Reserve Bank of Minneapolis
December from the month prior, though two-thirds of firms reported no change. In contrast, about
40 percent of firms reported an increase in nonlabor input prices for the month. The wholesale
prices component of a regional manufacturing index ticked up slightly in December to a moderate
overall level. Respondents to a construction survey continued to report that inflation was a
problem, but they also indicated that prices were nonetheless moderating at the wholesale and
retail level compared with last year. An alcoholic beverage retailer said that suppliers were clearing
inventories by offering deep end-of-year discounts, which they passed along to customers. Retail
fuel prices were roughly flat since the last report in most of the District except for Montana, where
they fell moderately. Prices received by farmers increased in November from a year earlier for
sugar beets, chickens, eggs, milk, hogs, and cattle; prices decreased from a year earlier for corn,
soybeans, wheat, barley, potatoes, canola, lentils, hay, and turkeys.
Worker Experience
Workforce development contacts across the District reported a slight softening in job openings but
noted that demand remained robust for some health care and construction jobs. Contacts highlighted ongoing challenges matching available talent to those high-demand occupations. Midcareer
job seekers looking for management opportunities struggled, because those jobs were scarce. A
union contact said that hiring commercial drivers, mechanics, and law enforcement professionals
in some areas of the U.P. was a “perpetual struggle.” They added that public employees kept
“moving backwards,” facing stagnant wages and a higher cost of living.
Consumer Spending
Consumer spending grew modestly. Retail contacts were generally upbeat about holiday sales.
Stores reported strong crowds, with some seeing sales surpass pre-pandemic levels for the first
time. One Minnesota mall contact expected sales increases from three percent to five percent
over last year. Another Minnesota contact said that “traffic is up and a lot of people [are] carrying
bags.” Some restaurants in Minneapolis-St. Paul reported slow holiday event bookings and lower
overall sales. Sentiment among retailers in South Dakota was also somewhat softer, and a source
there noted a spate of recent restaurant and brewery closings. Some contacts noted healthy consumer spending, but also expressed caution regarding rising consumer debt, particularly among
middle- and low-income households. Hotel occupancy softened across the District, though Wisconsin operators saw decent gains. Vehicle sales were flat overall, with higher sales of new
vehicles but lower sales among used vehicles.
Construction and Real Estate
Construction grew slightly overall since the last report. Industry data suggested that project
activity increased somewhat, and contacts overall reported slightly higher activity in December
compared with a month earlier. Recent permitting activity in the District’s larger markets was
35
36
The Beige Book
mostly lower for commercial projects, and flat-but-mixed overall for single- and multifamily activity.
Recent surveys showed a notable uptick in the sector’s near-term outlook, but some contacts
noted that optimism has not yet translated to increased activity. A Wisconsin architecture and
design firm contact said that “there is so much uncertainty . . . that I have heard would-be developers say they will have to wait before moving forward.”
Commercial real estate fell slightly. Office space was still widely lower across most District markets. Industrial space continued to soften somewhat, with increased subleasing in some markets,
but conditions were still considered healthy. Multifamily vacancy rates ticked higher. Retail continued to perform well in many markets, buoyed by strong holiday foot traffic and tight vacancy
rates. Residential real estate was widely higher. A large majority of markets saw growth in recent
home sales year over year, including strong, double-digit increases in Montana markets.
Manufacturing
Activity in manufacturing decreased moderately in the District since the previous report. Preliminary results from an annual survey of manufacturers indicated a contraction in 2024 from the previous year. Manufacturers responding to a monthly business survey reported orders decreased in
December from the previous month, and more than 20 percent reported large reductions. A metal
fabricator reported that incoming order volumes were “falling dramatically compared to the past
six months, which were themselves down significantly from last year.” In contrast, another index of
regional manufacturing conditions found activity increased in Minnesota and North Dakota in
December relative to the previous month, while activity in South Dakota decreased.
Agriculture Energy and Natural Resources
District agricultural conditions remained weak. An overwhelming majority of contacts reported that
farm incomes fell in the fourth quarter from a year earlier due to low crop prices. Livestock producers continued to outperform crop producers. District oil and gas exploration activity was steady
since the previous report.
Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned business enterprises was lower on balance over the
month. Some categorized the slowdown as “normal seasonal changes.” About one in five contacts
experienced slightly higher labor costs, while one in three paid more for other inputs in the last
four weeks. Staffing levels were slightly lower on balance, and labor demand was mostly
unchanged.
For more information about District economic conditions visit: https://www.minneapolisfed.org/
region-and-community.
37
Federal Reserve Bank of
Kansas City
Summary of Economic Activity
Economic activity expanded slightly in the Tenth District, led by consumer spending on both goods
and services. Contacts indicated consumers are increasingly using longer-term financing and consolidating debt to manage household cash flows and support ongoing spending. Growth in consumer spending supported modest hiring activity concentrated in service sectors. Similarly, prices
rose at a modest pace overall but rose faster among consumer-oriented businesses. Contacts
broadly reported expectations that growth and hiring will accelerate in coming months, driven by
faster consumer spending, growth in manufacturing demand and rising construction activity. Contacts also noted several risks to their favorable outlooks. Agriculture and leisure and hospitality
businesses highlighted risks to their capacity that could arise from potential changes in immigration policy. Professional service sectors with large technology outlays expressed concerns about
sourcing equipment amid potential tariffs and are already adjusting inventories.
Labor Markets
Employment levels grew slightly over the past month and business contacts expected faster job
growth early in the new year. Recent hiring activity was concentrated in services sectors, and
wages for service workers continued to grow at a moderate pace. While hiring and wage growth
were subdued in manufacturing, contacts shared the favorable employment outlook. District firms
reported limited reliance on immigrant labor in general, but contacts in select industries and
regions expressed concerns that potential immigration policy changes could exacerbate already
tight labor market conditions by limiting the supply of labor. Food manufacturing and agricultural
contacts in Kansas and Nebraska indicated restrictions on temporary migrant labor could lead to
significant supply constraints. Similarly, leisure and hospitality contacts in Colorado suggested
immigration restrictions could exacerbate labor shortages in towns near resort communities. Technology industry contacts expressed additional concerns surrounding the ability to employ overseas
technology workers if offshoring policies were to shift.
Prices
Prices continued to grow slowly over the last month, driven by consumer goods and services
prices. Contacts noted automobile prices rose moderately due to the combination of rising costs
of sourcing vehicles and pent-up demand. As consumers were holding onto their cars longer,
38
The Beige Book
dealers had to pay more to find and transport used car inventory. While recent price growth was
slow overall, expectations for price growth over the next six month rose at a moderate pace. Faster
input price growth was a noted driver of higher expected prices across goods and services for the
coming year. In general, businesses were not able to pass along recent cost pressures but
expressed plans to do so.
Consumer Spending
Consumer spending grew slightly over the last month, driven by growth in discretionary spending
and auto purchases. Overall leisure and hospitality spending continued to rise, albeit with some
signs of a softer outlook ahead. Casino operators in New Mexico reported fewer visits and lower
spending per visit, and contacts at Oklahoma casinos indicated the outlook for 2025 is lower than
the previous two years. Ski resort contacts noted busy early-season bookings and a sold-out
holiday season. However, out-of-state powder hounds opted for lower cost basic passes to save on
their ski vacations and locals were reportedly less likely to book lodging in advance, gambling that
lower prices on vacant lodging would be available. While durable consumption contracted over the
past month, auto purchases grew moderately driven by pent-up demand as many consumers made
year-end vehicle purchases. Consumers reportedly took on long-term financing (often more than
72 months) to reduce monthly auto payments in an effort to manage household budget
constraints.
Community Conditions
Contacts reported low- and moderate-income (LMI) consumers were struggling with increasing debt
burdens. Most contacts said that they were seeing higher credit card utilization, increasing debt-toincome ratios, and delinquencies. Community development financial institutions contacts noted
more clients were seeking consolidation loans due to higher debt burdens. Contacts indicated LMI
populations continued to struggle with food and housing prices, as the ability to offset prices was
limited due to higher earnings pushing households toward a benefits cliff with a potential loss in
government benefits. One contact noted workers would need at least a 10 to 15 percent increase
in wages to offset lost benefits but were only finding jobs with much smaller increases.
