April Beige Book

For use at 2:00 PM EST
Wednesday
April 19, 2023
The Beige Book

Summary of Commentary on Current Economic Conditions
By Federal Reserve District
April 2023
Federal Reserve Districts
Minneapolis Boston
New York
Chicago Cleveland
San Francisco Philadelphia
Kansas City St. Louis

Richmond
Atlanta
Dallas
Alaska and Hawaii The System serves commonwealths and territories as follows: the New York Bank serves the
are part of 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.
San Francisco District.
This report was prepared at the Federal Reserve Bank of Richmond based on information collected
on or before April 10, 2023. This document summarizes comments received from contacts outside
the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.
National Summary 1 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 charac-
Boston A-1 terizes regional economic conditions and prospects based on a variety
First District of mostly qualitative information, gathered directly from each District’s
sources. Reports are published eight times per year.
New York B-1 What is the purpose of the Beige Book?
Second District The Beige Book is intended to characterize the change in economic
conditions since the last report. Outreach for the Beige Book is one of
Philadelphia C-1 many ways the Federal Reserve System engages with businesses and
Third District other organizations about economic developments in their communi-
ties. Because this information is collected from a wide range of con-
tacts through a variety of formal and informal methods, the Beige Book
Cleveland D-1 can complement other forms of regional information gathering. The
Fourth District Beige Book is not a commentary on the views of Federal Reserve
officials.
Richmond E-1 How is the information collected?
Fifth District Each Federal Reserve Bank gathers information on current economic
conditions in its District through reports from Bank and Branch direc-
Atlanta F-1 tors, plus interviews and online questionnaires completed by business-
Sixth District es, 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
Chicago G-1 information about a broad range of economic activities. The Beige
Seventh District Book serves as a regular summary of this information for the public.
St. Louis H-1 How is the information used?

The information from contacts supplements the data and analysis used
Eighth District
by Federal Reserve economists and staff to assess economic condi-
tions in the Federal Reserve Districts. The qualitative nature of the
Minneapolis I-1 Beige Book creates an opportunity to characterize dynamics and identi-
Ninth District fy emerging trends in the economy that may not be readily apparent in
the available economic data. This information enables comparison of
economic conditions in different parts of the country, which can be
Kansas City J-1
helpful for assessing the outlook for the national economy.
Tenth District
The Beige Book does not have the type of information I’m looking
Dallas K-1 for. What other information is available?
Eleventh District The Federal Reserve System conducts a wide array of recurring sur-
veys of businesses, households, and community organizations. A list of
statistical releases compiled by the Federal Reserve Board is available
San Francisco L-1 here, links to each of the Federal Reserve Banks are available here,
Twelfth District 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 liveli-
hoods. The System also relies on a variety of advisory councils—
whose members are drawn from a wide array of businesses, non-profit
organizations, and community groups—to hear diverse perspectives on
the economy in carrying out its responsibilities.
National Summary
The Beige Book ■ April 2023
Overall Economic Activity

Overall economic activity was little changed in recent weeks. Nine Districts reported either no change or only a slight
change in activity this period while three indicated modest growth. Expectations for future growth were mostly un-
changed as well; however, two Districts saw outlooks deteriorate. Consumer spending was generally seen as flat to
down slightly amid continued reports of moderate price growth. Auto sales remained steady overall, with only a couple
of Districts reporting improved sales and inventory levels. Travel and tourism picked up across much of the country this
period. Manufacturing activity was widely reported as flat or down even as supply chains continued to improve. Trans-
portation and freight volumes were also flat to down, according to several Districts. On balance, residential real estate
sales and new construction activity softened modestly. Nonresidential construction was little changed while sales and
leasing activity was generally flat to down. Lending volumes and loan demand generally declined across consumer and
business loan types. Several Districts noted that banks tightened lending standards amid increased uncertainty and
concerns about liquidity. The majority of Districts reported steady to increasing demand and sales for nonfinancial ser-
vices. Agriculture conditions were mostly unchanged in recent weeks while some softening was reported in energy
markets.
Labor Markets
Employment growth moderated somewhat this period as several Districts reported a slower pace of growth than in re-
cent Beige Book reports. A small number of firms reported mass layoffs, and those were centered at a subset of the
largest companies. Some other firms opted to allow for natural attrition to occur, and to hire only for critically important
roles. Contacts reported the labor market becoming less tight as several Districts noted increases to the labor supply.
Additionally, firms benefited from better employee retention, which allowed them to hire for open roles while not con-
stantly trying to back-fill positions. Wages have shown some moderation but remain elevated. Several Districts reported
declining needs for off-cycle wage increases compared to last year.
Prices
Overall price levels rose moderately during this reporting period, though the rate of price increases appeared to be
slowing. Contacts noted modest-to-sharp declines in the prices of nonlabor inputs and significantly lower freight costs
in recent weeks. Nevertheless, producer prices for finished goods rose modestly this period, albeit at a slightly slower
pace. Selling price pressures eased broadly in manufacturing and services sectors. Consumer prices generally in-
creased due to still-elevated demand as well as higher inventory and labor costs. Prices for homes and rents leveled
out in most Districts but remained at near record highs. Contacts expected further relief from input cost pressures but
anticipated changing their prices more frequently compared to previous years.
Highlights by Federal Reserve District

Boston New York
Business activity was roughly even. Tourism contacts Regional economic activity was little changed, though
enjoyed moderate growth, while retail sales were flat, goods production picked up noticeably. The labor market
and manufacturing slowed. Home sales fell further. has remained solid, with ongoing slight job growth and
Headcounts rose modestly and wage growth was moder- wage gains. Inflationary pressures moderated somewhat
ate. Prices increased modestly amid further easing of but remained widespread. Conditions in the broad fi-
cost pressures. Some contacts worried that smaller nance sector deteriorated sharply coinciding with recent
banks might restrict lending over liquidity concerns, stress in the banking sector.
putting a damper on economic activity.
1
National Summary
Philadelphia St. Louis

Business activity appeared to decline slightly during the Economic conditions have remained unchanged since
current Beige Book period after increasing last period. our previous report. Labor markets remained tight, but
Consumer demand ticked down, while employment held reports of easing increased. Firms struggled to pass on
steady. Wage growth slowed to a modest pace. Price price increase to customers, and contacts across a
inflation subsided but continued to grow modestly. Banks range of industries reported supply chain improvements.
reported tighter lending standards. Expectations were Banking contacts reported slowing loan growth and a
subdued as sentiment remained cautious. decline in deposits, but expressed confidence in their
overall position.
Cleveland
Economic activity was generally flat in the Fourth District Minneapolis
and developments in the banking sector appeared to Economic activity in the region grew slightly in recent
have very little impact on either recent economic activity weeks. Employment gains were modest, and labor sup-
or credit availability. Labor demand eased, and the supply improved slightly. Prices were steady and wages
ply of workers increased, particularly for lower-wage rose slightly; levels for both remained high. Consumer
positions. Wage and other cost pressures continued to spending was flat. Manufacturing declined a bit, but the
ease. outlook was more positive. Construction activity im-
proved slightly, save for residential building. Minority-and
Richmond women-owned firms reported steady activity.
The regional economy contracted slightly in recent
weeks. Manufacturing activity, retail spending, and loan Kansas City
demand softened. Travel and tourism picked up moder- Total economic activity across the Tenth District declined
ately while nonfinancial service providers indicated slightly in March and April. However, almost every busi-
steady demand. Real estate firms reported reduced ness contact reported no pull back in planned capital
activity, while transportation freight volumes contracted expenditures, hiring plans or planned wage increases in
moderately. Employment rose slightly with moderate response to recent financial volatility. Worker retention
increase in wages. Prices grew at a strong rate. was reportedly much higher, even as wage growth
slowed. Households pulled back on spending, particular-
Atlanta ly on bigger ticket items like cars or home construction
Economic activity grew modestly. Labor markets im- projects.
proved further, and wage pressures eased slightly.
Some nonlabor costs moderated and others remained Dallas
unstable. Retail sales softened. Auto sales were robust. Modest growth continued, with steady gains in service
Tourism activity remained strong. Housing demand sector activity and a pickup in home sales and manufac-
improved further. Transportation was mixed. Loan turing output. Job growth was modest, though hiring
growth was solid. Energy demand was healthy. Agricul- slowed sharply in services. The pace of price increases
ture remained mixed. slowed. Outlooks were largely negative, and contacts
voiced concern about weakening demand, a potential
Chicago recession, and the spillover effects of the recent bank
Economic activity was little changed. Employment in- failures on the broader economy.
creased moderately; consumer spending, business
spending, and construction and real estate were flat; San Francisco
nonbusiness contacts saw little change in activity; and Economic activity expanded slightly. Employment levels
manufacturing demand decreased modestly. Prices and were steady amid tight labor market conditions, while
wages rose moderately, and financial conditions tight- wage and price growth moderated further. Demand for
ened moderately. Agricultural incomes were expected to retail goods softened, while demand for services was
be lower in 2023 than in 2022. robust. Manufacturing activity was stable, while condi-
tions in the agriculture sector slowed somewhat. Resi-
dential and commercial real estate activity fell, and lend-
ing activity declined substantially.
2
Federal Reserve Bank of Boston
Summary of Economic Activity

Business activity in the First District was flat on average. Tourism maintained its strong momentum, with moderate
further increases in air travel and convention activity, while retail sales were steady on balance amid mixed results.
Demand softened moderately for manufacturers, although some continued to experience solid revenue growth. Soft-
ware and IT services firms reported stable demand and somewhat higher profits. Residential real estate sales declined
modestly, as low inventories and high prices continued to deter transactions. Commercial real estate activity was flat,
but credit was expected to tighten moving forward. Employment increased modestly and wage growth was moderate.
Prices increased at a modest pace and slower price growth was expected for the rest of 2023. The outlook was mostly
positive, but some contacts worried that smaller banks might restrict lending over liquidity concerns, putting a damper on
economic activity.
Labor Markets modest price hikes for selected products in addition to

