U.S. economic activity has increased slightly since late May as slow growth is expected through the second half of the year, according to the Federal Reserve’s Beige Book.
Much of the ag economy was weakened by an ongoing drought, according to the July 12 report. Though most of the corn and soybean crops in the Minneapolis region were listed in good or excellent condition, wheat crops worsened as the harvest approached.
In the Chicago region, crops were behind their normal growing schedule as expectations for this year’s corn crop worsened amid the drought. Though corn prices were down in the region, soybean crops were up and wheat prices remained basically the same. “Prices for milk were down once again, extending losses for dairy farms,” the Fed stated. “Although hog prices moved up some, producers continued to struggle to turn a profit.”
Ag conditions worsened in the St. Louis region as the percentages of corn, cotton, rice and soybeans rated as being in fair or better condition decreased. The price of most major commodities increased through June in the Kansas City region as drought weakened crop production areas.
Financial conditions tightened in the Chicago region as bond and equity market values increased while volatility slightly fell. Business loan demand weakened. In the Kansas City region, small businesses reported resorting to credit cards and online lending platforms with higher interest rates due to rising input costs and hiring challenges.
Employment increased modestly, according to the Fed, and labor demand remained strong as businesses were becoming more selective. U.S. unemployment remained low last month at 3.6 percent.
“Many districts reported that labor availability had improved and that some employers were having an easier time hiring than they were having previously,” the Fed stated. “Employers also report that the unusually high turnover rates in recent years appear to be returning to pre-pandemic norms.”
Prices rose at a modest clip, according to the Fed, as several districts experienced slowed increases. Some businesses were hesitant to raise prices as consumers were more sensitive to prices, while others said that strong demand allowed them to maintain margins.
Those reports came as inflation shows signs of easing. CPI inflation was measured at 3 percent in June, down from 4 percent in May.
Despite higher mortgage rates and low inventories, residential real estate activity was steady. In the Chicago region, residential construction fell slightly due to a slowdown in single-family development. Nonresidential construction slowed amid high interest rates, elevated costs and shortages of key inputs. The commercial real estate market weakened in the Minneapolis region as office properties continued to struggle.
Business spending and construction and real estate activity fell, and manufacturing activity was mixed. In the Kansas City region, manufacturers reported broad-based declines, including a drop in order demand and shorter order backlogs.