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Chicago

/beige-book-reports/2022/2022-07-ch

"July 13, 2022\nSummary of Economic Activity\nEconomic activity in the Seventh District increased slightly overall in late May and June, and contacts expected growth to remain slow in the coming months, with many expressing concerns about the potential for a recession. Employment increased moderately, business spending was up modestly, consumer spending rose slightly, and manufacturing and construction and real estate declined slightly. Wages and prices rose rapidly, while financial conditions tightened some. Agriculture income expectations for 2022 were little changed.\nLabor Markets\nEmployment increased moderately over the reporting period, and contacts expected a similar pace of growth over the next 12 months. Many contacts continued to report difficulty in finding workers across sectors and at all skill levels. That said, some indicated finding workers had become easier. A number of firms noted that a lack of staffing prevented them from operating at desired capacity. Some manufacturers were sufficiently staffed for current conditions but would not be if their supply chain issues were resolved. Overall, wage and benefit costs increased rapidly and were aimed both at attracting new workers and retaining existing talent. In addition to labor market tightness, contacts cited high inflation as an impetus for workers requesting wage increases. Numerous contacts were implementing mid-year wage bumps on top of their usual annual increases to keep up with quickly rising market wages.\nPrices\nOverall, prices rose rapidly in late May and June, though the pace of growth slowed a bit, and contacts expected a further slowdown over the next 12 months. There were large increases in producer prices, spurred by passthrough of higher costs for labor, energy, and shipping. Raw materials cost pressures eased somewhat, with contacts highlighting lower steel, copper, aluminum, and lumber costs. Consumer prices generally moved up robustly due to solid demand, limited inventories, and passthrough of higher costs. A number of business- and consumer-facing contacts indicated that they were experiencing limited pushback on price increases from customers, but others said they were only able to pass on some of their higher costs.\nConsumer Spending\nConsumer spending increased slightly over the reporting period, though there were signs that discretionary spending was slowing. Rising costs were squeezing some retailers' margins. One contact noted that when higher costs were passed through to consumers, lower income shoppers were trading down and buying more in-store brands, while higher income shoppers were buying more goods in bulk. Nonauto retail sales increased slightly, led by higher grocery and gasoline sales. Demand softened in some durable goods sectors, notably furniture and electronics. Some retailers indicated that because of high inventories, the upcoming back-to-school season would feature more promotions than last year. Light vehicle sales increased slightly overall: Sales of used vehicles were up, but new vehicle sales changed little as they were still constrained by low inventories. New light vehicle prices were unchanged but used light vehicle prices fell slightly. Some auto dealers commented that, unlike during prior periods of high gas prices, consumers weren't looking to trade in light trucks for cars to save on fuel costs.\nBusiness Spending\nBusiness spending increased modestly overall in late May and June. Retail inventories were up modestly, with elevated levels reported in some sectors but low levels in others where supply chain bottlenecks persisted. On balance, manufacturing inventories were moderately elevated, as numerous contacts reported they were building up \"just-in-case\" stocks of available inputs and that they were forced to hold on to nearly completed products while they waited for a small number of missing parts to arrive. Retail and manufacturing contacts expected inventory challenges to persist into 2023. Demand for transportation services was little changed and remained high. Capital expenditures increased modestly, with contacts reporting purchases of new equipment as well as technology for hybrid work environments. Lead times remained lengthy for some types of capital equipment. One contact noted that higher interest rates had made them more cautious about capital spending plans. Commercial and retail energy consumption increased slightly, with no change in industrial energy consumption.\nConstruction and Real Estate\nConstruction and real estate activity decreased slightly on balance over the reporting period. There was a small decline in residential construction. While demand for multi-family space stayed healthy, some existing projects were paused because of cost pressures. Residential real estate activity decreased modestly. Rising mortgage rates were a factor pushing down the number of offers per house; still, home prices were up slightly. Rents rose modestly. Nonresidential construction activity was unchanged, and materials and labor availability challenges continued to push back project completion times. Demand for new industrial space, particularly for warehousing, remained robust. In southeast Michigan, a number of new electric vehicle investments contributed to deep construction project backlogs. Commercial real estate activity was unchanged. One contact indicated that higher interest rates had negatively impacted sales of existing buildings. However, demand for quality commercial space stayed solid.\nManufacturing\nManufacturing production decreased slightly in late May and June. Output continued to be held back by difficulties with supply chains and labor availability. Auto production was flat, as shortages of microchips and other materials persisted. Heavy truck demand and prices fell slightly, though both remained high amid very low vehicle inventories. Demand for heavy machinery was up modestly, led by growth in the agriculture sector. Primary metals contacts noted modestly lower demand across a range of sectors. There was a small decrease in demand for fabricated metals, with contacts reporting declines in the automotive sector but growth in agriculture.\nBanking and Finance\nFinancial conditions tightened some on balance over the reporting period. Participants in the equity and bond markets reported rising interest rates, elevated volatility, and net declines in asset values. Business loan demand was little changed overall, though one contact noted that revolver usage had been rising steadily and attributed the increase to rising input costs. Business loan quality was unchanged, while standards tightened some, as contacts expressed greater uncertainty about the future state of the economy. In consumer markets, loan volumes decreased modestly, with contacts continuing to note large declines in mortgage refinancing in the face of rising rates. Consumer loan quality was stable, while standards loosened a bit.\nAgriculture\nContacts continued to expect agricultural incomes to be solid for most producers in 2022. Despite worries about supply chain problems, inputs were largely reaching farms in time. Heavy rains in some areas diluted fertilizer and created ponds in fields, hurting potential yields; in other areas there were concerns about dryness and heat. Still, corn and soybean conditions were close to average for much of the District. Corn and soybean prices fell some over the reporting period, while milk prices were generally higher. After widespread flock losses from bird flu, egg-laying capacity began to return and egg prices edged down from elevated levels. Hog and cattle prices increased. Farmland prices moved higher once more.\nFor more information about District economic conditions visit: chicagofed.org/cfsec\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2022/2022-07-kc

"Beige Book Report: Kansas City\nJuly 13, 2022\nSummary of Economic Activity\nGrowth in the Tenth District slowed to a modest pace, with mixed performance across segments of the regional economy. Consumer spending declined slightly, with the most significant reduction reported for larger ticket items. After several months of historically high growth in the manufacturing sector, overall growth slowed to a modest pace. Contacts pointed to shipping delays, and difficulties procuring or storing materials, as barriers to growth. New demand for residential construction declined amid rising interest rates, though contacts reported that backlogs in orders will support construction employment over the medium term. Energy activity expanded at a solid pace with drilling activity and production rising in several District states. Job growth picked up recently as several contacts pointed to improvement in the number of applicants for open positions. Several businesses across sectors indicated they began to offer pre-paid gas cards or direct payments to offset rising gas prices for workers. Prices continued to rise broadly. Community and regional banks indicated that they continued to hold ample deposits, but started to experience some initial pressures on liquidity as interest rates rose.\nLabor Markets\nJob growth expanded at a robust pace, with broad-based hiring across sectors. Several contacts noted that both the number and quality of applicants for open positions picked up in recent weeks. Those that reported an increase in the number of applicants highlighted improvements for jobs spanning entry-level to management positions. Some contacts suggested the pickup in applications may be tied, in part, to financial strains arising from price pressures. Organizations that primarily serve low- and moderate-income households indicated that conditions for finding work, quality of available jobs and workers' access to technology improved. Overall, labor demand remains high and the number of job openings across the Tenth District grew modestly. Contacts across sectors reported expectations for modest job growth over the next six months.