Headcounts increased modestly on balance, led by annual cost-of-living adjustments built into contracts.
strong labor demand in the First District’s hospitality and Price changes were mixed among manufacturers, includ-
tourism sectors, and wage growth was steady at a mod- ing moderate increases by some and more aggressive
erate pace. Contacts in manufacturing said that the labor promotions and discounts by others. Retail prices were
market softened significantly, making for much easier largely stable. Hotel room rates in the Greater Boston
hiring and helping to alleviate wage pressures some. area declined in line with seasonal expectations but have
employment was roughly flat, and its wage growth was increased 10 percent relative to the same time last year.
moderate, as contacts said that turnover was stable at a Cost pressures abated noticeably, as contacts noted
manageable pace, marking an improvement from one modest-to-sharp declines in the prices of raw materials
year earlier. A clothing retailer was engaged in hiring and significantly lower freight costs. On balance, the
additional warehouse workers, but the pace of filling the outlook called for further easing of price growth for the
200 openings was slower than anticipated. Robust con- remainder of 2023, and some contacts planned to hold
vention activity and an anticipated increase in business prices strictly fixed moving forward on worries that addi-
travel from Asia gave a moderate boost to food and tional markups would be counterproductive.
beverage staffing at Boston-area hotels. Cape Cod
Retail and Tourism
hospitality contacts ramped up efforts to recruit interna-
First District retail contacts reported flat sales on aver-
tional workers to address labor shortages in advance of
age, while tourism contacts saw moderate further in-
the busy summer season, and Massachusetts has fund-
creases in activity relative to seasonal trends. A clothing
ed an effort to place visa holders in temporary housing to
retailer experienced softer demand throughout the early
facilitate such hiring. Looking ahead, labor demand is
months of 2023, but revenues held steady due to earlier
expected to soften modestly on balance, but only one
price increases. Cape Cod retailers experienced strong
firm—a manufacturer—was planning to make significant
first quarter sales, but a large-scale infrastructure project
reductions in staff in the near future. Wage growth was
crimped activity in recent weeks. Based on advance
predicted to slow to a modest average pace.
bookings, hospitality contacts on the Cape expect sum-
Prices mer 2023 occupancy and room rates to match last sum-
Price increases were modest on average as cost pres- mer’s record-setting results. Airline passenger traffic
sures eased further. Prices were mostly flat among through Boston increased steadily in recent months, on
software and IT services firms, although one enacted
A-1
Federal Reserve Bank of Boston
both domestic and international routes, reaching roughly balance received) increasingly generous concessions.
95 percent of pre-pandemic levels as of the first quarter Conditions in the retail market worsened slightly in re-
of 2023. The Greater Boston hotel occupancy rate in- sponse to patches of weakness in consumer spending,
creased relative to seasonal trends, and spring and and as a result firms became more cautious with capital
summer bookings continued to climb. Scheduled con- spending. Concerning the outlook, contacts expected to
vention activity and cruise bookings for the spring and see slight to moderate further declines in office and retail
summer are expected to exceed 2019 levels. leasing activity moving forward, and perceived growing
constraints on investment activity. In particular, several
Manufacturing and Related Services contacts predicted that lending to the commercial real
Manufacturing contacts reported mixed revenue results, estate sector would become more conservative in re-
but demand was moderately softer on balance. Some sponse to heightened concerns about banking risks, and
contacts reported modestly higher sales but also said one expressed that the credit contraction could be large
that the pace of revenue growth had slowed recently. For enough to spill over to other sectors of the economy.
one firm, overall results were hit by a steep slowdown in
demand from customers in the semiconductor industry. Residential Real Estate
Others experienced weaker sales as their customers First District home sales softened in February (the latest
continued to draw on inventories accumulated in 2022 in month for which data were available) following a tempo-
response to supply chain concerns. A contact in the rary uptick in sales in January that was attributed to a
semiconductor industry said that industry sales were slight—yet partly transient—decline in mortgage rates.
down but that their own sales were up due to investment Closed single-family sales were down sharply on a year-
demand from electric car manufacturers. None of our over-year basis, and in Boston dipped to their lowest
contacts reported major revisions to capital expenditure level in over a decade. Condo sales were roughly flat
plans, and a few pointed to increased spending on auto- since the previous report. Inventories grew over-the-year
mation. Contacts were generally optimistic for their own on balance, albeit at a somewhat slower pace than was
results for the rest of 2023, although several described reported last time, and several contacts noted that the
the outlook for the economy more broadly as highly supply of homes for sale remained extremely limited.
uncertain. Home prices showed signs of softening amid growing
buyer frustration over the lack of home affordability.
Software and IT Services Median single-family home prices nonetheless posted
Demand for software and IT services was stable on modest year-over-year increases on balance, a fact that
balance. Revenue growth at one firm exceeded expecta- one contact attributed to a decline in the proportion of
tions, and another experienced an ongoing pullback by starter homes on the market, although the median home
clients facing internal liquidity concerns. Profits and price in Boston was down moderately from a year earlier.
margins were modestly higher on average. Capital and Looking ahead, contacts expressed concerns that low
technology spending was unchanged and was expected inventories and high mortgage rates could dampen
to hold steady for most firms, although one mentioned activity during the typically busy spring sales season.■
the possibility that capital expenditures could soften
moving forward. Contacts were largely optimistic and
expected demand for their own products and services to
hold steady moving forward. Although one contact per-
ceived that the risk of a widespread banking crisis had
abated recently, another contact felt that nervousness
about the banking sector could dampen aggregate eco-
nomic activity.
Commercial Real Estate

Commercial real estate activity in the First District was
mostly unchanged since February. In the industrial prop-
erty market, rents continued to level off even though
leasing demand was still deemed strong relative to sup-
ply. Office leasing activity was mostly flat, although con-
tacts noted a modest slowing of deal flow in both Boston For more information about District economic conditions visit:
and Providence. Office asking rents were roughly stable, www.bostonfed.org/regional‐economy
but one contact noted that tenants demanded (and on
A-2
Federal Reserve Bank of New York

Economic activity in the Second District was little changed in the latest reporting period. The labor market has remained
solid: employment increased slightly despite ongoing difficulty finding workers, wages continued to increase, and many
businesses plan to add staff in the months ahead. Inflationary pressures eased somewhat but remained widespread.
Supply availability, while still constrained, continued to improve, and goods production picked up noticeably. Consumer
spending was flat to up slightly in recent weeks, while tourism has continued to strengthen. The home sales market has
continued to pick up and the rental market has been steady. On balance, commercial real estate markets were mostly
unchanged. Conditions in the broad finance sector deteriorated sharply, coinciding with recent stress in the banking
sector. Regional banks continued to report widespread declines in loan demand, ongoing credit tightening, and modest-
ly rising mortgage delinquency rates. Amid heightened uncertainty, most businesses do not expect economic conditions
to improve in the coming months.
Labor Markets Prices

Labor market conditions have remained solid. On bal- Inflationary pressures moderated somewhat but re-
ance, employment increased slightly in the latest report- mained widespread. Businesses reported that the pace
ing period despite ongoing difficulty finding workers of input price increases slowed slightly in recent weeks.
across the region. However, businesses in the manufac- Still, the costs of transportation, energy, and many raw
turing, construction, and education & health sectors materials remained high. The pace of selling price in-
indicated that employment declined in recent weeks. creases also eased somewhat, especially in the service
Even so, contacts at two major employment agencies sector though not among retailers or leisure & hospitality
noted ongoing strong labor demand and continued to firms. Fewer businesses than in the last report expect
indicate that worries of widespread weakening in the prices to increase.
labor market have not materialized. Indeed, thus far,
layoffs have been concentrated in large companies, and Consumer Spending
mostly among their workers who are outside of the re- Consumer spending was flat to up slightly in recent
gion. Further, a New York City employment agency indi- weeks as consumers continued to face pressure from
cated that the broader local labor market has yet to expe- high inflation and heightened uncertainty. Nonauto retail-
rience noticeable ripple effects from recent stress in the ers indicated that business was sluggish and down
banking sector. Looking ahead, on net, businesses plan slightly in recent weeks, while spending on travel-related
to add staff in the coming months. services, recreation, and in restaurants and bars has
remained strong. Auto dealers in upstate New York
Wages continued to increase, though at a somewhat reported that sales of new vehicles were steady with
slower pace than earlier in the year as major compensa- ongoing improvements in inventory levels, while sales of
tion adjustments tend to be concentrated at the beginning used vehicles firmed. Consumer confidence in the region
of the year for most workers. Businesses expect wage rose to a nearly two-year high in March, driven by grow-
increases to continue to moderate. ing optimism among New York City residents.
B-1
Federal Reserve Bank of New York
Manufacturing and Distribution Residential rental markets have been steady. After peak-
Manufacturing activity picked up in recent weeks, following last summer, rents including concessions have been
ing several months of contraction. New orders and ship- little changed near record highs in Manhattan, Brooklyn,
ments surged, and businesses indicated that supply and Queens and rental vacancy rates have remained
availability, while still constrained, continued to improve. exceptionally low as people gradually continue to return to
However, businesses in wholesale distribution and trans- New York City. Rents have also plateaued at a high level
portation & warehousing reported declining activity. in much of upstate New York.
While manufacturers remain mildly optimistic, distribution Commercial real estate markets were little changed in
-related businesses have turned pessimistic. recent weeks. Office vacancy rates edged up slightly in
and around New York City and were steady across upstate
Services
New York, while office rents were mostly flat across the
On balance, service sector activity rose modestly,
District. New York City’s retail market weakened some-
though conditions varied across sectors. Personal ser-
what, with vacancy rates up slightly and rents trending
vices businesses reported moderate weakening, while
down. Vacancy rates remained at low levels in the industri-
providers of business & professional, education & health,
al market and rents trended up modestly.
and leisure & hospitality services noted some growth in
activity after a sustained period of weakness. Business- Overall, construction contacts reported weakening condi-
es in the service sector generally expect little change in tions in March and early April. Office construction re-
economic conditions in the months ahead. mained steady at a low level in most of the District, though
there were some new starts in northern New Jersey, Long
Tourism activity in New York City continued to strength-
Island, and upstate New York. Industrial construction was
en and is nearing pre-pandemic levels. While domestic
solid, but little changed across the District. Multi-family
travel remains strong, international travel continues to
residential starts picked up from low levels in Manhattan
lag. Visitors from Asia—especially China—remain no-
and parts of upstate New York but remained weak else-
ticeably absent, in part due to long wait times for visas.
where.
Though business travel has yet to fully bounce back, it
has picked up beyond expectations in recent weeks. Banking and Finance
Demand for hotel rooms continued to increase with Conditions in the broad finance sector deteriorated sharply
advance bookings trending up as people have grown coinciding with recent stress in the banking sector. Small
more comfortable traveling. Even with the steady uptick to medium-sized banks in the District reported widespread
in visitors to New York City, the reduction in daily com- declines in loan demand across all loan segments. Credit
muters continues to exert pressure on the City’s retailers standards tightened noticeably for all loan types, and loan
and entertainment-related businesses. spreads continued to narrow. Deposit rates moved higher.
Finally, delinquency rates edged up on residential and
Real Estate and Construction
commercial mortgages.
Residential sales have picked up with the start of the
spring selling season, with prices steady at a high level. Community Perspectives
Sales activity in and around New York City has contin- Community leaders noted that economic challenges for
ued to increase beyond the seasonal norm. By contrast, lower-income families have been increasing as pandemic-
real estate contacts in upstate New York indicated that era assistance programs wind down. With the temporary
the spring selling season has gotten off to a slower start boost in SNAP benefits and Medicaid supplementation
in part due to unseasonably harsh weather, though being phased out, community organizations are stepping
demand remains strong for homes in the middle of the up their efforts to support the increase in vulnerable fami-
region’s price range. While listings have increased, the lies facing difficulty affording food and healthcare. Contacts
inventory of available homes has remained exceptionally expressed concern that state and local budgetary pres-
low across the region except in Manhattan. Contacts sures may impede the provision of community services.
pointed to heightened uncertainty and the prevalence of Labor shortages and understaffing in the not-for-profit
homeowners with mortgages locked in at historically low sector have just begun to ease, with increases in the num-
rates as key factors keeping some people from listing ber and quality of applicants. ■
their homes and moving.
For more information about District economic conditions visit:

https://www.newyorkfed.org/regional-economy
B-2
Federal Reserve Bank of Philadelphia

On balance, business activity in the Third District appears to have declined slightly after a small increase last period.
Consumer demand appeared to tick down, as contacts detailed slower traffic and smaller purchases by customers.
Inflation and higher interest rates continued to weigh on demand for big-ticket items, including homes and autos. Em-
ployment held steady as the demand for labor cooled. Wage growth eased to a modest pace, and inflation continued to
subside but remained moderate. Overall, firms continued to report less difficulty in hiring and fewer supply chain disrup-
tions. Bank lending to businesses declined, as contacts within the banking industry reported a tightening of lending
standards. On balance, expectations for economic growth over the next six months remained subdued, as both manu-
facturing and nonmanufacturing firms continued to expect slight growth.
Labor Markets lower compensation levels was just under 5 percent.

