Economic activity has increased since the start of the year, according to the Federal Reserve Beige Book.
Eight districts reported “slight to modest growth,” according to the Fed. Three reported no change, and one reported a slight weakening of conditions. Future economic growth outlooks remained mainly positive, as contacts noted expectations for stronger demand and less restrictive financial conditions in 2024.
“Consumer spending, particularly on retail goods, inched down in recent weeks,” according to the Fed. “Several reports cited heightened price sensitivity by consumers and noted that households continued to trade down and to shift spending away from discretionary goods.”
Farm conditions were mixed. In the Minneapolis region, farm income fell in the fourth quarter compared with the previous year, according to a majority of lenders in an agricultural conditions survey. Commodities prices were under breakeven levels for many producers, according to the Federal Reserve. Regional input costs moderated.
Expectations for farm income this year fell In the Chicago region. The outlook for livestock producers improved, while the outlook for crop producers fell. Corn prices fell slightly amid low demand, and a substantial 2023 harvest boosted stocks. St. Louis district agricultural conditions were stable even as total winter wheat acreage fell about 5 percent from the year before. District contacts were reportedly mixed on the impact of global commodity markets on their operations.
“While some reported benefitting from tightened export markets due to international shipping disruptions and high demand — particularly for cotton — others reported that declining commodity prices and competition from major exporters such as Brazil had depressed their outlook,” according to the Fed.
Ag credit conditions remained healthy in the Kansas City region despite softened farm conditions. Crop prices fell over the past month alongside reports of stronger production and yields during last year’s growing season than were previously estimated.
Employment increased at a “slight to modest pace” across much of the country, according to the Fed. Labor market tightness continued to ease, as nearly every district reported improvements in labor availability and employee retention. Wages increased, though several reports noted a slower pace of increase.
Commercial real estate activity was limited, especially for office space, according to the Fed. There were reports of strong demand for new industrial and manufacturing spaces, data centers and large infrastructure projects.“Loan demand was stable to down, and credit quality was generally healthy despite a few reports of rising delinquencies,” according to the Fed. Demand for residential real estate picked up in recent weeks, mainly due to moderation in mortgage rates, even as low inventories limited actual home sales.
Manufacturing was mainly unchanged, according to the Fed, and supply bottlenecks eased. Ongoing shipping disruptions in the Panama Canal and Red Sea caused delivery delays for electrical components.
Price pressures continued, but several districts saw inflation lessen, according to the Federal Reserve. “Nevertheless, businesses found it harder to pass through higher costs to their customers, who became increasingly sensitive to price changes,” according to the Fed. “The cost of many manufacturing and construction inputs, such as steel, cement, paper and fuel, reportedly fell in recent weeks.”