\nWages continued to rise at a robust pace, but some contacts indicated expectations that wage growth may stabilize somewhat in coming months. Several contacts reported that they began to offer temporary compensation to workers to offset rising gas prices. Some offered pre-paid gas cards as performance or retention incentives, while others made direct payments to workers tied to driving expenses.\nPrices\nPrices grew at a robust pace. Most contacts reported that input price growth continues to outpace selling prices. Compared to the previous six months, manufacturing contacts indicated a greater ability to pass through costs to customers. On the contrary, businesses in the services sector mostly reported no change in their ability to pass along costs over the same time period. Contacts pointed to shifts in customer spending patterns amid higher prices as a factor limiting pass-through of costs in service sectors.\nConsumer Spending\nOverall consumer spending declined slightly in recent weeks, with ongoing strength in seasonal leisure and travel spending being offset by moderate declines in spending on larger ticket items. Car sales were down and contacts also pointed to declines in household purchases of furniture. Spending on certain home improvement goods was reportedly below contacts' expectations for this time of year. Restaurant owners continued to point to shifts in patronage across establishments with different price points. If dining out, consumers were less likely to choose more expensive locations in favor of lower cost options.\nManufacturing and Other Business Activity\nContacts at manufacturing businesses across the District continued to report slowing growth from recent historic highs, with total production expanding at a slight pace. Service business contacts also reported softening growth. Across all sectors, most contacts reported lower expectations for growth over the next six months as compared to previous months. In line with softening expectations, new orders for manufactured goods declined slightly.\nThe overwhelming majority of District contacts indicated that supply chain disruptions remain a barrier to growth. The lack of available materials and delays in shipping are having the largest effects on businesses. Difficulties in warehousing or storing inventory were also noted as a significant concern. Generally, businesses did not cite rising shipping costs among the most significant logistical challenges. Still, some importers noted that recent declines in freight rates do not fully reflect their shipping expenses over the summer because the higher freight rates set into contracts earlier this year are the most relevant for businesses over the medium term.\nReal Estate and Construction\nGrowth in residential construction activity was mixed across segments, with more forward-looking indicators of activity declining moderately. Demand for multifamily housing construction remained elevated. However, financing conditions for new projects tightened recently, leading to fewer projects being initiated in recent weeks. Still, backlogs for multifamily housing development projects remain large by historical standards.\nSingle family construction declined slightly. The large number of housing projects previously under construction kept the level of activity high. However, the number of buyers for newly built homes fell rapidly across the Tenth District. Contacts noted that the slowing demand for new home construction will likely have lagging effects on employment and materials prices in the sector. For example, demand for crews doing framing for homes, which occurs early in construction, softened a bit while demand for skilled trades associated with the finishing of homes remains healthy. Other contacts noted that materials costs have not softened yet, but expectations are that prices of building materials are likely to come down in coming months.\nCommunity and Regional Banking\nLoan demand weakened modestly in the past month, particularly in the commercial real estate and residential mortgage segments, due to rising interest rates. While credit quality was unchanged, contacts expected credit deterioration over the next six months, as inflation and rising rates adversely impact borrower cash flow. Banks maintained excess liquidity, but deposit growth moderated in June, in part due to customers seeking higher yields. Contacts sought to defend their deposit shares and temper potential run-off. Increases in unrealized losses within securities portfolios following recent rate increases also placed pressure on liquidity for banks with material holdings of securities designated as Available For Sale.\nEnergy\nTenth District energy activity increased at a solid pace in June. The number of active natural gas and oil rigs rose across Colorado, Oklahoma, and Wyoming, as revenues grew at a solid rate. Difficulties sourcing key inputs, equipment and workers inhibited further production growth. Supply-chain disruptions for bespoke components were also a significant challenge for bringing new renewable energy generation and distribution online. Most firms across traditional and renewable energy segments expected resolution of supply-chain issues to take more than six months. Reported expectations for drilling and business activity over the next six months increased. Contacts in the renewable energy sector indicated that higher interest rates posed some challenges for future additions to generation capacity, given the long-term nature of generation and transmission infrastructure.\nAgriculture\nAgricultural economic conditions in the Tenth District remained strong through June. Although the price of some key commodities declined slightly from the previous month, both crop and livestock prices remained at multi-year highs. Agricultural prices continued to support revenue prospects, but District contacts continued to voice a heightened concern about significant increases in production costs for both crop and livestock producers. Drought also remained a primary concern. The condition of corn and soybeans was only slightly weaker than a year ago in most states. The condition of wheat in nearly all District states was exceptionally poor and could hinder revenues for many producers.\nFor more information about District economic conditions visit: www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2022/2022-07-bo

"July 13, 2022\nSummary of Economic Activity\nBusiness activity continued to expand at a modest pace in recent weeks. Employment was flat as turnover remained high and wages grew at an above-average rate. Prices continued to rise at a stable but above-average pace. Retailers enjoyed strong sales growth, while travel-related activity rebounded sharply to near pre-pandemic levels. Manufacturers had mixed results that yielded modest revenue gains on average, and software and IT services firms reported moderate growth that mostly exceeded expectations. Commercial real estate contacts described activity as roughly steady, but expressed growing concerns related to high borrowing and construction costs. Higher mortgage rates led to slightly softer demand for homes, boosting inventories in some markets. With some exceptions, the outlook turned more cautious or even pessimistic. Many saw ongoing inflation (and efforts to control it) as posing significant threats to activity moving forward.\nLabor Markets\nEmployment was roughly flat on average among First District contacts as wages continued to grow at an above-average pace. Retailers experienced somewhat greater ease in hiring, but others faced ongoing challenges in finding and/or retaining workers. One IT firm raised its headcount considerably year-to-date, but among other contacts employment was either stable or, in the case of one manufacturer, down moderately. The majority of contacts reported either above-average or robust recent wage increases. Some others planned to enact significant increases in the near future and a small minority held wages fixed, citing previous wage increases or enhancements to nonwage incentives. Looking ahead, IT services contacts and one retailer planned to increase staffing levels by slight to moderate margins, while manufacturers expressed no major hiring plans or, in one case, planned on further layoffs to compensate for ongoing demand weakness.\nPrices\nPrices increased at an above-average pace on balance. Several firms enacted large or very large price increases and some others were planning to impose new mark-ups soon. Others raised or planned to raise effective prices via reduced discounts, and a minority held prices firm or (one case only) lowered them slightly. Notable price increases included an 87 percent increase in Boston hotel room rates between February and May of 2022, far exceeding typical seasonal gains, and year-over-year price increases of 25-30 percent for frozen fish products. Cost pressures intensified further for fuel and freight, food commodities, and labor. Nonetheless, pass-through was described as incomplete because of anticipated consumer pushback, and some ruled out further price increases moving forward. The risk of ongoing high inflation was a central concern among many contacts, who worried about its implications for consumer demand and for their own profit margins.