Employment held steady following a modest rise in the Contacts noted warehouses have started to cut hours
prior period. Contacts reported instituting hiring freezes, and jobs, which has led to lower wage pressure for other
cutting overtime, and conducting layoffs. Other firms businesses in the area.
communicated they were not filling positions left open by
Prices
employee departures. Multiple contacts, including staff-
On balance, firms reported that prices continued to rise
ing firms, noted that hiring continued to be easier, with
moderately; however, they noted that the rate of price
more applicants, lower turnover, and less wage pres-
increases appears to be slowing. In our monthly surveys,
sure. In our monthly surveys, employment growth ap-
the prices paid and prices received indexes declined for
peared to be negligible, with most firms reporting no
both manufacturing and nonmanufacturing firms in
change in employment levels in March. The index for
March and are below nonrecessionary historical averag-
employment in the manufacturing sector turned negative
es, except for the index of nonmanufacturers’ input pric-
and fell to its lowest level since May 2020.
es. On balance, contacts also noted fewer supply chain
However, firms still described staffing as one of their disruptions.
primary challenges. Contacts continued to report difficul-
Two-fifths of the manufacturing contacts expected to pay
ty staffing night and weekend shifts. Firms revealed the
higher prices over the next six months, while slightly less
need to frequently move workers along the production
than one-quarter expected to receive higher prices for
line or overstaff shifts to accommodate the ongoing high
their own goods.
number of employees calling out.
Firms reported that wage inflation has continued to Manufacturing
subside since the prior month and grew at only a modest Manufacturing activity declined moderately – after declin-
pace – down from a moderate rise in each of the eight ing modestly in the prior period. The index for new or-
prior periods. In our monthly surveys, the share of non- ders fell from last period and was negative for the 10th
manufacturing firms reporting higher wage and benefit consecutive month. Moreover, the shipments index
costs per employee dropped to 30 percent – its lowest dropped sharply and turned negative. Contacts con-
level since March 2021; the share of firms reporting firmed that demand continued to slow and backlogs
C-1
Federal Reserve Bank of Philadelphia
continued to fall. Credit card volumes were essentially flat after rising
moderately during the same period last year – a sign of a
Despite the decline in manufacturing activity from the
potential pullback by consumers.
prior period, nearly half of the firms estimated increased
total production growth for the first quarter of 2023 com- Banks reported a strong decline in commercial and
pared with the fourth quarter of 2022. Most firms report- industrial loan volumes. Most contacts within the banking
ed labor supply and supply chains as slight or moderate industry confirmed a tightening of lending standards or
constraints to capacity utilization. that discussions were ongoing regarding a change in
lending behavior, following the failures of Signature Bank
Expectations among manufacturers for growth in the
and Silicon Valley Bank. Furthermore, multiple contacts
next six months remained subdued. The index for future
noted they focused on lending to existing customers and
activity turned negative, and the future indexes for new
became more prudent in lending to new customers.
orders, shipments, and employment were little changed.
The index for future capital expenditures turned negative Real Estate and Construction
for the first time since 2009. Homebuilders reported steady sales following an unex-
pected uptick in the prior period. Contacts continued to
Consumer Spending
attribute the recent improvement to incentives, discounts
On balance, retailers (nonauto) and restaurateurs report-
on older inventory, and new homes built with smaller
ed a slight decline in sales in the current period – after
footprints and lower-cost features.
those grew slightly in the prior period. Contacts reported
sales grew on a year-over-year basis because of higher Existing home sales fell slightly from already low levels
prices but described a slowdown in customer traffic and in most markets – following a moderate decline in the
fewer items purchased per visit. One contact also noted prior period. Contacts noted that the lack of new listings
the expiration of supplemental SNAP benefits was a and the continued decline in housing affordability meant
drag on sales in March. the normally busy spring housing market may fail to
materialize.
Tourism contacts reported an uptick in activity,
particularly in urban areas, after reporting steady activity Requests for assistance with housing and utility bills fell
in the prior period. Auto dealers again reported a slight but continued to dominate the share of 211 requests in
increase in sales as manufacturers continued to deliver New Jersey and Pennsylvania. Almost 32 percent of all
more new cars. However, contacts noted some softening requests in the two states were related to housing, while
of demand because of higher financing costs. The in- 27 percent of the requests regarded utility bills.
creased inventory and softer demand has prompted
Market participants in commercial real estate continued
some dealers to lower prices and reintroduce incentives.
to report steady current construction activity but noted
Nonfinancial Services that more projects in the pipeline have been delayed or
On balance, nonmanufacturing activity appeared to canceled. Leasing activity continued to slow modestly.
decline slightly after growing slightly last period. The Rent growth in multifamily housing eased slightly, and
index for general activity at the firm level fell to a near- landlords started to offer leasing incentives in some
zero reading, and the new orders index turned negative markets. Demand for life sciences space remained
as the share of firms reporting decreases exceeded the strong, but demand for warehouse space softened. ■
share reporting increases. The index for sales also de-
clined from the prior period but remained positive.
Financial Services
The volume of bank lending (excluding credit cards)
grew moderately during the period (not seasonally ad-
justed) – faster than the prior period but comparable with
growth in the same period last year. Inflationary effects
on big-ticket items continued to boost loan volume
growth during the current year relative to past years.
During the period, District banks reported moderate
growth in home mortgages and modest growth in auto For more information about District economic conditions visit:
loans, other consumer lending, and commercial real www.philadelphiafed.org/regional-economy
estate lending. Home equity lines declined modestly.
C-2
Federal Reserve Bank of Cleveland

Reports from Fourth District business contacts were consistent with generally flat aggregate economic activity, though
conditions continued to vary by industry segment. While consumer spending appeared to firm somewhat from that of the
prior period, it remained soft, and business spending was mostly flat. Concerns about developments in the banking
industry reportedly had limited impact on recent business activity, though a small share of contacts reported a modest
decrease in credit availability. However, many contacts indicated that these developments had increased uncertainty.
Hiring slowed as firms’ demand for additional workers eased and as a larger share of contacts sought to reduce head-
count. Labor availability appeared to increase, particularly for those seeking to fill lower-wage positions. Wage and other
nonlabor input cost pressures continued to trend lower, while price pressures eased from those of the previous reporting
period.
Labor Markets success yet.” That said, contacts in construction and

Employment growth in the Fourth District appeared to manufacturing noted that costs for steel and concrete
be flat in recent weeks. The apparent easing in labor products increased recently. One steel producer said
demand was illustrated in more-frequent reports of that he expected steel costs to rise further in the second
employers reducing staffing through attrition, hiring quarter, but he expected costs to fall in the third quarter.
freezes, or layoffs. Moreover, some banking and manu- More broadly, contacts expected further relief from input
facturing firms noted replacing only revenue-generating cost pressures in the months ahead.
positions or hard-to-fill production positions while hold- Overall selling-price pressures eased from those of the
ing off on hiring support staff. Firms looking to increase prior reporting period, but they varied across industries.
staff more frequently stated that labor supply had im- On the one hand, natural gas prices fell amid mild winter
proved recently. On balance, firms planned to maintain and early spring weather, and freight prices decreased
current staffing levels or selectively fill critical positions because of a drop in demand. On the other hand, some
in the coming weeks. manufacturers said they continued to raise prices to
The softer demand for labor and the increased labor “catch up” from the cost increases over the prior two
supply were accompanied by further easing in wage years. Similarly, some retail contacts reported selectively
pressures. The share of contacts that reported in- raising prices to cover higher costs, though they did so
creased pay fell to 36 percent, the lowest share in more cautiously to remain competitive.
than two years. Moreover, 62 percent of contacts report-
Consumer Spending
ed holding wages steady, many in response to declining
Reports suggest that consumer spending firmed some-
margins or increased labor availability. Even so, many
what from that of the previous reporting period. Still,
contacts across industries indicated that wage increases demand for discretionary items remained soft as house-
remained necessary to attract and retain skilled labor. holds faced continued pressure from inflation and in-
Prices creased interest rates. One general merchandiser noted
that higher prices for food and other essentials continued
Nonlabor input cost pressures eased in recent weeks,
“eating up more of the customer’s wallet,” leading cus-
continuing a trend that started last summer. Several
tomers to favor lower-priced options such as generic
contacts reported that their overall costs had flattened.
brands. Auto sales dipped in part because increasing
One homebuilder said he recently started “pressing
interest rates and higher vehicle prices pushed out of the
people to lower [their] prices but haven't had much
D-1
Federal Reserve Bank of Cleveland
market many buyers who want, rather than need, a new among banks and to outflows to higher-yielding alterna-
vehicle. One dealer hoped that more manufacturer in- tives. Looking forward, loan demand was expected to
centives would increase demand, but he cautioned that soften further in coming months.
higher credit standards had become an additional head-
wind for potential buyers. On balance, contacts expected Nonfinancial Services
consumer spending to remain stable in the coming Freight activity declined this reporting period. One hauler
months. mentioned that contract customers have cut back their
Manufacturing orders and that the spot market for freight has also
Overall demand for manufactured goods increased weakened. Contacts anticipated that freight demand
slightly from that in the previous period. Orders for aero- would continue to decline. Generally, professional and
space-related products remained strong, but demand business services contacts expected demand to be flat.
generally weakened for items from manufacturers tied to
Community Conditions
the housing and automotive sectors. Some manufactur-
Nonprofit contacts reported increased demand for their
ers benefitted from an increase in international orders,
services over the past six months because of rising costs
particularly from Europe, Asia, and the Middle East. That
for food, shelter, and utilities. One contact noted that
said, heightened uncertainty tempered some manufac-
food pantry use is up 30 percent compared to pre-
turers’ expectations because of a decrease in new or-
pandemic levels, and another mentioned an increase in
ders and backlogs.
the number of first-time users of food assistance. Sever-
Real Estate and Construction al contacts said that homelessness was rising and that
Demand for residential construction and real estate more families were moving in with relatives because of
continued to be hindered by higher interest rates. One higher rents, increased evictions, and a shortage of
homebuilder stated, “As long as interest rates stay high, affordable housing. According to multiple contacts, fewer
demand is going to be down. We’re still selling, but it’s landlords were accepting Section 8 vouchers, a situation
down from where it was a year ago.” Given low invento- which contributed to the housing shortage. Some con-
ries, some builders reported that demand for housing tacts who offer loan products to households and busi-
seems stronger than expected. Some builders are at- nesses noted that rising interest rates increased the
tempting to offset higher interest rates through various demand for their products. One community service pro-
incentives, including rate buydowns. vider saw a rise in applications for zero-interest, small-
dollar loans, and a community development financial
Nonresidential construction and real estate contacts institution contact reported that more individuals were
indicated that demand had changed little in recent weeks seeking funding through her enterprise because of high-
on balance. While a few contacts reported that projects er interest rates at local banks. ■
had been put on hold, others indicated they have still
been able to secure new projects. One general contrac-
tor noted that demand had remained stable, but projects
were taking longer to get started because the firm had
been spending more time working on budgeting issues in
the preconstruction phase. Several contacts anticipated
construction and leasing activity to soften further in com-
ing weeks because of rising interest rates and banks’
tightening credit.
Financial Services
Overall, loan demand continued to decrease, albeit at a
slower pace than in the prior period. Several bankers
reported that recent developments in the sector added to
heightened economic uncertainty that motivated custom-
ers to reach out about the safety of their deposits. Others
posited that the increased uncertainty along with high
interest rates had reduced borrowing. Lenders indicated
that delinquency rates remained low for both commercial
and consumer loans. Core deposits continued to decline,
www.clevelandfed.org/en/region/regional‐analysis
a situation which bankers attributed to rate competition
D-2
Federal Reserve Bank of Richmond