Manufacturing and Other Business Activity
Activity in service sectors grew moderately over the past month, largely driven by consumer-facing
services rather than business services. Contacts shared that households within the region had
some pent-up demand for purchases that were delayed due to economic concerns that subsided
recently. Service firms continue to face pressure on profit margins as input prices rose faster than
selling prices. Margin pressures were further exacerbated by higher overhead costs. Select business contacts reported robust growth in inventories in the past month for specific imported
Federal Reserve Bank of Kansas City
goods—such as computers, phones, and other electronic equipment, as well as certain industrial
products—due to concerns over potentially higher costs from proposed import tariffs. The manufacturing sector continued experiencing a slight decline in activity. Nonetheless, manufacturing
firms remained optimist, anticipating greater activity in the early part of next year driven by
improvement in future production and new orders.
Real Estate and Construction
The level of construction activity was unchanged in recent months, however several contacts noted
substantial shifts in the sources of construction demand. Municipal construction projects had
been a key source of demand in recent years, but municipal development activity is waning as the
availability of public funds and outlook for fiscal spending dwindle. Contacts indicated more private
sector customers are coming to the table to satisfy pent-up demand from delayed development
projects and deferred maintenance, offsetting the declines in municipal projects. In particular, contacts highlighted growth in demand for construction of healthcare facilities. Demand for singlefamily home building also firmed slightly, primarily in luxury segments or homes with large footprints. Overall expectations for construction activity were favorable for the next six months, with
contacts indicating an outlook for modest growth.
Community and Regional Banking
Loan demand and credit standards were mostly unchanged across categories. However, the trend
of lower demand for residential mortgage loans continued. Concerns related to credit performance
over the next six months were less prevalent overall but shifted notably to different segments of
the regional economy. Much of the improvement in the outlook around credit performance was due
to concerns with commercial real estate loans being modified in the lower interest rate environment. In contrast, contacts reported more pessimism for agriculture loans, as grain prices
remained low. Deposit levels were stable, though bankers noted a continued migration into certificate of deposit accounts and money market accounts, as customers took advantage of the current rate environment.
Energy
Tenth District oil and gas activity fell modestly. While most contacts reported no change in activity,
approximately a quarter of businesses reported declines. The number of active oil rigs in the District fell slightly, while gas rig counts rose as natural gas prices now meet the average breakeven
price reported by firms. Despite declining revenues and profits, District firms raised capital expenditures and employment substantially from this time last year. Firms expect drilling activity to pick
up somewhat in the next six months but still do not expect material increases in production
39
40
The Beige Book
heading forward. Contacts reported the prices needed for a substantial increase in drilling
remained higher than their long-term price expectations.
Agriculture
Agricultural economic conditions in the Tenth District remained subdued alongside weak crop
prices. Soybean, wheat and cotton prices were nearly unchanged from the prior month and stayed
below average breakeven levels. Corn prices also remained weak despite increasing slightly following recent reports of higher than anticipated export activity. Strong market conditions and high
prices supported broad strength in the cattle industry, but incomes were dampened in some areas
heavily affected by drought. Lenders in the District reported slight deterioration in farm loan repayment rates alongside weaker incomes, but many noted that balance sheet strength of recent years
kept financial stress limited.
For more information about District economic conditions visit: https://www.KansasCityFed.org/
research/regional-research.
41
Federal Reserve Bank of
Dallas
Summary of Economic Activity
The Eleventh District economy continued to expand moderately over the reporting period. Growth
resumed in manufacturing output and activity picked up in nonfinancial services and retail. Bank
loan volume expanded, and banks reported increased demand for loans despite continued credit
tightening. Home sales increased slightly, while energy activity was steady. Overall employment
rose slightly in December, although manufacturing employment was flat. Wages and prices grew
moderately. Demand for nonprofit services remained high amid uncertainty regarding government
funding. Outlooks continued to improve although there was concern regarding potentially adverse
effects of future immigration and trade policies.