\nRetail and Tourism\nFirst District retail and tourism contacts enjoyed strong sales growth recently. For both a clothing retailer and a furniture seller, sales increased at a brisk pace, exceeding year-to-date expectations, as supply chain issues eased. Despite that recent strength, retailers' optimism looking ahead was somewhat tempered by concerns about inflation and a possible recession. Tourism contacts also reported accelerated growth in sales. Airline passenger traffic through Boston rose at a rapid pace, and as of June 2022 had reached 90 percent of its June 2019 level. Advance bookings for July and August showed further gains, with improvements in all types of travel. The number of travelers by cruise ship increased sharply, but as of May 2022 passenger volume was still less than half of its 2019 benchmark. The Greater Boston hotel occupancy rate in May 2022 rose 30 percentage points from its February 2022 level, and more than doubled from a year earlier, to land at over 77 percent. Convention activity accelerated, with recent attendance at roughly 80 percent of pre-pandemic levels and advance bookings poised to meet or exceed 2019 levels. Tourism contacts were resoundingly optimistic for the rest of 2022.\nManufacturing and Related Services\nSales volume was flat or somewhat softer among most manufacturers contacted this round, while one reported robust sales growth. However, two firms that experienced weaker demand nonetheless had modest revenue gains owing to output price increases. One contact with stable recent sales noted that year-over-year sales were still down significantly. In addition, a furniture manufacturer said that while April and May were very strong, sales growth slowed considerably in June, coinciding with the FOMC rate increase announcement. Contacts faced intense input pricing pressures and some raised prices further in recent months, but pass-through was incomplete. Logistics remained a major problem for some. Two contacts reported downward revisions to capital expenditure plans due to long lead times for new equipment and construction delays. Most contacts (with one exception) held an optimistic outlook, but several said they were more cautious than they had been earlier in the year. In particular, inflation presented downside risks for some and another faced uncertainty over future sources of demand.\nSoftware and IT Services\nSoftware and IT contacts experienced stable to moderately higher sales in the second quarter and reported robust sales increases from a year earlier. Recent results exceeded expectations at two of three firms contacted, one of which benefited indirectly from the recent rebound in elective surgeries. Operating margins increased modestly on average as conditions normalized following pandemic-related disruptions. Capital and technology spending was unchanged and was expected to hold steady in the coming months. The overall economic outlook turned less optimistic this quarter due to concerns about inflation and a possible recession. Nonetheless, all expected demand at their respective firms to remain stable for at least the third quarter of 2022, barring significant changes to the macroeconomic environment.\nCommercial Real Estate\nFirst District commercial real estate leasing activity was roughly steady in recent weeks, but investment activity fell and the outlook worsened. Contacts reported that office tenants approached leasing decisions with greater clarity. In Connecticut, office downsizing led to substantial negative absorption. Elsewhere, changes in office space requirements were mixed, but occupancy rates remained well below pre-pandemic levels in downtown areas. While office asking rents and vacancy rates were flat, pressure for costly tenant improvements was significant and shorter-term leases were the norm. Industrial leasing activity persisted at a solid pace amid historically low vacancy rates, and industrial rents edged even higher. Retail leasing was stable. Two contacts noted a significant slowdown in commercial property sales volume, and one noted a moderate decline in nonresidential construction, developments that reflected rising interest rates and sky-high building costs. Life sciences conversions also slowed amid concerns about tenants' creditworthiness and a looming glut of space. The outlook turned decidedly more pessimistic, as contacts expected further declines in investment sales and construction moving forward. Contacts largely expected leasing to slow in the summer months for seasonal reasons, and some saw a chance of weakness in the fall in response to further interest rate increases and potentially worsening macroeconomic conditions.\nResidential Real Estate\nFirst District contacts reported that higher mortgage rates had led to somewhat cooler demand for residential real estate, resulting in increased inventories in recent months. (Vermont reported changes to April 2022 and all other areas reported changes to May 2022. Connecticut data were unavailable.) Closed sales declined again significantly on a year-over-year basis in most markets, but the pace of decline moderated from a month earlier for seasonal reasons. However, closed sales increased slightly over-the-year for single-family homes in Boston and for condos in Rhode Island. Boston's results were attributed to seasonal factors as well as a rush to buy before interest rates increased further. Inventories increased in most markets in recent months, reflecting a softening of demand, but remained down on a year-over-year basis in several markets. The price of single-family homes continued to rise at about the same year-over-year pace as a month earlier. However, condo markets experienced downward price pressures. Going into the summer, contacts were optimistic that residential inventories would increase further and that prices would level off, developments that should offer some relief to potential buyers.\nFor more information about District economic conditions visit: https://www.bostonfed.org/in-the-region.aspx\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2022/2022-07-ri

"July 13, 2022\nSummary of Economic Activity\nSince our previous report, the regional economy continued to expand modestly, although there were emerging signs of softening demand. Manufacturers reported declines in shipments and new orders; at the same time, they continued to struggle with supply chain disruptions, labor shortages, and rising costs. Fifth District ports continued to report that imports outpaced exports. Meanwhile, trucking firms reported some easing of freight conditions and a modest increase in labor availability. Retailers reported some reduced demand for their goods, although sourcing remained difficult and inventories stayed low. Leisure travel, on the other hand, held strong and business travel started to come back. Real estate markets\u2014residential and commercial\u2014were tight, although in some residential markets, inventories of homes for sale and days on market increased from low levels. Financial institutions reported slowing in commercial loan demand, which they attributed to rising interest rates. Residential mortgage lending also slowed, but auto lending remained strong. Nonfinancial services firms generally reported moderate growth and solid demand but some expressed uncertainty about the future. Labor markets remained tight, although there was some emerging signs of improved labor availability. Price growth remained robust although, again, there were some incipient signs of slowing growth in recent weeks.\nLabor Markets\nThe Fifth District labor market remained tight and employment grew modestly, although there was some indication of increased worker availability as fewer survey contacts reported trouble finding workers with the right skills. To attract and retain workers, firms increased wages, and looked for other ways to improve retention. Employment grew particularly in leisure and hospitality, where firms reported an increase in tourism and conference activity. Firms broadly expected employment to grow in the next six months.\nPrices\nOverall, price growth remained significantly elevated in recent weeks, although the growth did not steepen. Service sector firms reported increased growth in input prices, but some flattening in output price growth. Manufacturers, on the other hand, reported a moderation in input price growth, but a slight pickup in output price growth. Compared to last year, prices were still increasing at a high rate. Firms across industries continued to report that shortages of materials, rising fuel costs, and steep transportation costs contributed to price rises. Most firms continued to increase wages in an effort to recruit and retain workers.\nManufacturing\nSince our previous report, Fifth District manufacturers reported a modest decline in demand, while supply chain frictions persisted. Many firms reported decreases in both shipments and new orders from last cycle, which a few firms attributed to rising consumer prices and a shift in consumption from durable goods to services. Survey contacts reported switching suppliers to improve lead times as a way to meet customer demand, but this had mixed results. Backlogs persisted while vendor lead times remained extended. Meanwhile, finished goods and raw materials inventories rose.\nPorts and Transportation\nFifth District ports continued to experience record volumes, with imports far outpacing exports. There were also record numbers of empty containers leaving the ports. However, most ports reported that loaded exports fell this period, partially due to inland constraints. Inland terminals and warehouses were full, and railroads were still restricting the number of containers taken to match available terminal, warehouse, drayage, and chassis capacity. Grain and feed exports were down although the ports expect volumes to increase this summer due to the decreased supply to other countries from eastern Europe. Overall, the dwell time for containers decreased compared to the last report. Spot shipping rates continued to decline but remained well above 2019 levels. Air freight volume was down slightly this period while air freight rates increased due to higher fuel costs.