The U.S. economy was stagnant over the holiday season, according to the Federal Reserve Beige Book.
Economic activity slightly fell in the Minneapolis region, even as hiring trends remained positive. “Wage pressures continued to moderate, approaching pre-pandemic conditions,” according to the Federal Reserve. “Price increases were mild, with most firms reporting no change in input or final prices. Holiday sales and traffic were generally strong, but construction and manufacturing activity decreased.”
Employment increased moderately in the Chicago area as nonbusiness contacts reported a rise in activity. Consumer spending increased slightly, as construction and real estate and business spending were little changed. High mortgage rates continued to limit home sales. Holiday sales reportedly met expectations by slightly improving over last year’s mark.
Consumer spending fell moderately in the Kansas City region. Demand for seasonal employment was reportedly low, with few workers 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.
The rate of price increases slowed in the St. Louis region. “Travel and hospitality firms reported strong leisure travel growth during the holiday season and an optimistic outlook for the upcoming year,” according to the Federal Reserve. “Rental prices were flat and residential inventory rose slightly.”
Most districts reported that growth prospects were positive, had improved, or both. Nearly every district cited at least one sign of a cooling labor market, including larger applicant pools, easing wage pressures, selective hiring by firms and lower turnover rates.
Contacts from nearly every district reported drops in manufacturing activity. Finding and retaining manufacturing workers remained a challenge in the St. Louis region as firms expect small increases in production and delivery lead times in the coming quarter.
“Districts continued to note that high interest rates were limiting auto sales and real estate deals,” according to the Federal Reserve. “However, the prospect of falling interest rates was cited by numerous contacts in various sectors as a source of optimism. In contrast, concerns about the office market, weakening overall demand, and the 2024 political cycle were often cited as sources of economic uncertainty.”
Financial conditions loosened in the Chicago region as bond and equity values increased while volatility fell. Business loan rates were steady amid tightening terms and a slight drop in loan quality. Business loan demand was flat in the region. “Prices and wages rose moderately,” according to the Federal Reserve.
Banking conditions and lending activity remained strong in recent weeks in the St. Louis Fed region even as loan growth slowed. Commercial and industrial loan growth fell despite the rise in overall loan volume, and demand for loans continued to lag the previous year.
Net farm incomes were above average last year in the Chicago region as stronger-than-expected crop yields drove district net farm income to above average. Expectations for farm income for 2024 are lower, as prices started this year below break-even amounts for many commodities, according to the Federal Reserve. In the St. Louis region, drought conditions adversely impacted crops and livestock. Minneapolis regional agricultural conditions were unchanged in recent weeks as income dropped substantially from a year ago.