The Fifth District economy contracted slightly since our previous report. Manufacturing activity softened as new orders
fell and more customers started pushing back on price increases. District ports and trucking companies reported de-
clines in freight volumes, particularly a sharp decline in import volumes, leading to lower shipping and trucking spot
rates. Consumer spending on retail goods and autos slowed slightly; however, spending on tourism and travel increased
moderately. Residential real estate markets softened as closings and pending sales declined while listing prices held
flat. Commercial real estate activity declined, on balance. The retail and industrial real estate segments remained
strong; however, the remaining segments, particularly office, softened. Financial institutions continued to report modest
declines in loan demand. Deposit levels also declined, on balance, despite some institutions reporting an inflow of de-
posits from new clients. Demand for nonfinancial services was unchanged in recent weeks. Employment rose slightly
and wages increased moderately, due in part to recent minimum wage increases in some Fifth District jurisdictions.
Price growth remained robust; however, there were several reports that customers were starting to reject further price
increases or insist on reduced prices.
Labor Markets Manufacturing

Employment increased slightly in the Fifth District over Manufacturing activity in the Fifth District softened mod-
the most recent reporting period. Contacts continued to estly in recent weeks. Overall, manufacturers reported a
report a lack of qualified workers as a significant issue for decline in new orders. A fabric manufacturer that produc-
their business. A Maryland construction contact reported es products for retail stores said that they were working
better than expected demand, but projects were slowed through an inventory glut, and were hoping that as inven-
by a shortage of skilled labor. A South Carolina staffing tories clear, new orders would increase. Manufacturers
firm said that demand for engineering and skilled trades also reported more push-back from clients on price
workers has been consistently high and doesn’t show increases. A label printer reported increased pressure
signs of slowing. Wages picked-up moderately, due in from purchasing teams to reduce pricing this year. With
part from increases in the minimum wages in Maryland, supply chain pressures easing, purchasing teams were
Virginia, and the District of Columbia. A Virginia retailer “raging back and shopping the business.” Finding work-
reported that the minimum wage increase resulted in ers remained an issue. An aluminum producer cited that
wage increase for all workers, not just those making the growth is limited severely by availability of skilled labor
minimum. and administrative workers.
Prices Ports and Transportation

Prices continued to grow at a strong rate, particularly for Fifth District ports reported a sharp decline in loaded
services. According to our recent surveys, manufacturers import volumes this period. Imports of retail goods and
reported average price increases around 5.5 percent, but household related items were down. Additionally, due to
this was down considerably from the peak set in 2022. the extended Chinese New Year, there was an increase
Services sector firms, on the other hand, saw prices in blank sailings. Loaded exports were stronger and
continue to rise at a near-peak rate of about 6.5 percent. driven by auto and machine parts as well as rolling
There were some reports by firms in both sectors that stock. Empty containers were dwelling slightly longer at
customers were starting to push back on further price the port. Shipping carriers had excess availability this
increases. One manufacturer said that they were under period. Spot rates fell to pre-pandemic levels or below
pressure to cut prices, which would compress margins as and were significantly under current contract rates. Air
input costs were still rising.
E-1
Federal Reserve Bank of Richmond
cargo demand continued to soften with airfreight rates creased in the last month, particularly in the office sector.
stabilizing as airlines pulled back on freight capacity. Retail and industrial/flex space leasing remained robust
this period. The industrial market continued to be strong
Trucking firms reported a moderate decline in freight
with higher rental rates and good absorption rates. How-
volumes this period. Respondents indicated that there
ever, rents were moderating in other commercial real
was excess capacity in the truck load segment but less-
estate sectors and landlords were increasing their incen-
than truckload demand was not down as much. Spot
tives and concessions. Rising interest rates slowed sales
market rates decreased slightly with carriers experienc-
and commercial real estate capital markets activity was
ing some push back from customers on further rate
negligeable. Some banks had stopped lending for new
increases. Trucking firms stated that in response to
commercial construction projects and/or had tightened
lower freight volumes, they were still adding drivers, but
underwriting standards; many equity lenders also had
they had scaled-back recruiting and were being very
left the market. Many respondents cited a looming issue
selective in hiring. Availability of new tractors and trailers
of certain CMBS loans that are coming due in 2023
from manufactures continued to improve and there was
being unable to qualify for refinancing.
a glut of used trucks on the market due to a few regional
trucking companies going out of business. Banking and Finance
Loan demand continued to slow modestly across almost
Retail, Travel, and Tourism
all loan types, with the most weakness seen in the com-
Fifth District retailers reported a slight pull back in sales
mercial loan portfolio. Consumer loan demand was
and demand in recent weeks. An auto dealer said that
mixed, with home equity and used auto loans showing
sales were down and customers seemed skittish about
some increased demand over the last few months. Con-
making big ticket purchases. Similarly, an appliance and
sumer mortgage demand, especially refinancings, have
electronics store saw a slowdown in demand and cus-
slowed, which contacts attributed to rising rates. Deposit
tomer traffic. A couple of retailers, however, noted that
levels declined slightly, on balance, however a few
their typical busy season doesn’t start until April, so they
banks did see an inflow of deposits following the failure
were expecting business to pick up soon.
of Silicon Valley Bank. Loan delinquencies continued to
Travel and tourism increased moderately in recent increase, albeit slightly and still not to pre-covid levels.
weeks. Hotels in the Fifth District reported increases in Financial institutions expected moderate declines in loan
the number of rooms sold and because room rates were and deposit levels for the remainder of the year.
higher than last year, revenue growth was strong. One
hotel in South Carolina said that their business was Nonfinancial Services
highly tied to events in the area and volumes were up in Nonfinancial service providers continued to report steady
recent weeks because of sports tournaments. Lastly, a demand for their services along with stable revenues.
regional airport saw a rebound in air traffic but to a level Providers also continued to express concerns over their
still slightly below 2019 levels; however, they expected ability to attract and retain employees. Common themes
to surpass 2019 levels by this summer. that were noted were the higher wages demanded by
applicants, a lack of qualified employees, and retaining
Real Estate and Construction new hires employed after they arrive on the job. Firms
Residential real estate respondents noted that so far it reported getting push back from clients and customers
hasn’t been the typical robust spring market, evidenced over price increases and some were considering looking
by a decline in both sales and pending sales. Days on for lower cost alternatives or to cut costs elsewhere in
market have increased, but still not above the historic their business to offset these higher prices. ■
average; housing inventory has decreased year-over-
year with substantially less new listings. Sales prices
have remained flat for this period, but new contracts
were starting to come in at less than list price. Many
potential home buyers were priced out and sellers were
having to offer concessions to close deals. Higher mort-
gage rates have made finding affordable homes even
more of a challenge. Construction costs were down, but
overall, home builders are no longer acquiring new
building lots due to economic uncertainty.
Overall commercial real estate market activity de- www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of Atlanta

The Sixth District economy grew at a modest pace from mid-February through March. Labor markets improved, and
wage pressures diminished slightly amid increasing labor availability. Some nonlabor costs such as shipping,
eased, while others, like construction materials, remained volatile. Retail sales softened, but demand for new autos
was robust. Tourism activity remained healthy. Demand for housing improved amidst lower mortgage interest rates
and declining home prices. Demand for commercial real estate remained mixed. Transportation activity was
unchanged, on balance, from the previous report. Manufacturing activity was mixed with consumer confidence cited
as a risk. Loan growth at banks remained strong despite concerns about liquidity. Activity in the energy sector was
mostly healthy. Agriculture conditions remained mixed.
Labor Markets like food inputs and construction materials saw