\nTrucking companies reported that demand remained strong, but there were signs of expanding truckload capacity. Trucking firms reported some decrease in booked orders and declining spot rates, although fuel surcharges reduced most of the cost savings. Most trucking companies indicated that drivers have become more available and turnover has decreased due to increased wages and benefits and a return of independent owner-operator drivers to freight lines. Respondents noted continued challenges sourcing new equipment and obtaining parts to service their existing fleet.\nRetail, Travel, and Tourism\nSince our last report, many retailers reported that sales had started to decline slightly. In addition, rising costs reduced consumer demand for products and services. Retailers noted that the supply chain has been unreliable for new inventory. Automotive dealers stated that due to production interruptions, their vehicle inventory continued to be extremely low. Additionally, demand was negatively affected by higher vehicle costs and rising interest rates. Several respondents mentioned increasing wages and benefits in order to reduce turnover and attract workers. In the Fifth District, leisure travel remained strong and contacts reported that both group and business travel had started to come back. Both hotel occupancy rates and average daily rates increased in recent weeks. Passenger counts at airports were robust, but there remained issues with flight cancellations due to lack of flight crews. Hospitality firms continued to struggle with workforce shortages despite higher wages and benefits.\nReal Estate and Construction\nRespondents indicated that the residential real estate market remained competitive. However, contacts reported there was a shift in market activity to slightly lower sales volumes and a reduction in buyer traffic, which they attributed to higher mortgage rates. Inventories of homes for sale and days on market increased in the last month while growth in listing prices for homes started to soften. Nonetheless, in many markets the shortage of new homes persisted, as did the slowing of new home completion due to supply chain disruptions. Potential homebuyers were being priced out of the housing market by the interest rate increases and higher home prices, particularly first-time homebuyers.\nOverall, commercial real estate activity remained strong. Availability of Class A office tightened, especially in suburban markets. Retail vacancy rates continued to edge down although shopping centers that experienced higher store closures during the pandemic were still struggling. New commercial construction was hampered by a lack of availability of some materials as well as a shortage of skilled workers. Respondents noted that rising interest rates slowed sales activity with the exception of stabilized properties, especially industrial and multifamily, which continued to sell at high prices due to strong leasing demand and increasing rental rates.\nBanking and Finance\nLoan demand began to slow for most commercial loan types, with this easing attributed primarily to rising interest rates. Residential mortgage demand continued to slow because of higher rates and limited housing stock. Auto lending, especially used autos, continued to be strong with respondents noting very little effect on demand from higher rates or limited inventories. Deposit growth was mixed: some institutions reported slowing due to rising prices increasing consumers' need for cash, but other institutions reporting increased growth attributed to a flight to safety. Overall credit quality remained good, and delinquencies remained low. Loan quality was stable.\nNonfinancial Services\nNonfinancial service providers continued to report moderate growth and solid demand. Contacts were concerned that their increased costs could hamper growth and negatively impact employment. One employment firm noted they expect to reduce headcount by the fall because rising interest rates will force clients to reduce project spending. One professional services firm reported that recession concerns caused their clients to consider a decrease in spending. Finding employees remains a top concern of respondents. Many of them are increasing wages and benefits to reduce turnover and attract talent.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/2022/2022-07-at

"July 13, 2022\nSummary of Economic Activity\nEconomic activity in the Sixth District expanded modestly from mid-May through June, albeit at a slightly slower pace. Labor markets remained tight and wage pressures persisted. Some nonlabor costs continued to rise. Firms' pricing power remained steady. Retailers experienced solid demand, on balance, and demand for new autos increased but was hindered by low inventory; used vehicle sales declined Leisure travel activity was robust, and business travel improved. Demand for housing slowed amid record home prices and rising mortgage interest rates. Commercial real estate activity remained mixed. Manufacturing demand remained strong. Transportation activity was mixed. Deposit growth slowed at financial institutions, but demand for loans increased.\nLabor Markets\nLabor market conditions were largely unchanged from the previous report. Most contacts continued to report tightness. Competition for employees remained high and turnover was elevated by most accounts; some reported modest improvements in labor availability. Firms continued to adapt their businesses and policies, including more widespread adoption of flexible work arrangements, to attract and retain workers. Some firms reported shifting the composition of their workforce to more part-time staff to reduce benefits costs or attract candidates in or near retirement. Contacts reported increasing training and workforce development efforts to upskill staff, and some were streamlining operations, enabling them to grow without the need to hire.\nReports of upward pressure on wages persisted, particularly among lower-wage positions. Firms noted providing recruitment and retention bonuses, and a number reported giving bonuses to help offset higher gas and housing costs. Several employers anticipate wage pressures to subside later this year.\nPrices\nDistrict contacts noted continued cost increases over the reporting period, particularly for concrete, steel, and petroleum-based products like plastics and resin. Several contacts, however, noted a slight decrease in freight costs due to slowing demand. Pricing power was described as moderately stable. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth ticked up slightly to 4.3 percent, on average, from 4.2 percent in May. Firms' year-ahead inflation expectations remained unchanged at 3.7 percent, on average.\nConsumer Spending and Tourism\nDistrict retail contacts reported healthy sales levels, on balance, since the previous report; however, some segments, such as furniture and apparel, experienced a slight softening. Rising gas and food prices were noted as cause for growing uncertainty for the remainder of the year. Automotive dealers reported strong demand for new vehicles, which continued to be hampered by inventory shortages, while used vehicles sales declined.\nTravel and tourism contacts reported that business travel and convention activity continued to recover, with solid bookings for the fall. Leisure travel activity remained robust as summer began. While travelers' per capita spending remained elevated, contacts shared concerns about rising prices weakening long-term demand.\nConstruction and Real Estate\nHousing demand throughout the District continued to slow as affordability declined. Home prices reached record levels while mortgage rates rose sharply. The combination of these factors led to a sharp drop in affordability throughout the District. Mortgage originations and pending sales fell in most markets compared with year-earlier levels, as more potential buyers were priced out of the market. Still, the number of days on market remained near record lows. Supply chain disruptions and cost inflation moderated somewhat for new homes. However, builders reported greater buyer resistance to price increases and the need to offer incentives, such as covering closing costs, to sell homes.\nDistrict commercial real estate (CRE) contacts reported strong demand in the multifamily and industrial segments. However, concerns regarding a slowdown in the industrial market grew over the reporting period. In the lower-tier office segment, contacts reported a slight deceleration. Employers' returning to the office mitigated some of the downward trend in the office sector; however, heightened levels of sublease space remained an impediment to recovery. Some CRE contacts reported elevated concerns regarding potential declines in CRE values. Contacts noted increased instances of buyers seeking concessions, shrinking pools of buyers, and declining prices in some property sectors.\nManufacturing\nDistrict manufacturers reported continued strong demand and increased revenues, on balance. However, several firms indicated that production remained hindered by supply chain disruptions and persistent employee turnover. A few contacts reported some slowing in sales which resulted in cancelled shifts and an elimination of overtime. Some firms cited increasing uncertainty about future production amid rising interest rates and costs, and ongoing concerns over supply chain interruptions.\nTransportation\nTransportation activity in the District was mixed. Port contacts again cited record container volumes. In air cargo, demand remained robust even as carriers raised prices. Activity for inland barge companies was flat since the previous report. Railroads experienced continued declines in total rail traffic, but intermodal traffic improved slightly. Trucking firms reported further slowing in domestic freight and an easing of capacity constraints. While expected to eventually dissipate, contacts suggested that supply chain disruptions could persist for the next year or beyond.