Labor Markets
Employment rose slightly in December. Services employment increased led by education and
health services, while employment fell in trade, transportation, and utilities and information services. Manufacturing employment remained flat as job gains in durable goods were offset by
losses in nondurable goods manufacturing. According to a Dallas Fed survey, about a third of firms
are looking to hire either for new positions or replacement, while around two percent are laying off
workers, both percentages remained steady since August.
Contacts reported an adequate supply of low-skilled labor, but a tight supply of skilled workers.
One firm is looking to hire remote workers abroad to meet its need for skilled workers and another
firm noted increasing wages to retain talent. A third contact noted that their firm’s growth is being
held back by the struggle to find high-quality employees. Energy contacts stated that while overall
hiring was on pause, exceptions were being made for certain skilled positions. Wage growth
remained moderate, but firms anticipate wage growth to be slower in the upcoming year than it
was in the past 12 months.
Prices
Prices increased at a moderate pace over the reporting period. Selling and input prices grew moderately in services, while slowing to a modest pace in manufacturing. Contacts broadly noted that
potential tariffs would raise input costs, and, in response, several firms anticipate passing
42
The Beige Book
through the increased cost to consumers. Firms plan to raise selling prices by more than they did
in 2024 although input prices are expected to grow more slowly.
Manufacturing
Manufacturing activity grew modestly in December, led by gains in computer and electronic product
and food manufacturing. Manufacturers reported no growth in new orders, though many expect an
increase in demand in the first half of 2025. A Dallas Fed survey showed that two-thirds of manufacturers are acting ahead of the anticipated tariffs, by raising prices, finding new suppliers, and in
housing production or processes. Outlooks continued to improve in December but were tempered
by concern about changes in domestic policy.
Retail Sales
Retail sales grew robustly in December driven by increased revenues for retailers and nondurable
goods wholesalers. Meanwhile, durable goods wholesalers saw net declines. Auto dealers
reported a modest increase in sales, although a few contacts noted that margins continue to
remain under pressure. Overall outlooks remained positive with some contacts citing optimism
about the implementation of business-friendly policies by the incoming administration.
Nonfinancial Services
Nonfinancial services activity continued to grow moderately over the reporting period. Revenue
growth was led by trade, transportation, and utilities as well as professional and business services. Revenues fell in information and leisure and hospitality. A transportation services firm
reported a small increase in parcel volumes, while another contact noted that despite slow
growth, overall parcel volumes in 2024 will match the 2022 record-breaking level. Demand for air
travel remained strong driven by leisure travel. Despite this, one airline industry contact reported
not planning to increase capacity to keep upward pressure on airfares. Moreover, to further
improve margins, the airline plans to implement cost cutting measures such as reducing discretionary spending and improving workforce efficiencies. Nonfinancial services outlooks remained
positive in December, and most firms expect an increase in revenue over the next six months.
However, many contacts expressed concern about the negative impact of some anticipated
domestic policy changes.
Construction and Real Estate
Housing contacts noted mixed activity, with some reporting meeting or exceeding sales expectations while others citing sluggish demand. Homebuilders continued to offer incentives to capture
Federal Reserve Bank of Dallas
sales. Home inventories inched upward, and elevated mortgage rates and high home prices continued to challenge affordability. Outlooks were cautiously optimistic.
Commercial real estate activity was stable during the reporting period. Apartment leasing was seasonally slow, and rents were flat to down as apartment operators remained focused on maintaining occupancy. Office leasing demand picked up in some markets but remained subdued
overall. Industrial activity was characterized as solid, and rents rose modestly.
Financial Services
Loan volume accelerated sharply in December. Credit tightening continued, but loan pricing
declined, both at the same pace as six weeks ago. Loan nonperformance rose but at a slower
pace. In addition to swift growth in loan demand, bankers reported a sizeable pickup in general
business activity for the first time in over two years. Meanwhile, bankers’ outlooks turned even
more optimistic. They expect rapid improvement in loan demand and business activity and just a
mild deterioration in loan performance six months from now.
Energy
Oilfield activity was largely flat over the reporting period. Contacts noted that oil prices in early
2025 were not expected to support an increase in production. A lower price outlook than a year
ago, rising productivity, and ongoing M&A activity are expected to keep a lid on production capex
growth, if there is any. Exploration and production contacts noted that M&A activity is expected to
remain healthy through 2025 resulting in some further layoffs though most operations are “operating as lean as they can already.” Job losses are also expected by oilfield services contacts primarily in natural gas producing regions. Narrowing margins are being driven by consolidation
among their customers, and rising insurance costs. Due to this narrowing, investment in equipment is expected to remain at “maintenance levels.”