Labor market conditions continued to improve. continued volatility and this, coupled with elevated
Contacts noted that many positions were easier to fill, labor costs, kept firms from passing easing cost
and most indicated retention had improved. However, pressures on to customers. The Atlanta Fed’s Business
businesses continued to cite challenges including acute Inflation Expectations survey showed year-over-year
shortages of various positions (for example, in unit cost growth at 3.8 percent, on average, in March,
hospitality, accounting and transportation), confronting up significantly from 3.5 percent in February. Firms'
an aging labor force, and facing sustained demand for year-ahead inflation expectations increased to 3.1
flexible work arrangements by employees. Most firms percent, on average in March, up significantly from 2.9
have been hiring to back-fill open positions while a percent in February.
small number were hiring to grow business. Several
Consumer Spending and Tourism
firms noted efforts to move away from underperforming
Retail sales softened over the reporting period but
lines of business by downsizing through both attrition
remained above pre-pandemic levels. Retailers
and layoffs while staffing up more profitable lines. continued to report that inflationary pressures have
Contacts noted turning to automation to fill repetitive, caused lower-income consumers to be more selective
understaffed roles, and some have begun to leverage with discretionary spending. However, automobile
the use of artificial intelligence in lieu of hiring for dealers reported strong demand for new vehicles as
certain professional positions. inventory levels improved. Contacts were cautiously
Most contacts noted some relief from wage pressures optimistic for the remainder of the year in spite of
continued inflationary pressures and rising interest
and expressed certainty that wage growth would
rates.
moderate further this year.
Travel and tourism activity was little changed from the
Prices previous report. Demand for leisure travel remained
Contacts reported continued improvement in supply healthy and was described as normalizing from
chain issues and shipping capacity, which has helped unsustainably high year-earlier levels. Business travel
ease transportation cost pressures. Even though continued to recover. Hotel average daily rates
contracts still carried elevated escalation or remained above pre-pandemic levels and travelers'
contingency clauses, some degradation in pricing spending on experiences continued to be robust.
power at the wholesale level was reported. Buyers
Construction and Real Estate
were reportedly winning more concessions compared
Though still weaker than a year ago, housing demand
to the last two years of a take-it-or-lose-it price
throughout most of the District was boosted by lower
environment. However, various other nonlabor costs
mortgage interest rates and continued declines in
F-1
Federal Reserve Bank of Atlanta
home prices. A higher percentage of homes have sold recent bank failures and their level of uninsured
below asking price and median home prices in many deposits held at a single institution; however, banks
metro areas declined from peak levels reached in 2022. have not experienced a large outflow of deposits.
This, combined with lower interest rates, has led to a Unrealized losses remain elevated, limiting the ability to
steady improvement in home ownership affordability and sell securities for liquidity without negatively impacting
increased demand for housing. Activity has been capital. Despite concerns about liquidity, banks
stronger in the entry-level price points compared to indicated loan growth remained solid over the reporting
more high-end homes. However, inventory remained period.
near historic lows in most markets. Cancellations in the
new home market moderated and some homebuilders Energy
have increased speculative home inventory. Energy contacts noted robust activity in exploration and
production, crude oil refining, power infrastructure
Commercial real estate (CRE) conditions were mixed. projects, liquefied natural gas, and renewable energy
The industrial sector remained healthy, while office, projects. Strong global demand and federal dollars for
multifamily, and some segments of retail slowed. An decarbonization from the Inflation Reduction Act were
increasing number of contacts reported concerns about cited as factors influencing activity strength. Chemical
rising costs outpacing rent increases. More employers manufacturers reported softening in the chemicals
requiring staff to return to the office has helped stabilize space, largely for housing sector inputs. Utility providers
some segments of the market; however, a significant also reported some slowing in industrial segments tied
amount of available sublease space is expected to to housing. Commercial and residential utility segments,
create headwinds. A rising number of contacts however, remained strong.
mentioned concerns about the availability of financing
as some banks reduced funding commitments amid Agriculture
weaker lending from larger financial and non-bank Agricultural conditions were mixed. Domestic supplies
institutions. Concerns over declining CRE values of chicken exceeded demand as the Avian Flu limited
accelerated. exports. However, foreign demand for poultry improved
as some countries loosened import regulations.
Transportation
Demand for eggs exceeded supply but softened in
Transportation activity was largely consistent with the
response to elevated prices. Cattle supply remained
previous report. Ports continued to see a slowing in
low, and beef producers expressed concerns that falling
container trade, though volumes remained above pre-
chicken prices may cause consumers to substitute
pandemic levels. Shipments of autos and heavy
chicken for beef. Demand for cotton and soybeans fell
machinery through District ports increased. Railroads
from already low levels. Contacts expect reduced
reported further declines in overall freight shipments. Air
plantings of cotton this year as discretionary spending
cargo contacts noted significant year-over-year volume
softens. Contacts noted continued supply chain
declines. Truck capacity remained readily available, and
improvements.■
some trucking contacts noted expectations for an
improvement in volumes later this year.
Manufacturing
Some manufacturers reported significant slowing in
activity, especially firms producing inputs for residential
construction, where declines were attributed to elevated
mortgage rates and persistently high construction costs.
Lead times and supplier delivery times improved, and
supply chains were characterized as normalizing. Auto
manufacturers noted strong demand; however,
consumer confidence was cited as a risk to the outlook.
Banking and Finance
Liquidity pressures persisted for some District financial
institutions. Banking contacts reported that a limited
number of customers expressed concerns about
www.atlantafed.org/economy‐matters/regional‐economics
F-2
Federal Reserve Bank of Chicago

Economic activity in the Seventh District was little changed overall in late February and March. Contacts generally ex-
pected slow growth in the coming months, though many expressed concerns about the potential for a recession in the
coming year. Employment increased moderately; consumer spending, business spending, and construction and real
estate were flat; nonbusiness contacts saw little change in activity; and manufacturing demand decreased modestly.
Prices and wages rose moderately, and financial conditions tightened moderately. Banking contacts reported some
movement in deposits but little change in credit availability following the collapse of Silicon Valley Bank. Agricultural
incomes were expected to be lower in 2023 than in 2022.
Labor Markets Consumer Spending

Employment increased moderately over the reporting Consumer spending was unchanged on balance over
period and contacts expected slower employment growth the reporting period. Nonauto retail sales were slightly
over the next 12 months. Many contacts continued to softer, with contacts noting declines for gasoline and
have difficulty finding workers, especially those in the building materials and lower than expected sales of
skilled trades. At the same time, however, many said furniture and electronics. Light vehicle sales were un-
hiring was easier compared with a few months ago. changed overall, and service and parts demand re-
Some manufacturers reported that with a slowdown in mained strong. Leisure and hospitality spending in-
orders, they were feeling less urgency to fill open posi- creased slightly, driven by greater spending in travel
tions and were more willing to wait for the right candi- categories such as cruise lines and travel agencies.
date. One contact in state government saw signs of less
labor hoarding, as businesses were making less of an Business Spending
effort to keep underutilized or underperforming workers. Business spending was stable overall in late February
Wage and benefit costs rose moderately, with several and March. Capital expenditures increased modestly,
contacts indicating that regular annual wage and benefit with several contacts reporting spending on renovation
increases had recently taken effect. or expansion of existing structures. Demand for transpor-
tation services decreased some, though activity re-
Prices mained at a high level. Demand for residential, commer-
Prices rose moderately in late February and March, and cial, and industrial energy decreased slightly, with one
contacts expected a similar rate of increase over the contact highlighting declines from manufacturing and
next 12 months. Producer prices rose modestly, with small commercial enterprises. Inventories for most retail-
contacts highlighting higher costs for raw materials ers were at comfortable levels. Though auto inventories
(particularly steel) and energy. Several contacts noted continued to move up, according to a survey of dealers
that growth in shipping costs had slowed noticeably, they were still only around half of pre-pandemic levels. In
particularly for containers and ocean freight. Consumer manufacturing, inventories stayed slightly elevated, and
prices generally increased due to the continued elevated many contacts indicated that they were no longer experi-
level of demand and the passthrough of higher costs. encing supply chain disruptions. A construction contact
G-1
Federal Reserve Bank of Chicago
noted that materials availability had improved to the point Agriculture

that certain suppliers were no longer taking orders more With input costs remaining elevated and many product
than a few weeks in advance. prices down, contacts expected lower agricultural in-
come for the District in 2023 compared with a strong
Construction and Real Estate
2022. Wheat prices were generally lower over the report-
Construction and real estate activity was little changed
ing period, during which the agreement for exporting
on balance over the reporting period. Residential con-
grain from Ukraine was extended into May. Corn and
struction decreased slightly, while residential real estate
soybean prices were also lower despite smaller esti-
activity was up modestly across segments. One contact
mates for the South American harvest. Planting delays
attributed the pickup in sales to lower mortgage rates.
were likely in some places in the District due to excess
Home prices and rents moved up modestly. Nonresiden-
precipitation, though contacts noted the extra moisture
tial construction activity was little changed overall,
could also recharge ground water levels for use later in
though contacts highlighted renovation of hospitality
the growing season. Although fertilizer costs fell, the cost
space as an area of growth. Elevated construction costs
of most other inputs remained high for crop farms. Cattle
continued to hold back new projects. Commercial real
prices increased as the U.S. herd was squeezed by
estate activity decreased moderately, though some
drought and a harsh winter. Egg prices moved up, while
contacts said deal flow was still at a healthy level. De-
dairy and hog prices were down. High feed costs contin-
mand for leased multifamily space increased while de-
ued to compress most livestock margins. Prices for
mand for office space continued to fall. Prices and rents
agricultural land continued to rise, reportedly at a slower
were down slightly. Vacancy rates increased slightly, and
pace.
the amount of sublease space grew modestly.
Manufacturing Community Conditions

Community development organizations and public ad-
Manufacturing demand decreased modestly in late Feb-
ministrators reported little change in overall economic
ruary and March. Steel orders decreased slightly. Fabri-
activity through March. Demand for social services re-
cated metals orders were down modestly, with several
maining elevated despite reports of overall economic
contacts citing the automotive sector as a reason for
strength. State government officials again saw healthy
declines. Auto production fell slightly. Machinery sales
growth in tax revenues and low levels of unemployment
were up slightly, and one contact highlighted stronger
insurance claims. Despite slow growth and funding chal-
demand from the aerospace sector. Heavy truck orders
lenges, small businesses and nonprofits continued to be
moved up slightly and backlogs remained very high.
focused on employee recruitment and retention and
Banking and Finance were not reporting plans for layoffs. High interest rates
Financial conditions tightened moderately over the re- and elevated supply costs continued to challenge plans
porting period. Bond and stock markets saw little change to expand availability of affordable housing units and
in asset values on net, though volatility spiked and asset childcare facilities, non-profit developers reported. Fami-
values temporarily fell following the collapse of Silicon ly-facing organizations said there were signs of slower
Valley Bank (SVB). Banking contacts reported fielding growth in consumer prices; however, the end of Covid-
some inquiries about deposit safety after SVB’s failure era benefits was putting new stress on household budg-
and also saw some deposit transfers. A contact at a ets. ■
large bank that received new deposits was uncertain
whether the deposits would stick once there was more
clarity about the health of smaller banks. Business loan
volumes decreased slightly, with one contact noting that
clients producing durable goods were most likely to be
struggling. Business loan quality was stable, and con-
tacts did not report changes in lending standards. The
consumer loan market saw a slight decrease in the
volume of loans, led by further declines in refinancing
activity. Consumer lending standards tightened slightly,
while loan quality was stable.

chicagofed.org/cfsec
G-2
Federal Reserve Bank of St. Louis

Economic conditions have remained unchanged since our previous report. Although labor markets remain tight, con-
tacts reported further improvement in their ability to hire and retain workers. Firms struggled to pass on higher costs to
customers, which resulted in wage growth compressing profit margins. Consumer spending was mixed, with reports of
weaker demand among low-income consumers but more robust demand among high-income consumers. Construction
and manufacturing contacts reported that supply chains continued to improve. The real estate sector saw home sales
increase and inventory continue to decline, though rental rates remained flat. The banking sector saw loan growth slow
and deposits fall, but expressed confidence in their overall position.