\nBanking and Finance\nActivity at District financial institutions slowed amid rising interest rates. Mainly, deposit growth decelerated, and financial institutions slowed expansion of securities portfolios. Still, most loan portfolios grew, except for construction and development loans at larger institutions. Some portfolios, such as agriculture loans and credit cards, experienced higher delinquency rates, though those rates remained below pre-pandemic levels. The allowance for credit losses, as a percentage of nonperforming loans, remained sufficient for the existing credit environment.\nEnergy\nDemand for refined products was robust. Oil refining remained at historically high production levels and some refiners delayed maintenance projects to ensure supply availability. Natural gas production rose, and exports soared amid increasing global demand. Contacts reported planned or ongoing domestic pipeline projects to transport natural gas from producers to processing plants and/or export terminals. Utility contacts reported that the recent heat wave put pressure on utility systems and some regions were at high risk of interrupted service due to heightened demand and insufficient generation capacity. Utilities also experienced higher fuel and power costs which are expected to eventually result in higher utility bills for customers. Investment in renewables remained robust, particularly in solar and offshore wind, as well as recently announced carbon capture facilities in the District.\nAgriculture\nAgricultural conditions remained mixed. Most of the District was drought free. On a month-over-month basis, the June production forecast for Florida's orange crop increased slightly from the previous forecast, but was still well below last season's production. The USDA reported year-over-year prices paid to farmers in April were slightly up for cattle corn, cotton, eggs, milk, soybeans, rice, and broilers. On a month-over-month basis, prices decreased for broilers, corn, cotton, eggs, milk, rice, and soybeans. Cattle prices were unchanged.\nFor more information about District economic conditions visit: https://www.atlantafed.org/economy\u2010matters/regional-economics.aspx\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2022/2022-07-cl

"July 13, 2022\nSummary of Economic Activity\nBusiness activity in the Fourth District declined slightly, and contacts expected further weakening in the months ahead. The softening in customer demand was evident across sectors as households and firms contended with higher costs and rising interest rates. Additionally for goods producers, ongoing supply chain challenges and heightened uncertainty about the economic outlook led to declines in orders and reduced capital investment. The share of firms that increased staff levels or raised wages has eased since the start of 2022. Still, labor market conditions remained tight. Firms continued to add staff moderately amid high turnover, and they continued to give pay increases that were above historical averages. Looking ahead, most contacts intended to increase their staffing levels throughout the remainder of the year. Reports of higher nonlabor costs were widespread, particularly for food, energy, and petroleum-related products. Most firms raised prices, but a number of contacts reported that their profit margins had shrunk as they were unable to fully pass cost increases to customers.\nLabor Markets\nEmployment rose moderately, albeit at a slower pace than at the start of the year. A few firms noted that worker availability had improved somewhat, but for the most part, contacts cited difficulty finding and retaining workers across skill levels. Tight labor supply prompted one retailer to start recruiting the youngest workers allowed by law. High turnover rates remained a challenge, which some contacts attributed to retirements and employees' leaving for higher pay. One manufacturer said that a few of the firm's employees had left because of high commuting costs. Despite difficulty finding workers and recent softening of customer demand, most contacts intend to add staff throughout the remainder of 2022.\nTight labor market conditions continued to put upward pressure on wages. However, the share of contacts reporting such increases has declined from around 70 percent at the end of 2021 to a little more than half during the current reporting period. Pay increases were often above historical averages in percentage terms, although some firms noted that such increases did little to attract more job applicants. Several firms said that pay increases for new workers required them to increase wages for current staff. One manufacturer remarked that employees were worried about rising food and fuel costs and that she was considering offering them memberships to warehouse clubs to help reduce these expenses. A banker with a similar concern said that staff are pushing for remote work and that the firm was considering providing transit benefits.\nPrices\nThe vast majority of firms reported that nonlabor costs rose for a broad range of items. There were scattered reports that the sizes of recent cost increases have diminished compared with last year's but that they remained large relative to historical norms. Higher energy costs were widely cited as a strain on firms, but other inputs, including cardboard, food, and electronics, also increased in cost. Goods producers reported that higher oil and electricity costs have pushed up prices for an array of inputs such as drywall, lubricants, and asphalt. A few contacts reported that lumber and steel prices declined. Contacts generally expected meaningful upward pressure on nonlabor costs to continue over the next few months.\nMost firms raised prices as they attempted to keep up with rising costs. There were a few exceptions, though. Spot rates for freight services came down because of weaker demand. Also, in a few instances some manufacturers passed through lower steel costs to customers. Despite raising prices, several retailers and manufacturers commented that they were unable to fully pass cost increases to customers and that their profit margins were shrinking. One manufacturer noted that smaller firms were less able to raise prices than larger firms and consequently were experiencing greater pressure on their margins.\nConsumer Spending\nReports suggested that consumer spending slowed. General merchandisers and apparel retailers reported weakened demand, which they attributed to higher food and gas prices decreasing households' discretionary income. Restaurateurs reported steady sales; however, they also expressed concern that inflation was dampening customer demand. One contact commented that high gas prices caused households to \"stay local\" for vacations, a situation which benefited his restaurant, but he expected demand to soften as consumers draw down their savings to keep up with rising expenses. Auto dealers reported declines in new-vehicle sales and leasing that they attributed to a lack of inventory and rising interest rates that are pricing out lower-income customers. Some dealer contacts projected high gas prices and rising vehicle prices will further slow demand, a situation which will eventually allow stocks to build.\nManufacturing\nDemand for manufactured goods remained flat, and manufacturers grew more cautious overall. High inflation, labor shortages, ongoing supply chain disruptions, and concerns over excess inventory contributed to a decrease in orders for some producers. Many manufacturers noted that backlogs were at or near record highs; however, some expected order cancelations to increase in the coming months. Spending on capital equipment declined modestly, with one contact noting that long lead times meant almost all orders for this year would not be fulfilled until next year. On balance, manufacturers expected demand to decrease modestly in coming months.\nReal Estate and Construction\nResidential construction and real estate activity softened further amid rising interest rates. One real estate agent noted that while demand remained elevated, rising interest rates priced some buyers out of the market, which reduced the number of competing offers on listings. Construction contacts noted that although new traffic has slowed, their large backlogs have kept them busy. Going forward, contacts anticipated housing demand would slow further as rising interest rates and high inflation push more buyers out of the market.\nDemand for nonresidential construction and real estate also slowed amid heightened uncertainty about the economic outlook and increasing construction costs and interest rates. One real estate agent noted that growth and expansions for many of his firm's customers halted at the beginning of June. Contacts anticipated that current headwinds would persist and further dampen demand into the near future.\nFinancial Services\nOverall, banking activity remained stable. Contacts noted a slight increase in demand for commercial loans, particularly for financing inventory and working capital. Nevertheless, one banker noted that commercial clients are contacting his bank more frequently over concerns about a possible persistent slowing in economic activity. On the consumer side, contacts noted declines in auto loan and mortgage applications related to low inventories and higher interest rates. Lenders said that commercial and consumer loan delinquency rates remained low and core deposits were stable. Looking ahead, multiple contacts stated that they expect deposits to decrease into the next quarter as more of businesses' and consumers' account holdings are consumed by higher costs. Bankers also expected overall loan demand to level off or slow in the third quarter.