Fed Beige Book: Overall economic activity increased at a slight to modest pace in 8/12 districts, while two districts reported little change and two districts reported slight to modest declines

Overall Economic Activity

• Overall economic activity increased at a slight to modest pace in eight of the twelve Federal Reserve Districts, while two Districts reported little change and two Districts reported slight to modest declines.
• The conflict in the Middle East was cited as a major source of uncertainty that complicated decision-making around hiring, pricing, and capital investment, with many firms adopting a wait-and-see posture.
• Manufacturing activity rose slightly to moderately in most Districts.
• Banking sector activity was generally steady with loan demand stable to up moderately. On balance, consumer spending increased slightly despite harsh winter weather in some regions and higher fuel prices.
• Many Districts continued to report signs of consumer financial strain, increased price sensitivity, and rising demand at food banks and other social service organizations, while spending among higher-income consumers was resilient.
• Housing market activity softened across several Districts as heightened uncertainty and rising mortgage rates dampened buyer demand. Commercial real estate markets improved, with strength in industrial properties, especially data center projects.
• Office markets saw solid demand for Class A space but weaker demand for lower-tier properties.
• Energy activity was up slightly as oil prices rose, though many producers remained cautious about increasing drilling due to uncertainty about the persistence of higher prices.
• Agricultural activity was mixed, and several Districts reported that rising crop prices helped offset steep price increases of fertilizer and fuel. Business outlooks varied amid widespread uncertainty about future conditions.

Labour Markets 

• On balance, employment was steady to up slightly during this reporting period, though one District noted a slight decline.
• Most Districts described labor demand as stable, with low turnover, minimal layoffs, and hiring mostly for replacement.
• Several Districts noted increased demand for temporary or contract workers, as firms remained cautious about committing to permanent hires.
• Many Districts reported that labor availability had improved, although difficulty finding some skilled workers, especially in the skilled trades, persisted.
• While most Districts indicated that AI had not yet significantly impacted overall staffing levels, some noted that AI-driven productivity improvements had enabled many firms to delay or reduce hiring.
• Wages generally continued to rise at a modest to moderate pace. Some Districts noted continued wage pressures for some roles in health care and the skilled trades, though overall wage competition remained muted.

Prices

• Price growth mostly remained moderate overall, with the vast majority of Districts reporting moderate increases and others pointing to modest growth. Generally, input cost increases outpaced selling price growth, compressing margins.
• Energy and fuel costs rose sharply in all Districts, attributed to the Middle East conflict, leading to higher freight and shipping costs and higher prices for plastics, fertilizers, and other petroleum-based products.
• Input cost pressures beyond energy-related increases were also widespread.
• Several Districts reported rising prices for metals due to tariffs, such as steel, copper, and aluminum.
• Technology costs rose for both hardware and software. Insurance premiums and health care costs continued to climb.