Employment has increased slightly since our previous Prices have increased modestly since our previous
report. Although labor markets remain tight overall, report. Overall, contacts project increasing prices, but at
reports of easing have increased since our previous a slower pace compared with the previous few quarters.
report. While unemployment rates remain low and hiring Despite increasing input costs, business contacts report-
workers is still a challenge, more contacts have been ed a decreased ability to pass on costs to consumers
reporting an ability to hire and retain workers to meet due to increased price sensitivity of consumers and the
demand than in recent months. A railroad contact in desire to maintain competitive pricing. Of businesses
Louisville reported reaching full capacity in employment that reported the ability to increase prices, the projected
for the first time post-pandemic. A St. Louis staffing change in prices varied. A contact in the car industry
company, although still reporting hiring challenges and indicated only slight increases in prices, while a contact
churn in the market, has seen these issues begin to in the hospitality industry estimated a larger 6-10% in-
relax compared with last year. A Memphis contact re- crease in prices.
ported labor shortages and retention problems are no
longer widespread and are primarily affecting the service Consumer Spending
industry. District general retailers, auto dealers, and hospitality
contacts reported mixed business activity and a mixed
Wages have continued to grow slightly since our previ- outlook. In Little Rock, some stores saw less and more-
ous report. Companies reported slow wage growth due volatile foot traffic, whereas others reported that higher-
to difficulties transferring labor costs onto consumers income consumers are starting to spend more again. A
and slightly improved labor supply. An insurance contact St. Louis auto dealer reported that business activity did
in Louisville reported rising wages cutting into their profit not change over the past month, and they have a posi-
margins, and a home building contact in Little Rock tive outlook for spring and summer. This dealer also
reported margins being down 15-20% due to increased noted that sales of luxury cars have not decreased, since
wages for employees. the people who buy luxury cars are typically cash buyers
and they are less affected by interest rates. A restaurant
contact in Memphis reported that business has been
H-1
Federal Reserve Bank of St. Louis
stable, and they are careful about increasing prices to Construction demand remains steady despite high inter-
avoid driving away customer demand. The hospitality est rates. Contacts reported opportunities to bid on jobs
industry in Louisville is pessimistic about the tourism if they have available capital. One St. Louis construction
industry’s chances of returning activity to pre-pandemic contact reported increased delays in project start times
levels. since our previous report. An Arkansas contact reported
that, due to labor shortages, construction firms are win-
Manufacturing ning bids and finding smaller subcontractors to bid on
Manufacturing activity has slightly decreased since our
the jobs they have been awarded.
previous report. Firms in Missouri have reported a slight
uptick in new orders, while firms in Arkansas have re- Banking and Finance
ported a slight decrease in new orders and a small rise Banking conditions in the District have remained stable
in production. Raw material prices continue to decrease, since our previous report. Loan growth in the commer-
with products from Asia returning to pre-pandemic levels. cial, industrial, and consumer lending sectors all declined
Supply chains continue to improve but remain subopti- slightly—a continuation of the cooldown in loan demand
mal relative to before the pandemic. The manufacturing since the beginning of 2023. Real estate loan growth, on
industry continues to expand in the region: Two compa- the other hand, saw an uptick. Total deposits fell. Con-
nies in Lee County, Mississippi, added over 60 employ- tacts expect net interest margins to begin contracting if
ees, which represents $2 million in each of their payrolls. they have not already, as deposit costs are still increas-
ing. Asset quality remains good, and bankers in the
Nonfinancial Services District are closely monitoring debt that will be renewed
Activity in the nonfinancial services sector has remained
at higher interest rates this year. Memphis banking con-
stable since our previous report. While air passenger
tacts reported a renewed focus in the industry on liquidity
traffic has increased, freight traffic has slightly de-
in light of recent bank failures, while expressing confi-
creased. In Northwest Mississippi, access to rural
dence in their diverse and strong deposit base. One
healthcare continues to be affected by rising costs and
Memphis-area contact reported inflows from local resi-
low Medicare reimbursements, which have caused hos-
dents who had previously held deposits in distressed
pitals to delay investment in new structures and services.
West Coast banks.
Investment in technical training increased across the
District. A community college in Tennessee has part- Agriculture and Natural Resources
nered with local businesses to provide customized work- District agriculture conditions have seen little change
centered training and short-term credentials to address since our previous report. The number of acres planted
student concerns about the rising cost of education and in the District for corn, cotton, rice, and soybeans in-
local business concerns about the lack of qualified work- creased around 1% compared with last year; outcomes
ers. Similarly, community colleges in the St. Louis area were similar for all District states. The composition of the
are investing in advanced manufacturing training pro- crops has changed; cotton and soybeans were planted
grams by procuring high-end equipment, building new in lesser quantities compared with last year, while corn
facilities, and developing new curriculums to accommo- and rice increased in acreage. Southern parts of the
date more students. Memphis-area nonprofits reported District have planted significantly fewer acres of cotton
that volunteer engagement has increased since our
and replaced it with corn and rice.
previous report.
Natural resource extraction conditions declined moder-
Real Estate and Construction ately from February to March, with seasonally adjusted
Home sales in all four major District MSAs have in- coal production decreasing 9%. March production was
creased since our previous report. The median sale price also down moderately compared with a year ago, falling
of listings in Memphis has increased significantly, and over 5%. ■
other major District MSAs have seen small increases in
median sale price. Inventory has dropped in all four
major District MSAs since our previous report. However,
rental rates remain unchanged.
Commercial real estate continues to see low demand for
large office spaces. In Northwest Arkansas, one contact
reported high demand for commercial warehouses,
which has resulted in a vacancy rate of less than 1%.
H-2
Federal Reserve Bank of Minneapolis

The Ninth District economy grew slightly since the previous report. Employment gains were modest; labor demand
remained high, but signs of softness also appeared. Wage pressures rose slightly and remained at high levels. Price
pressures were steady at high levels. Consumer spending was flat, though activity varied in different segments. Com-
mercial construction rose slightly, but residential construction continued to be slow. Commercial real estate was flat, and
residential real estate remained very slow. Manufacturing activity contracted slightly, and agricultural conditions re-
mained strong. Activity among minority- and women-owned businesses was steady. A substantial majority of contacts
reported no effect on their organization from recent banking turmoil.

Employment grew modestly since the last report. Price pressures were steady since the last report, though
Contacts reported a slight drop in job openings, but levels remained elevated. Price pressures for inputs
overall demand for labor remained healthy. A monthly were greater on balance than for final goods, according
business conditions survey showed that overall hiring to contacts. About half of respondents to a District
sentiment remained positive; staffing contacts also noted business conditions poll reported no change to the prices
increases in job orders with the coming of spring. Layoffs they charged for their products and services in March
appeared to increase, but mass layoff events were still from a month earlier, compared with a third reporting
low. A Minnesota staffing firm said that businesses were increases. Nearly two-thirds of hospitality and tourism
“exfoliating the workers they don't need.” A Wisconsin contacts reported that inflationary pressures had gotten
workforce contact said that hiring had softened; there somewhat or much worse over the past three months.
was not widespread downsizing, but more the Several manufacturing contacts reported more
“abandonment” of recruiting for unfilled positions. resistance from customers to price hikes. Construction
Several sources noted that turnover also appeared to be contacts reported that although prices of lumber and
ebbing and could be a factor in lower job postings. certain materials have retreated from highs, prices of
Numerous contacts said labor availability improved other inputs, such as furnishings, remained elevated.
slightly. A Wisconsin staffing contact said the number of Retail fuel prices in District states increased moderately
job applicants rose “but the quality is not strong.” Still, overall since the previous report. Prices received by
job placements were growing because clients “are farmers in February increased from a year earlier for
becoming more open to more-questionable candidates.” corn, soybeans, potatoes, hay, cattle, turkeys, and eggs;
prices decreased from a year earlier for wheat, milk,
Wage pressures remained high but there were small
hogs, chickens, sugar beets, dry edible beans, lentils,
signs of easing. Most contacts reported that they still
and canola.
needed to offer higher wages than previously to fill open
positions. A staffing firm reported that wages for Worker Experience
industrial positions had risen more than 10 percent over Job seekers continued to prioritize higher pay and
the past year, and additional increases were expected. greater flexibility as they looked for jobs and remained
But multiple contacts said there was less need for off- positive overall about their prospects. Many showed a
cycle pay increases, and raises were returning to an strong willingness to learn new skills and consider a
annual frequency. different line of work to advance their goals. Minnesota
I-1
Federal Reserve Bank of Minneapolis
and South Dakota immigrant workers employed in amount of new supply coming online. Office space saw
agriculture, food processing, and manufacturing reported the opposite trend, with vacancies rising despite no new
stable employment conditions. Some wished to find supply. Residential real estate remained slow, with
employment outside their current industry but were higher mortgage rates heavily impacting sales. Available
limited by language barriers and job proximity. A food data on closed and pending home sales in March
processing worker in her sixties said she reduced her showed moderate-to-large declines across the District. A
working hours because driving in the winter was difficult, lack of inventory kept home prices elevated.
but she did not plan on retiring soon. "We came here to
work, retirement is not for us," she added. Others shared Manufacturing
similar sentiments. Manufacturing activity decreased slightly since the last
report. A regional index of manufacturing conditions
Consumer Spending indicated contraction in activity in March from a month
Consumer spending rose slightly since the last report, earlier in Minnesota, North Dakota, and South Dakota.
with varied activity among different segments. Minnesota Manufacturing respondents to a District business
retail contacts reported modest sales growth in recent conditions survey reported overall unchanged sales in
weeks. However, foot traffic at some South Dakota March from a month earlier, though expectations for April
retailers has reportedly slowed compared with last year, were higher and many contacts noted strong backlogs.
said a contact there. The lodging industry in Minnesota Inventories increased slightly, according to contacts, and
and Montana continued to see healthy demand in March. several noted that supply chain pressures had eased. A
However, industry contacts in both states noted some producer of inputs for large engines and industrial
signs of softening demand. Vehicle sales in Minnesota equipment reported that it was expecting a dramatic
and Wisconsin in March were lower compared with last reduction in sales and was planning to reduce staff by 20
year; in the western part of the District, sales at a percent in response. A producer of food and beverage
dealership with multiple locations were slightly higher for equipment noted that “customers are hesitant to invest in
new vehicles, despite inventory shortages, but 12 costly equipment when interest rates are so high.”
percent lower for used vehicles. Recreational,
powersport, and marine vehicle sales remained Agriculture, Energy, and Natural Resources
subdued, with the RV industry “bloated with inventory,” District agricultural conditions were stable at strong
according to a contact, and higher interest rates levels entering the planting season. Most contacts
dampening demand. Spring break airline traffic has been reported that farm incomes continued to increase from a
brisk, with monthly passenger levels at some District year earlier, while capital spending was steady.
airports seeing double-digit growth over last year. However, persistent wintry weather, including a severe
snowstorm, delayed preparation for spring planting in
Construction and Real Estate many areas. District oil and gas exploration activity was
Commercial construction rose slightly since the last unchanged since the previous report.
report. While new office projects remain slow, other
sectors remained active, especially with the coming of Minority- and Women-Owned Business Enterprises
spring. Industry data showed that recent nonresidential Minority- and women-owned businesses reported little
activity has been on par with last year. Contacts also change in activity compared to last period. A few were
reported that multifamily construction has remained concerned that their inability to pass on increased input
healthy. A small sample of construction contacts and labor costs through final prices was beginning to
reported that March sales were higher, on average, than threaten their existence. A number of contacts were still
a month earlier, and they had similar expectations for the unsuccessfully looking for workers; they quoted wage
coming month. Residential construction, on the other competition and mismatched skills as the main reasons.
hand, was still in the doldrums. The number of single- Sentiments around recent banking events were mixed.
family units permitted in March was down more than 40 While some expected their access to credit to further
percent, year-over-year, in the Minneapolis-St. Paul narrow, others expected little or no impact. A contact
region; even larger declines were seen in Rochester, working with startups expected area entrepreneurs in the
Minn., Bismarck and Fargo, N.D., and Sioux Falls, S.D. tech sector to be affected but was unsure as to what
extent. ■
Commercial real estate was flat since the last report. In
the Minneapolis-St. Paul region, leasing activity for
industrial property remained strong, and vacancy rates For more information about District economic conditions visit:
fell slightly in the first quarter, despite a considerable minneapolisfed.org/region-and-community
I-2
Federal Reserve Bank of Kansas City