\nProfessional and Business Services\nDemand for professional and business services was stable at elevated levels. One consultant noted that while there have been many discussions about a potential slowdown within the next year, there had been no actual change in demand for services thus far. Going forward, software providers and digital authentication firms anticipated that activity would remain elevated as the robust demand for online shopping and services is expected to persist into the near future. Engineering firms were also optimistic and anticipated increased activity related to infrastructure spending.\nFreight\nFreight demand weakened during the reporting period. Demand on the spot market fell amid a decline in imports, partly because of the lingering effects of China's COVID-19 lockdowns and ongoing supply chain issues. Some companies reported reducing capital expenditures given long lead times and other difficulties securing new equipment, while one contact was concerned about future demand for freight services. Driver availability reportedly improved, although, overall, the supply of drivers remained tight.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nJuly 13, 2022\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded modestly during the mid-May through June reporting period. Overall labor market conditions remained tight, accompanied by wage increases that lagged the pace of price inflation. Inflation remained elevated, driven chiefly by food and energy price increases. Retail sales were strong but moderated further, while conditions in the consumer and business services sectors deteriorated slightly. Conditions in the manufacturing and agriculture and resource-related sectors were mixed. Residential real estate activity eased, while activity in commercial real estate decelerated modestly. Lending activity was unchanged on balance. In general, District contacts communicated a somewhat worsening outlook for the year.\nLabor Markets\nLabor markets remained tight across all sectors during the reporting period. Employers reported difficulty attracting skilled workers in health care, technology, engineering, and finance as well as the skilled trades. Contacts in leisure and hospitality continued to operate below desired staff levels despite some reported increase in job applications. In addition, contacts in the air travel industry said that although employment remained below pre-pandemic levels, airlines began adjusting their summer schedules to better reflect crew availability. Some contacts reported improved employee retention in recent weeks, but turnover rates remained generally elevated. A few contacts mentioned that the recent hiring freezes at large technology firms could make it easier for other businesses to attract experienced professionals in the field. Several contacts also noted a pickup in unionization efforts in the retail and health-care sectors.\nWages grew across all sectors but did not keep pace with price inflation. Reports indicated that workers demanded more pay, citing higher food and energy prices. Additionally, employees continued to put emphasis on flexible work arrangements, expanded benefits, and hiring incentives. Contacts in agriculture, health care, and financial services reported the highest wage increases. Despite ongoing labor shortages, several contacts reported not planning mid-year raises because of overall economic uncertainty and previously granted pay adjustments.\nPrices\nPrices continued to grow during the reporting period, particularly for energy products. Price increases were reported across multiple industries, including manufacturing, construction, agriculture, health care, and technology services. Fuel surcharges were widespread, particularly in freight and manufacturing, and contacts reported little resistance to such adjustments given the current inflationary environment. Raw materials costs remained elevated, although there were reports of some relief in lumber and steel prices. Contacts from the travel and hospitality industries reported sustained increases in airfares and hotel rates amid high demand for leisure travel. Contacts generally expected cost pressures to persist, and in some cases worsen, over the next few months.\nRetail Trade and Services\nRetail sales growth moderated further over the reporting period. Demand for retail goods remained strong but rising prices led consumers to trade down and limit the number of items purchased. Reports indicated that rising costs for food and fuel were particularly binding for consumers when deciding what to purchase. Contacts noted that sales growth for durable goods such as motor vehicles, electronics, appliances, and furniture moderated noticeably. Despite some easing, supply chain issues continued to strain inventories, and worker shortages at stores limited business hours and sales. While one contact from Utah mentioned little to no vacancy in retail space, a specialty retailer from Arizona reported widespread excess retail capacity in the region.\nConditions in the consumer and business services sectors deteriorated slightly on net. Contacts reported slowing sales with rising costs for materials, fuel, transportation, wages, and other supplier services. Contacts noted that high inflation led both consumers and businesses to reconsider spending on discretionary services, while labor shortages made it difficult to properly train new hires. Conversely, demand for domestic and international travel, as well as hospitality services, continued to grow strongly, partly due to consumers' pent-up demand for vacationing. Demand for health-care and wellness services remained at or near capacity in some regions.\nManufacturing\nConditions in the manufacturing sector varied by industry. Demand for capital equipment strengthened, as firms in the food, beverage, chemical, personal care, and pharmaceutical industries sought to increase productivity. However, new orders and production of wood products, electrical equipment, and fabricated metals declined over the reporting period. Manufacturers' backlogs remained elevated. Supply chain disruptions continued to negatively impact the availability and cost of raw materials and extend delivery times. A few contacts reported accumulating vast inventories of hard-to-obtain materials. Many contacts expressed concern that COVID-19 lockdowns in China have remained a source of supply chain uncertainty.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors were mixed. Drought conditions in many areas adversely impacted the growing season, with some producers letting portions of their farms go fallow in order to prioritize water usage. Growers in the Pacific Northwest instead reported increased precipitation, with one producer expressing concern that the colder weather would reduce crop yield. Farmers throughout the District reported increased international demand for both fresh and processed foods but noted that a strengthening dollar dampened sales somewhat. Input costs, such as those for fertilizer, machinery, fuel, and feed, increased further over the reporting period, partially due to the continuation of the Russian invasion of Ukraine. Supply chain disruptions persisted, but many contacts reported an easing of port backlogs and shipping rates despite increased fuel costs. One producer in the Pacific Northwest warned declining shipping rates could indicate decreasing food sales prospects, while a contact in the seafood sector reported only minor improvement in shipping conditions.\nReal Estate and Construction\nResidential real estate activity eased over the reporting period. Supply chain disruptions and rising labor and material costs continued to put upward pressure on housing prices. Sharp increases in mortgage rates, combined with high home prices, cooled down demand for existing and new single-family homes. Many contacts highlighted a decline in the number of offers sellers received. Inventories remained strained by historical standards despite an increase in the number of houses available for sale in some regions. Homebuilder confidence declined further, and permit issuance weakened in most of the District. One developer in Alaska reported a considerable decline in speculative construction of housing units and a low supply of seasonal housing. Reports mentioned increasing rents and declining availability of multi-family housing units.\nActivity in the commercial real estate market was balanced overall. Demand for retail space weakened throughout most of the District, while demand for industrial and warehouse space remained robust. Contacts noted that commercial real estate permits and construction slowed down somewhat, and one contact in the Pacific Northwest said that ongoing labor and material shortages delayed construction projects. In California, commercial real estate conditions were reportedly steadier.\nFinancial Institutions\nLending activity was unchanged on balance. The number of corporate loans and consumer credit cards issued increased, while demand for new mortgages, refinancing, and auto loans declined in most areas. Demand for industrial lending remained steady. Many contacts mentioned a notable increase in competition for loans and continued ample liquidity. Credit quality remained high, but contacts expected credit health to deteriorate somewhat on account of increasing interest rates and moderating deposits. Financiers in the private equity and venture capital space noted that the cost of leveraging has increased notably, dampening the volume of new deals in recent weeks. Demand for insurance products generally declined, with a notable exception being pet insurance.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

