Economic activity was essentially unchanged in recent weeks, according to the Federal Reserve Beige Book.
Agricultural conditions were stable in the Minneapolis region as preliminary estimates indicated that corn production would decrease from a year ago while soybean production would increase moderately. “Wheat production in district states increased significantly from last year,” according to the report. “A decline in Montana was more than offset by increases in other states. District oil and gas exploration activity was unchanged since the previous report.”
Farm income expectations were stable for the Chicago region in recent weeks despite prospects for strong corn and soybean harvests. Dry weather helped cut down on crop drying expenses but also led to lower crop weights, reducing potential revenue. Corn and soybean prices increased as farmers maximized crop storage to sell later at higher prices. Cattle prices increased as the supply of cattle continued to dwindle, reaching its lowest mark since the 1950s.
Despite strong yields and lower-than-usual input costs, low commodity prices sparked stress in the agricultural sector in the St. Louis and Kansas City regions. Ag production was stable in recent weeks in the St. Louis region even as overall conditions worsened. “Agriculture businesses reported that most of the contraction and rightsizing had already occurred over the past six months,” according to the report.
In the Kansas City region, deteriorating farm borrower liquidity and income was especially pronounced in states with higher concentrations of crop production. Financial conditions were stronger in areas with the highest concentration of cattle production as profit opportunities remained healthy for cow/calf producers.
Lower energy prices limited producers’ margins, according to the report. “Despite elevated uncertainty, contacts were somewhat more optimistic about the longer-term outlook,” according to the Federal Reserve.
Overall employment increased in recent weeks as businesses reported low turnover and limited layoffs. Demand for workers eased, with hiring focusing on replacing rather than growing staffing. Wages increased at a modest to moderate rate. The availability of workers improved, as contacts found it easier to find the necessary staffing.
Employment was flat in the Kansas City region as regional businesses reported recently reducing their staffing. Businesses experienced more delays in receiving payments, increasing financial strains but not impacting their hiring plans. Firms in the St. Louis region planned to maintain their employment levels in the coming months, according to the report.
Reports on consumer spending were mixed. In the Kansas City region, growth in consumer spending offset slowed manufacturing and professional service activity. Some Fed districts saw shifts in purchases toward less expensive alternatives. Housing market activity has remained strong nationwide. While housing inventory continued to grow in much of the country, home values were steady or slightly increased, according to the report.
“Uncertainty about the path of mortgage rates kept some buyers on the sidelines, and the lack of affordable housing remained a persistent problem in many communities,” according to the Federal Reserve. “Commercial real estate markets were generally flat, although data center and infrastructure projects boosted activity in a few districts.”
Businesses in the Kansas City region reported a large increase in the time it takes to receive customer payments compared to the start of the year, increasing financial strain on businesses and changing their cash management practices. Still, few contacts reported those delays caused either reduced hiring or capital outlays.
Commercial real estate activity improved in the St. Louis region as construction activity increased. “Many multifamily complexes across the district are under construction, and rental units continue to be in high demand,” according to the Federal Reserve. “Contacts also reported industrial connection is expected to remain strong due to demand for data centers and power plants.”
Activity in the banking sector was unchanged to up slightly, while loan demand was mixed as some districts reported an improvement in the outlook because of the decline in interest rates. Loan volumes fell in October, despite loan prices falling for the first time in three years.