Total economic activity across the Tenth District declined slightly in March and April. However, almost every business
contact reported no pull back in planned capital expenditures, hiring plans or planned wage increases in response to
recent financial market volatility. Hiring activity slowed, leaving total District employment mostly unchanged. Worker reten-
tion was reportedly much higher, even as wage growth slowed. Consumer spending declined slightly. Households pulled
back most on bigger ticket items like cars or home maintenance and improvements. Prices continued to rise at a moder-
ate pace. Several food manufacturers indicated they do not expect to be able to negotiate the same pace of price increas-
es as they did over the past year in the coming months. Deposit outflows at community and regional banking organiza-
tions raised funding challenges for many organizations in recent weeks. However, community development financial
institutions, which typically serve microbusinesses and low-to-moderate income borrowers, reported stable funding condi-
tions despite recent financial volatility. Agricultural lenders also indicated stable liquidity to support lending over the medi-
um term. Generally, lenders expected somewhat tighter lending standards and stricter pricing related to credit risks in
coming months.

Manufacturing employment in the Tenth District in- Prices rose moderately across the District. Services
creased modestly in recent weeks, which contacts tied to contacts reported selling prices grew only slightly. Yet,
a better ability to recruit for open positions rather than an most contacts at services businesses anticipate chang-
increase in overall demand for workers. Restaurant ing their prices more frequently compared to the previ-
owners, hotel operators and most service businesses ous year, taking opportunities to raise prices incremen-
indicated that employment changed little over the past tally when available. Most businesses said their recent
month. Although employment in healthcare grew at a difficulty with passing cost increases through to custom-
moderate pace over the last month, labor demand at ers compressed their profit margins, with most indicating
healthcare establishments slowed moderately in some they expect to increase prices further over the medium
parts of the District. Job losses in tech occupations were term to rebuild lost profitability. One notable exception
concentrated among larger companies operating in the was processed food categories, where contacts do not
region. Contacts noted that tech workers were finding expect to be able to negotiate as large, or as many, price
new employment opportunities within a couple of weeks increases with grocers as they did last year.
on average, but often at somewhat lower pay. Expected
employment growth was reportedly much lower than just Consumer Spending
a few months ago. Household spending continued to fall slightly in recent
weeks. Purchases of larger ticket items, such as cars or
Across industries and geographies, contacts reported spending on home construction projects, declined signifi-
that wage growth is slowing significantly compared to cantly. Offsetting those declines were robust spending
last year, and that mid-cycle wage increases are much growth at restaurants and a rebound in leisure travel
less likely this year. Despite slowing wage growth, most activity. Several contacts noted in-store retail spending
businesses indicated that worker retention improved in growth picked up slightly, but also highlighted that the
recent weeks. Most contacts characterized expected distinction between brick-and-mortar and online sales is
wage growth over the near term as being above growth less important as most establishments have developed
rates expected over the long term. some sort of online sales platform.
J-1
Federal Reserve Bank of Kansas City
Community Conditions Community and Regional Banking

Community Development Financial Institutions (CDFIs) After tightening credit standards over the past several
across the District reported they have generally not weeks, many contacts reported expectations for further
experienced adverse effects resulting from the recent tightening or more strict pricing related to credit risks.
volatility in the banking sector so far. Most contacts Loan demand also weakened modestly in the past
reported their banking relationships were strong, with month, driven by increased borrowing costs and eco-
some banks proactively reaching out to quell any con- nomic uncertainty. Most notably, contacts reported
cerns about funding commitments. CDFIs expect strong weaker demand in commercial real estate and commer-
and increasing loan demand as an alternative and com- cial and industrial loans, though declines were broad-
petitive lender to commercial banks, especially as banks based. Credit quality remained stable, but contacts con-
tighten credit. Looking ahead, several CDFIs reported tinued to expect loan quality to deteriorate over the next
concerns about the ability of businesses to pay on loans, six months. Deposit levels declined moderately as large
especially as more Economic Impact Disaster Loan depositors withdrew uninsured balances amid the volatil-
payment deferments continue to expire throughout the ity in the regional banking sector and ongoing intensity of
year. rate competition.
Manufacturing and Other Business Activity Energy

Manufacturing activity was unchanged from recent Tenth District energy activity declined moderately over
months while activity at services businesses declined recent months. The number of active gas rigs in the
slightly. In response to recent financial volatility, almost District decreased as natural gas prices continued to
every contact reported they quickly assessed their distri- decline below profitable levels, and prices were expected
bution of bank deposits; however, most business con- to remain in an unprofitable range over coming months.
tacts reported no pull back in capex plans, hiring plans or However, declines in the number of active oil rigs were
planned wage increases resulting from recent events. modest, as firms expect oil prices to remain in a profita-
Expectations of production and sales over the next six ble range in the near term, albeit with profitability falling
months were little changed, except in technology sectors in recent months. In line with these expectations, oil
where business activity is expected to decline moderate- producers reported access to credit over the last month
ly. remained unchanged despite banking disruptions. The
average price needed for a substantial increase in drill-
In contrast, District contacts in the venture capital and
ing to occur remains above near-term oil and gas price
start-up space reported a much more adverse outlook
expectations, constraining future production growth.
compared to just a couple of months ago as a direct
Most business contacts reported higher cost pressures
result of the closure and challenges among the key
across several key inputs and anticipate persistent cost
lenders to the sector. Businesses tended to point to
pressures in the coming year. Accordingly, capital
prolonged declines expected for the start-up ecosystem,
spending growth slowed relative to last year and is ex-
rather than declines in certain segments of the startup
pected to decline over the next six months.
community, such as life/bio sciences or tech services.
Real Estate and Construction Agriculture

Vacancy rates at commercial properties increased mod- Agricultural economic and credit conditions in the Tenth
erately in recent weeks, most notably at office properties. District were reportedly strong. Elevated commodity
Yet, contacts indicated use of warehousing and distribu- prices continued to support profit opportunities for many
tion space, which had been the strongest property seg- producers. Farm loan repayment rates improved at a
ment over the last year, declined over the past month. gradual pace in the first quarter and indicators of credit
Several contacts noted subleasing prices declined fur- challenges were limited. Agricultural bankers throughout
ther. Following the recent financial market volatility, most the region also reported that their liquidity was adequate
contacts noted that lending for commercial real estate to meet current credit demand and deposit withdrawals.
development is almost completely unavailable. From the The impact of higher interest rates on borrower finances
lender side, one contact commented “we’d already been and farmland markets was reportedly a growing concern.
focusing only on premium deals, but now we are being More broadly, drought and elevated production costs
even stricter about what ‘premium’ means.” continued to affect many areas of the region. ■
J-2
Federal Reserve Bank of Dallas