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"July 13, 2022\nSummary of Economic Activity\nEconomic activity in the Ninth District grew modestly since mid-May. Employment grew slightly, as labor demand appeared to weaken but remained at a high level. Wage and price pressures remained strong as employers worked to attract talent and continued to pass on increased input costs. Professional services, manufacturing, and energy activity increased since the last report. Consumer spending fell slightly as households adjusted their budgets in response to increased inflation and fuel costs. Commercial construction was flat and residential construction was mixed, while commercial and residential real estate activity decreased. Agricultural conditions remained strong. Reports from minority- and women-owned business enterprises were slightly positive.\nLabor Markets\nEmployment grew slightly since the last report. Overall, firms added more workers, but some signs of weakness appeared. Job postings, for example, flattened or fell across District states in recent weeks, but remained at high levels. Anecdotal reports of layoffs rose, as did initial unemployment claims. An annual survey of professional services firms found that their employment levels have been flat, in part due to persistent difficulties attracting labor, a continued point of emphasis from numerous sources. Recent statewide data on workers' compensation policy renewals suggested that Minnesota firms were slightly pessimistic about future staffing levels. A monthly pulse survey of District employers also found modestly softer hiring expectations in the coming month compared with the previous month.\nWage pressures remained strong. Among professional services firms, 36 percent said wages grew by 6 percent or more over the last 12 months; however, respondents expected more moderate growth on balance over the coming year. A Minnesota financial services firm recently gave employees $5,000 \"inflation bonuses\" to help offset rising consumer prices. A staffing contact noted that average wages for administrative staff have risen by 20 percent, year-over-year; wages for unskilled manufacturing and other industrial work \"are getting much closer to skilled [wages].\" A North Dakota contact said firms were doing more with fewer workers, and able to absorb larger-than-average raises as a result.\nPrices\nPrice pressures remained strong since the previous report. Three-quarters of respondents to a monthly District business survey reported that their non-labor input prices increased in May from a month earlier. More than half said they increased their selling prices over the previous month; 51 percent expected to increase prices in June. Manufacturing contacts reported significant ongoing wholesale price pressures. Retail fuel prices in District states increased briskly since the last report. Prices received by farmers increased in May from a year earlier for corn, soybeans, wheat, canola, dry beans, potatoes, hay, cattle, turkeys, eggs, and milk, while prices for hogs decreased. By contrast, prices for certain types of lumber fell in May from the previous month.\nWorker Experience\nJob seekers were mainly looking for full-time employment, upward mobility, and better pay, according to South Dakota respondents to a recent worker experience survey. Childcare costs and availability and the need for more skills or credentials topped the list of barriers job seekers faced in pursuing their goals. Rising fuel, energy, and grocery prices continued to put downward pressure on workers' budgets. More than 70 percent of survey respondents reported having reduced their consumption of groceries, and 40 percent said they were cutting back on their fuel consumption. A moderate-income social service professional shared that she was making more \"lower-end meals,\" limiting entertainment and social activities, purchasing more secondhand items, and forgoing house repairs to adjust her budget. Many others noted similar adjustments.\nConsumer Spending\nConsumer spending fell slightly since the last report, with sources noting several shifts. Contacts at two regional malls noted slower foot traffic in June, which they attributed to the effects of high gas prices and overall inflation. Multiple contacts reported that consumer demand was increasing for services while ebbing for durable goods. Spending was reportedly still healthy among higher-income households, while lower-income households faced choosing among competing needs. A grocer noted increased purchases of cheaper foodstuffs to offset higher costs overall. Tourism contacts reported strong activity overall in the District. However, a flood in the Yellowstone region of southern Montana was expected to have a major, negative impact on the region for the remainder of the summer season.\nProfessional Services\nProfessional services sector activity increased moderately. Respondents to the annual services survey reported increased revenues over the previous year, while profits, productivity, and employment were steady. Firms' expectations were mildly positive for the coming 12 months. A media company executive noted he had to increase prices in response to higher input costs but expected conditions to stay \"steadily well.\"\nConstruction and Real Estate\nCommercial construction was flat since the last report. Contacts said overall demand was still healthy, but persistently high material costs, supply chain difficulties, and rising borrowing costs were having an increasingly negative impact. New projects and total active projects over the most recent six-week period (ending mid-June) were lower, year-over-year. Some regions have seen strong activity, including Billings, Mont., and Mankato, Minn.; Sioux Falls, S.D., has seen record-breaking activity. A contact there said that \"interest rate hikes have not seemed to dampen anyone's urge to build yet.\" Residential construction was mixed; single-family permitting was flat or lower in much of the District while multifamily permitting remained solid across the District, and particularly in Minneapolis-St. Paul.\nCommercial real estate was modestly lower since the last report. Real estate contacts reported slower deal activity, except for industrial real estate, which remained strong. To compensate for higher financing costs, leveraged buyers were pulling back from deals or reducing offers. Office occupancy remained weak as return-to-office momentum has faltered due to hybrid work schedules and continued COVID-19 infections. Retail occupancy rates have increased in some markets, thanks in part to comparatively low levels of new construction. Residential real estate activity was moderately lower. New listings in June flattened and pending sales fell, largely attributed to higher mortgage rates. Price discounts were reportedly rising but have not yet impacted median prices meaningfully.\nManufacturing\nManufacturing activity increased moderately since the last report. A regional manufacturing index indicated increased activity in Minnesota and South Dakota in June relative to the previous month, while activity in North Dakota decreased. Most manufacturing contacts reported recent orders were increased or unchanged since the last reporting period; however, a growing number reported slowing sales or were expecting a slowdown in orders in the coming month.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions remained strong since the previous report. Most of the region's corn and soybean crops were rated in good or excellent condition and progressing on schedule. However, nearly half of the Montana winter wheat crop was in poor or very poor condition, as drought conditions persisted in the Golden Triangle region. District oil and gas drilling activity increased slightly since the last report.\nMinority- and Women-Owned Business Enterprises\nReports from minority- and women-owned business enterprises (MWBEs) in the District were slightly positive. The majority of MWBE respondents to a survey said their sales and profits remained steady or grew in May compared to the previous month. Forty percent of respondents said their ability to hire had improved but challenges remained for many. To attract and retain workers, most reported having increased wages and provided more flexible schedules and working conditions. Most MWBE respondents expected sales to remain flat or improve in the next month but lowered their profit expectations.\nFor more information about District economic conditions visit: minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"June 1, 2022\nSummary of Economic Activity\nExpansion in the Eleventh District economy slowed to a moderate pace during the reporting period. Most notably, home sales slowed, retail sales fell, and growth in manufacturing and nonfinancial services decreased from a solid to a moderate pace. Growth in loan volumes remained strong across most loan types, except for residential real estate, which saw no change in loan volumes over the last six weeks. Activity in the energy sector expanded further, while worsening drought further hampered agricultural conditions. Employment rose robustly, and wage growth continued to be elevated amid labor market tightness. Supply-chain issues and high energy prices continued to drive up costs. Optimism in outlooks waned, and uncertainty stayed elevated amid concerns about inflation, rising interest rates, resolution of supply-chain issues, and expectations of weakening demand.\nLabor Markets\nDemand for labor continued to be strong, though supply remained tight. Several firms noted that staffing shortages were a drag on growth. Three-fourths of the 230 Texas business executives responding to a Dallas Fed April survey cited a lack of applicants as an impediment to hiring workers, and 30 percent within that group noted the availability of applicants had worsened over the past month. Staffing firms reported increased interest in direct hires over temporary workers in recent weeks. One contact mentioned that a large e-commerce firm intends to automate half of the jobs at a new facility in Shreveport, Louisiana, due to difficulty hiring, and there were multiple reports indicating that firms were beginning to consider outsourcing work overseas due to local labor market tightness.