Economic conditions have changed little in recent weeks, according to the Jan. 15 Beige Book.
Economic activity and employment increased in the Chicago region. “Nonbusiness contacts saw a modest increase in activity; consumer spending was up slightly; construction and real estate and business spending were flat; and manufacturing decreased modestly,” according to the Federal Reserve. “Net farm incomes were above average in 2023.”
District economic activity fell slightly in the Minneapolis region as hiring was strong but job postings fell. Wages pressures moderated, nearing pre-pandemic conditions. “Price increases were mild, with most firms reporting no change in input or final prices,” according to the Federal Reserve. “Holiday sales and traffic were generally strong, but construction and manufacturing activity decreased.”
Economic activity declined in the Kansas City region as consumer spending fell. Demand for seasonal employment was low, according to the Federal Reserve, with few employees changing to full-time status. “Commercial real estate transactions were suppressed, while CRE loan modification activity was inhibited by lenders’ concerns about credit performance and borrower liquidity,” according to the Federal Reserve.
Consumer spending fell in several categories in the Kansas City region. Expected wage growth was much lower for 2025, according to the Federal Reserve. “Despite the recent softening in activity, most contacts expressed a favorable outlook for the next six months,” according to the Federal Reserve. “Prices grew slightly on average, but food retail contacts indicated they had no more ability to pass higher prices to customers.”
Net farm income was lower in the Chicago region last year than in 2023 as prices began 2024 under break-even levels for many commodities, according to contacts. Corn and soybean prices edged lower, while wheat prices slightly increased.
“Dairy, hog and cattle prices decreased,” according to the Federal Reserve. “Egg prices were slightly higher and avian influenza cases led to concerns about a repeat of last winter’s large outbreak. Contacts felt district farms generally ended 2023 in strong enough financial positions to weather whatever 2024 brings.”
Ag conditions were unchanged in the Minneapolis region, according to the report, as contacts gave varying reports about farm income. Ag income was down from a year ago, but some contacts said they were stronger than anticipated. Ag economic conditions were also stable in the Kansas City region through December, even as softening farm income and credit conditions continued to be areas of concern. Profits narrowed in the past year, especially in areas where yields were limited by drought.
Financial conditions loosened in the Chicago region, according to the Federal Reserve. Business and consumer loan rates were steady, while business loan terms tightened and loan quality decreased.
Banking contacts in the St. Louis region experienced slower loan demand in recent weeks, while a drought continued impacting crop and livestock conditions. Loan growth slowed to a “modest pace” in recent weeks as banking conditions and lending activity remained strong.
Contacts from nearly every district reported decreases in manufacturing as high interest rates limited auto sales and real estate deals. “Concerns about the office market, weakening overall demand, and the 2024 political cycle were often cited as sources of economic uncertainty,” according to the Federal Reserve. “Overall, most districts indicated that expectations of their firms for future growth were positive, had improved, or both.”
There were widespread reports of a cooling labor market in recent weeks, including larger applicant pools, lower turnover rates, tighter hiring practices by firms, and easing wage pressures. Hiring indexes were stable in the Dakotas and Minneapolis as the supply of labor improved. More firms were closer to being fully staffed and being more selective in hiring, according to the Federal Reserve. High labor costs and materials expenses, elevated interest rates and slower rent growth slowed the pace of new multifamily construction in the Chicago region, according to the Federal Reserve.
Most districts reported “slight or modest price increases”. Companies in the majority of districts reported steady or falling input prices, especially in manufacturing and construction. Consumers were more price sensitive, forcing retailers to narrow their profit margins and to push back on supplier efforts to raise prices.
Construction activity fell in recent weeks in the Minneapolis region. CRE activity was flat, as vacancy rates for industrial space increased due to significant speculative building, according to the Federal Reserve.