The Eleventh District economy continued to expand modestly. Manufacturing output rose slightly following a mild con-
traction in the previous period. Growth in the service sector continued at a modest pace, and retail sales and energy
activity were flat. Loan demand weakened further, loan volumes fell, and credit conditions tightened. Agricultural condi-
tions remained strained by drought in some areas. Home sales rose. Local nonprofits cited higher demand for assis-
tance. Overall payrolls rose modestly, though hiring slowed sharply in the service sector. Wage growth remained elevat-
ed, while price pressures eased notably. Outlooks worsened, and uncertainty surged, partly due to heightened appre-
hension about the recent banking sector issues and high interest rates, and their spillover effects on the broader econo-
my.
Labor Markets broadly, bringing price growth close to or below its histor-
Employment increased modestly during the reporting ical average in manufacturing and services. Homebuild-
period. The pace of hiring picked up in manufacturing but ers continued to use incentives and discounts to close
slowed in energy and nearly stalled out in services. sales. Airlines said ticket prices remained elevated, while
Difficulty hiring workers remained a top concern for many energy firms reported declining rental rates for drilling
firms, though a few reported some improvement. Airlines rigs and said they expect cost inflation to continue slow-
cited capacity constraints due to pilot shortages, and a ing. More than a third of firms responding to a March
workforce development contact said some employers Dallas Fed survey of nearly 400 Texas business execu-
were taking a closer look at non-traditional talent pipe- tives cited inflation as a primary outlook concern over the
lines to fill positions. In contrast, staffing firms noted next six months.
clients were taking longer to make hiring decisions in
Manufacturing
part due to the increased economic uncertainty, and
Texas factory output expanded slightly in March after
there were scattered reports of layoffs in construction-
declining in February. New orders for manufactured
related manufacturing and upstream energy.
goods continued to contract, however. Weakness in
Wage pressures remained elevated, though they have demand was most pronounced in primary metals and
stabilized or moderated in some industries. A food man- plastics, though construction-related and computer man-
ufacturer noted having issues finding workers despite ufacturers cited declines in new orders as well. In con-
offering a starting salary that was more than twice the trast, demand for fabricated metals and machinery rose,
minimum wage, while construction contacts noted some and chemical and refinery utilization rates increased.
easing in pricing for certain trades. Overall, outlooks weakened, with just under two-thirds of
contacts noting waning demand and/or recession as a
Prices key concern. Other headwinds cited were elevated input
While input costs continued to rise, the pace of increases costs, labor shortages, and higher labor costs.
moderated in energy, construction, and manufacturing.
Freight costs dipped. Some manufacturers noted contin- Retail Sales
ued price pressures from supply chain constraints, and a Overall retail sales held steady in March. Auto sales rose
few firms said higher borrowing costs were slowing down strongly, though one contact noted a pullback in demand
expansion plans. Selling price pressures decelerated due to high interest rates. Clothing and health and per-
K-1
Federal Reserve Bank of Dallas
sonal care retailers cited higher sales. In contrast, elec- increases in loan pricing were noted. Banking outlooks
tronics and appliance store sales dipped, which some continued to deteriorate, with contacts expecting a con-
contacts attributed to slow activity in the housing market. traction in loan demand and business activity and an
Nonstore retailers reported sluggish activity in part due increase in nonperforming loans over the next six
to more people traveling this spring break. months. Increased uncertainty and lack of confidence
resulting from the recent banking issues were cited as
Nonfinancial Services concerns.
Modest expansion continued in the service sector. Reve-
nue growth was the strongest in leisure and hospitality, Energy
and activity in professional and business services, edu- Energy activity was essentially flat over the past six
cation, and transportation services rose as well. Small weeks. The rig count was unchanged as activity shifted
parcel and air cargo shipments were flat to down, while between and within basins in part due to lower natural
sea cargo volumes remained robust and were up notably gas prices. Oil and natural gas production increased in
compared with year-ago levels. One contact noted that the first quarter, and expectations are for drilling and
the recent train derailments had increased supply chain completion activity to rise moderately through the year.
delays. Airlines saw continuing solid demand for leisure Outlooks worsened, however, partly due to uncertainty
travel and some contacts expect business travel reve- about the economy.
nues to reach pre-pandemic levels this spring. Demand
for staffing services was mixed, with firms making white- Agriculture
collar placements seeing continued strong activity while Drought conditions persisted in the western part of the
those filling blue-collar positions citing weakness. Health district while soil conditions were quite favorable else-
care and real estate rental and leasing firms noted de- where. The La Niña weather pattern has ended, and
clining revenues on net. rainfall is expected to increase moving into summer and
fall. Cotton acres are expected to be down significantly
Construction and Real Estate this year, with farmers favoring crops with a relatively
Single-family housing demand improved further during higher price and drought tolerance. On the livestock
the reporting period partly due to lower mortgage rates. side, cattle prices increased dramatically over the past
However, the level of activity remained well below year six weeks and were up from this time last year, and
ago levels. Most contacts reported a solid spring market, demand was solid.
with sales, particularly in popular locations at or above
plan. Buyer traffic held up, and contract cancellations Community Perspectives
dipped. Housing starts remained subdued. Outlooks Nonprofits saw increased demand for their services, with
improved but uncertainty remained elevated particularly one contact citing higher activity compared with pre-
considering the recent banking challenges. Apartment pandemic levels. Utilization of housing assistance or
leasing picked up slightly. Rents were flat and occupan- temporary shelters increased notably, and some non-
cy continued to dip as supply outpaced demand. profits said that housing assistance was the fastest
growing need among their clients. Contacts cited grow-
Demand for office space was lackluster, and heightened ing financial difficulties for low- to moderate-income
levels of sublease space remained an impediment to families in part due to the recent reduction in SNAP
market recovery. Activity in the industrial market stayed benefits. One nonprofit noted that more middle-class
solid, but vacancy edged up due to the arrival of new families were seeking financial help as their wages had
properties. The higher cost of capital, tighter lending not kept pace with rising living costs. High or rising oper-
standards, and financial uncertainty has made it chal- ating costs remained a challenge for many nonprofits,
lenging to price deals, diminishing investment sales and some were concerned that with many companies
activity. Some contacts voiced concern regarding the downsizing, they would not meet their fundraising
renewal of commercial real estate loans, particularly goals.■
those secured by office properties.
Financial Services
Loan demand continued to decline in March as bankers
reported worsening business activity. Loan volumes fell,
driven largely by a sharp contraction in consumer loans.
Loan performance worsened slightly overall. Credit For more information about District economic conditions visit:
standards and terms tightened sharply, and marked www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of San Francisco

Economic activity in the Twelfth District grew slightly during the mid-February through March reporting period. Employ-
ment levels were stable, while labor market conditions remained tight overall. Elevated wage and price levels persisted
though grew at a slower pace relative to the last reporting period. Sales of retail goods softened slightly, while activity in
the consumer and business services sectors maintained strength. Demand for manufactured products was steady, while
conditions in the agriculture and resource-related sectors continued to slow slightly. Residential and commercial real
estate markets weakened. Lending activity decreased substantially. Communities across the Twelfth District faced
heightened challenges in their ability to provide food, shelter, and services due to credit constraints and reduced philan-
thropic giving. Looking ahead, contacts had a weaker overall economic outlook and expressed uncertainty in their busi-
ness planning amid current market conditions.
Labor Markets consumer services, legal services, and agriculture. One

Labor market conditions remained tight overall despite contact in California noted that produce prices rose
reported softening in some sectors such as financial following supply disruptions due to recent flooding in the
services and technology. Employment levels remained state. Firms largely continued to experience rising input
mainly stable, although hiring challenges continued in costs, such as transportation, food, some construction
most sectors due to skill mismatch and limited labor materials, and insurance, though the pace of these in-
supply. Contacts reported difficulty finding workers creases moderated. Changes in energy prices were
across all skill and experience levels. There were some reportedly mixed, and a few contacts observed some
signs however of easing, which several contacts attribut- softening in steel and aluminum prices.
ed to an increase in labor supply from recently laid-off
workers seeking employment. Several contacts noted Community Conditions
improved worker retention in recent months, although job Conditions in the community support and services sector
turnover remained generally elevated. While employers worsened in recent weeks. Nonprofit organizations re-
in leisure and hospitality continued to hire, which alleviat- ported that heightened uncertainty in the banking sector
ed ongoing staff shortages, businesses in the financial limited their access to credit and delayed ongoing afford-
services, technology, and entertainment sectors reduced able housing and community support projects. Nonprofit
head counts in response to waning demand. organizations noted that recent banking developments
led many corporations to cut back on charitable dona-
Wage growth moderated during the reporting period, but tions, which further constrained their ability to meet
wage levels remained high. Although wage pressures demand for basic needs, including shelter, rental and
eased somewhat, workers continued to demand higher food assistance, and mental health services. Employers
pay, and employers maintained offers of higher wages to across the District reported increased burnout and men-
attract and retain workers in the face of consumer price tal health strain among workers, particularly low-wage
inflation and high housing costs. Contacts noted that with earners, due to higher living costs.
stiff competition for labor, firms attracted talent with pay
increases and better benefits. Retail Trade and Services
Retail goods sales softened slightly, as reduced savings
Prices and rising household debt hampered consumption ex-
Overall price levels rose during the reporting period, penditures. Food spending decreased somewhat as
though at a somewhat slower pace. Reports indicated households continued to trade down to lower cost items.
higher final prices for goods and services in several One contact from Washington noted that sales of organic
sectors, including manufacturing, leisure and hospitality, produce weakened relative to conventional products.
L-1
Federal Reserve Bank of San Francisco
However, home improvement and do-it-yourself projects output in the Pacific Northwest remained stable. Sales of
continued to support strong sales at home centers. harvested timber cooled further, while investor demand
for timberland remained elevated.
Conditions in the consumer and business services sec-
tors remained strong. Demand for health-care services Real Estate and Construction
continued an upward trend. Demand for air travel was Conditions in the residential real estate sector worsened
strong, while that for leisure and hospitality moderated over the reporting period. Demand for single-family
somewhat in parts of the District, including Southern homes softened, and homes stayed on the market long-
California, due to consumers’ concerns about economic er. Selling prices fell below initial asking prices, and the
uncertainty. At the same time, the tourism industry in cancellation rate for purchase agreements reportedly
Hawaii and Nevada remained strong. Record rain and increased. Multifamily housing demand was stable to
snowfall across the West Coast had a mixed effect. weaker, depending on the region, and asking rents or
While the hospitality sector in Southern California saw a the rate of rent increases fell. Uncertainty and high fi-
significant slowdown, Northern California saw higher nancing costs dampened new construction, but some
demand for outdoor recreation. reports indicated stronger activity in the lower-cost home
category. Ongoing projects continued to be developed
Manufacturing
as planned across the District, but builders highlighted
Activity in the manufacturing sector was steady. Some
shortages of electrical equipment as a constraint to
reported softness in orders from the construction indus-
construction activity in the region.
try was offset by strength in metal production, engineer-
ing, and food manufacturing. Demand for capital equip- Activity in the commercial real estate market weakened.
ment and metal recycling products increased in recent Demand for office and health-care space continued to
months, while demand for wood products weakened as wane. Office vacancies rose as leases expired and
rising mortgage rates and bad weather slowed down occupants reduced their need for space due to hybrid
residential construction. Production costs remained and remote work arrangements. Demand for warehouse
above historical averages, and labor tightness persisted. and industrial space remained generally strong, as did
While supply disruptions continued to improve, contacts the demand for new data centers. One contact in Oregon
across the District reported delays in getting various highlighted local government’s ongoing plans for contin-
electrical components. ued development in downtown areas.
Agriculture and Resource-Related Industries Financial Institutions

Activity in agriculture and resource-related sectors decel- Lending activity fell significantly in recent weeks amid
erated slightly. Exports of agricultural goods weakened, higher interest rates and elevated uncertainty in the
and domestic demand for agricultural products was banking sector. Lending standards tightened notably,
mixed. While growers in the Pacific Northwest reported and several depository institutions opted to reduce loan
weaker sales overall, producers in California noted volumes, especially for new clients, despite reporting
strong, stable demand for fresh produce and other agri- ample liquidity. Reports indicated that existing and
cultural goods. Persistent rains and flood conditions in planned projects across sectors were delayed or can-
California affected plant pollination, delayed the planting celled due to higher funding costs, heightened uncertain-
of crops like tomatoes and cotton, and cast doubt on the ty, and more limited access to credit. Following recent
viability of some orchard crops. One contact in Central volatility in deposit levels at regional and community
California reported that the recent rains made large banks, outflows have reportedly stabilized since late
portions of grazing lands unsuitable for cattle. Seafood March.■
L-2

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Kansas City St. Louis

St. Louis H-1 How is the information used?

Overall Economic Activity

Highlights by Federal Reserve District

Philadelphia St. Louis

Summary of Economic Activity

Labor Markets modest price hikes for selected products in addition to

Commercial Real Estate

Summary of Economic Activity

Labor Markets Prices

For more information about District economic conditions visit:

Summary of Economic Activity

Labor Markets lower compensation levels was just under 5 percent.

Summary of Economic Activity

Labor Markets success yet.” That said, contacts in construction and

Summary of Economic Activity

Labor Markets Manufacturing

Prices Ports and Transportation

Summary of Economic Activity

Labor Markets like food inputs and construction materials saw

Summary of Economic Activity

Labor Markets Consumer Spending

noted that materials availability had improved to the point Agriculture

Manufacturing Community Conditions

For more information about District economic conditions visit:

Summary of Economic Activity

Labor Markets Prices

Summary of Economic Activity

Labor Markets Prices

Summary of Economic Activity

Labor Markets Prices

Community Conditions Community and Regional Banking

Manufacturing and Other Business Activity Energy

Real Estate and Construction Agriculture

Summary of Economic Activity

Summary of Economic Activity

Labor Markets consumer services, legal services, and agriculture. One

Agriculture and Resource-Related Industries Financial Institutions

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