Agriculture
Drought conditions retreated in parts of the district and remained present in others. Conditions
improved in the cattle sector with more ample grazing—thanks to recent rainfall—and significantly
higher calf prices. Row crop producers faced financial struggles in 2024 with largely unprofitable
crop prices, and contacts expressed continued financial concerns heading into the new year. The
winter wheat crop is a bright spot looking ahead, with strong production prospects and solid
demand. Several contacts noted concern about disruption from potential retaliatory tariffs on agriculture exports.
43
44
The Beige Book
Community Perspectives
Nonprofit service providers reported a sustained high level of demand for social services. This
comes at a time of heightened uncertainty regarding future funding from state and federal governments and possible changes in eligibility for social assistance programs. Nonprofits are looking for
alternative sources of funding, as a result. An El Paso contact noted that if changes in eligibility
require more work hours, the resulting influx of generally low-skilled workers into a saturated labor
market will suppress wages. Another contact reported that close to half of the families they serve
lost childcare benefits recently because they could not find a job within the required time. In higher
education, 2024 community college enrollment exceeded pre-pandemic levels. In addition, many
community colleges have surpassed performance expectations, and thus, will receive additional
funding in 2025.
For more information about District economic conditions visit: https://www.dallasfed.org/
research/texas.
45
Federal Reserve Bank of
San Francisco
Summary of Economic Activity
Economic activity in the Twelfth District expanded slightly during the mid-November through
December reporting period. Employment levels were largely unchanged, and employee retention
improved further. Wages were up slightly overall, and year-end pay increases were in line with historical averages. Price levels were generally stable in recent weeks. Retail sales grew modestly as
contacts reported a solid holiday shopping season. Consumer and business services sectors saw
steady to slightly higher activity over the reporting period. Manufacturing activity varied by product
category, while conditions in the agriculture and resource-related sectors softened slightly. Residential real estate markets were stable overall, and commercial real estate conditions were mixed.
Lending activity was steady. Demand for services related to affordable housing, food assistance,
and mental health remained high from communities across the District. Contacts’ economic outlook worsened slightly relative to the prior reporting period.
Labor Markets
Employment levels were stable on net over the past few weeks. Employers generally noted
improved retention rates, expanded applicant pools, and higher quality candidates. Open positions
were easier to fill overall. However, a larger share of contacts expressed caution in their hiring
decisions and hesitation to adjust their headcounts going forward relative to prior reporting
periods, citing uncertainty regarding the business environment. A few reports highlighted a mismatch between job requirements and applicants’ skill sets for some entry-level positions in information technology and the skilled trades. Additionally, employers noted lingering challenges hiring
engineers, accountants, as well as mid-level managers in business services, finance, and
health care.
Wages were up slightly up on balance. End-of-year pay adjustments and merit-based bonuses were
generally in line with historical averages across sectors and geographies. Wage pressures eased
in construction, manufacturing, real estate, and business services but remained somewhat
elevated for engineers as well as for some senior positions in finance and information technology.
Some contacts mentioned that the recent collective bargaining agreements between hotels and
labor unions as well as changes to some minimum wage requirements made the leisure and hospitality sector more attractive to hourly wage workers in other sectors.
46
The Beige Book
Prices
Price levels were generally stable in recent weeks. On balance, nonlabor costs were unchanged in
several industries, such as manufacturing, consumer and business services, and financial services. Business owners continued to report large increases in insurance premiums and healthcare costs, but some noted that recent declines in energy prices, particularly for fuel, helped ease
some of the cost pressures. Looking ahead, contacts generally expected their ability to pass on
higher costs to customers to remain limited, and most said their prices will likely increase at a
slower pace in 2025 relative to 2024, or even remain flat or decline.
Community Conditions
Demand remained elevated for community support services such as affordable housing, food
assistance, and mental health services. Funding for nonprofit organizations from both individual
donors and government sources fell. Contacts across the District reported that public and private
educational institutions of all levels faced tighter financial conditions due to lower funding inflows
and higher labor costs. Generally easing inflation trends lessened strain on small businesses,
though challenges persisted with insurance premiums, rents, and financing costs. Small businesses and nonprofit organizations reported that recent integration of software technologies
allowed them to expand their outreach efforts and provide more personalized services.
Retail Trade and Services
Retail sales expanded modestly over the reporting period. Contacts observed a solid holiday shopping season, similar to last year’s spending. Retailers noted higher demand for outdoor products
and increased foot traffic in shopping centers across the District. Sales at organic specialty stores
reportedly outpaced those at regular grocery stores, particularly in the Mountain West states. Consumers continued to take advantage of promotional pricing, which bolstered overall retail sales.
However, demand for some products reportedly softened, including pet specialty items and wood
products at home improvement stores. Retailers generally reported adequate inventory levels,
although they were somewhat lower than levels observed last year.
Activity in consumer and business services was stable to slightly up in recent weeks. Activity in
the leisure and hospitality sector picked up on balance, with increased travel demand from groups
and businesses that slightly offset flat demand for leisure travel. Reports indicated lower guest
counts at bars and restaurants in recent weeks, which were impacted by bad weather in parts of
the District despite typical holiday-related activity. Demand for consulting services increased of
late as firms inquired about the potential impact of economic policy adjustments on their business
operations. Demand for health-care services remained strong. Conditions in the legal services
sector were mixed by firm size, with smaller ones faring worse.
Federal Reserve Bank of San Francisco
Manufacturing
Activity in the manufacturing sector varied by product category. Demand strengthened for capital
equipment as more customers invested in using automation for cost savings on existing and new
tasks in response to elevated labor costs. Demand for manufactured lumber products was
unchanged. A contact in the Pacific Northwest reported some general slowdown in manufacturing
activity in the region but noted strengthening demand for defense manufacturing.
Agriculture and Resource-Related Industries
Conditions in agriculture and resource-related sectors softened slightly. Demand was stable for
agricultural and animal products such as fruits, vegetables, meat, and dairy. Yields of food crops
were solid but down compared to prior harvests. Drought conditions in the Mountain West
negatively affected grain yields, while growers in California reported that water supply was not an
issue. Exports of almonds fell. Log harvesting activity experienced seasonal slowing, which
reduced market supply and put upward pressure on log prices. Additionally, log exports remained
low because of muted demand from China. Materials and agricultural inputs were generally available. Some contacts reported persistent challenges with labor availability and generally high
energy costs.
Real Estate and Construction
Residential real estate activity was largely unchanged from the last reporting period. High
financing costs and excess supply of multifamily housing properties continued to hold back new
residential construction projects. Finding skilled labor remained a challenge. High mortgage rates
and home insurance costs curtailed demand in single-family markets in some regions in California
and Oregon. Contacts in the Mountain West noted that strong demand for housing in areas with a
growing population put upward pressure on home prices.
Conditions in the commercial real estate market were mixed. Demand for office space remained
sluggish overall, though one contact reported an uptick in demand and rental rates for the most
desirable office spaces. Developers put some retail and industrial projects on hold due to a recent
slowdown in demand. Demand in other sectors, including infrastructure projects and government
offices, was reportedly strong. Availability of raw materials generally improved of late but remained
an issue for some products such as electrical and HVAC components. Construction costs,
including those for insurance, electrical equipment, and steel, increased overall.
47
48
The Beige Book
Financial Institutions
Lending activity was steady. Demand for business loans improved somewhat over the reporting
period. Demand for consumer loans, including mortgages, was subdued due to elevated interest
rates. Credit quality remained healthy overall. However, reports highlighted some credit quality concerns coming from small businesses and low-income households. Demand for deposits was
unchanged, and deposit flows were stable.
www.federalreserve.gov
0125
Cite this document
Federal Reserve (2025, January 28). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20250129
@misc{wtfs_beige_book_20250129,
author = {Federal Reserve},
title = {Beige Book},
year = {2025},
month = {Jan},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20250129},
note = {Retrieved via When the Fed Speaks corpus}
}