\nWage growth remained robust amid labor shortages. Oilfield services firms cited intensifying wage pressures, and a large energy firm noted raising wages for oilfield workers by 10 percent. Over half of the firms in the above-mentioned April survey said job applicants were looking for higher pay than what was being offered. Multiple firms reported offering referral or hiring bonuses, and a nondurable goods manufacturer noted difficulty finding nightshift workers at an average hourly wage of $27. Staffing firms reported pressure to decrease mark-ups on bill rates in response to rapidly rising wages.\nPrices\nSelling prices climbed further at a rapid clip. Growth in non-labor input costs remained elevated, with contacts mainly citing material shortages, supply-chain issues, and/or high fuel prices as driving the rising costs. Energy firms said that day rates for rigs had climbed by 60 percent in six months, and many were revising up their expectations for overall cost increases from 10-15 percent to 15-20 percent for the year. Transportation costs remained high, and airlines said average fares rose above pre-pandemic levels. There were multiple reports of elevated or rising prices for feedstocks, metals, and construction materials. In contrast, prices for lumber and used vehicles declined. Pricing power generally remained solid, though several contacts, particularly in the service sector, noted diminished ability to fully pass along costs to end users and pushback from customers on the rapid pace of price increases.\nManufacturing\nTexas manufacturing activity increased moderately during the reporting period. Output growth was led by nondurable goods such as food and chemical manufacturing. Gulf Coast refinery utilization rates eased in April, while chemical production increased, buoyed by strong domestic and export demand. Among durables, strength was seen in transportation equipment and construction-related manufacturing. Enduring supply-chain backlogs and logistical constraints were impeding the ability of several manufacturers to meet demand. Manufacturing outlooks were negative with contacts citing geopolitical tensions, COVID lockdowns in China, inflation, and supply-chain delays as headwinds.\nRetail Sales\nRetailers and wholesalers reported sustained weakness in overall sales, with tight inventories and ongoing supply chain challenges continuing to hamper growth. Auto dealers cited continued declines in sales stemming from low inventories of new vehicles; however, demand for auto servicing and parts sales was characterized as normal. A few contacts noted that the opening of the border with Mexico has greatly benefited retailers in the area. Overall outlooks were pessimistic, however, with continued concern regarding supply side stresses.\nNonfinancial Services\nThe service sector expanded moderately during the reporting period. Revenue growth was mostly broad-based, with continued solid increases seen in the leisure and hospitality and transportation and warehousing sectors. Staffing firms continued to report strong demand, particularly for healthcare, IT, and construction workers, and added that filling low-skilled positions was more challenging than finding high-skilled workers. Demand for air travel rose during the reporting period. Leisure travel continued to dominate airline bookings, and contacts said that strong momentum heading into the summer travel season was boosting outlooks. Vessel traffic at Texas seaports fell slightly in April but was up strongly year to date relative to 2021. Vessel dwell times remained elevated in part due to truck driver shortages. Air cargo volumes also rose, though shipments to and from China slowed. Service-sector outlooks were subdued due to expectations of weaker demand going forward and uncertainty surrounding the global economic outlook and inflation.\nConstruction and Real Estate\nActivity in the housing market softened. The slowing was particularly pronounced at the entry price level, though rising rates were beginning to hit the move-up market as well. Builders said cancellations were up, traffic was disappointing, conversions were taking longer, and waitlists were shrinking. Offers were coming in closer to asking prices, a departure from the large premiums seen earlier, and incentives, particularly in the form of rate buydowns, rate locks or closing costs, were being reintroduced. Some builders were releasing homes earlier in the building cycle to enable clients to lock in rates. Uncertainty in outlooks increased, with contacts voicing concern about the impact of rising mortgage rates and higher home prices on affordability and future sales.\nThe multifamily market continued to tighten, with occupancy ticking up further. Apartment rent growth remained elevated, though there were reports of slowing at the lower end. Commercial real estate markets were steady to stronger. Office leasing continued to improve, and activity in the industrial sector remained elevated. One contact noted that underwriting standards for multifamily deals were gradually tightening, which may impact sales and valuations going forward.\nFinancial Services\nLoan demand rose over the past six weeks despite broad increases in loan pricing. Loan volume growth spanned loan types except for residential real estate, where lending was flat. Nonperforming loans continued to decrease, and credit standards and terms tightened further. Looking six months ahead, contacts expect a decline in loan demand and general business activity and an increase in nonperforming loans. Contacts note rising interest rates, inflation, and expectations of slower growth ahead as headwinds.\nEnergy\nOilfield activity increased, with the Eleventh District rig count climbing further during the reporting period. Labor and supply chain constraints continued to worsen and were becoming binding in many cases, slowing the pace of drilling and well completion. Lead times for many critical parts and components were well over a year. Contacts said that raising capital was becoming slightly easier due to an improved outlook for returns. Industry sentiment was cautiously optimistic, with contacts increasingly concerned about further lengthening of lead times for materials and the probability of a recession.\nAgriculture\nDrought intensified over the past six weeks, particularly in the western part of the district. Crop conditions generally declined, with increased risk of reduced yields for this year's row crops. Forage conditions suffered from the lack of moisture, putting additional strain on livestock grazing amid highly elevated supplemental feed costs. This has led to increased culling of herds and lower calf prices. Agricultural product prices showed mixed movements over the reporting period but generally remained high. Despite high prices, contacts noted increased financial risk this year due to drought and higher input costs.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nJune 1, 2022\nThis report was prepared at the Federal Reserve Bank of Philadelphia based on information collected on or before May 23, 2022. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nAll twelve Federal Reserve Districts have reported continued economic growth since the prior Beige Book period, with a majority indicating slight or modest growth; four Districts indicated moderate growth. Four Districts explicitly noted that the pace of growth had slowed since the prior period. Contacts in most Districts reported ongoing growth in manufacturing. Retail contacts noted some softening as consumers faced higher prices, and residential real estate contacts observed weakness as buyers faced high prices and rising interest rates. Contacts tended to cite labor market difficulties as their greatest challenge, followed by supply chain disruptions. Rising interest rates, general inflation, the Russian invasion of Ukraine, and disruptions from COVID-19 cases (especially in the Northeast) round out the key concerns impacting household and business plans. Eight Districts reported that expectations of future growth among their contacts had diminished; contacts in three Districts specifically expressed concerns about a recession.\nLabor Markets\nMost Districts reported that employment rose modestly or moderately in a labor market that all Districts described as tight. One District explicitly reported that the pace of job growth had slowed, but some firms in most of the coastal Districts noted hiring freezes or other signs that market tightness had begun to ease. However, worker shortages continued to force many firms to operate below capacity. In response, firms continued to deploy automation, offer greater job flexibility, and raise wages. In a majority of Districts, firms reported strong wage growth, whereas most others reported moderate growth. However, in a few Districts, firms noted that wage rate increases were leveling off or edging down. Moreover, while firms throughout the country generally anticipate wages to rise further over the next year, one District indicated that its firms' expected rate of wage growth has fallen for two consecutive quarters.\nPrices\nMost Districts noted that their contacts had reported strong or robust price increases \u2013 especially for input prices. Two Districts noted that this rapid inflation was a continuation of trend; however, three Districts observed that price increases for their own goods or services had moderated somewhat \u2013 across the board (among Philadelphia firms) or for some segments (used cars in Boston and manufacturing in Richmond). About half of the Districts observed that many contacts maintained pricing power \u2013 passing costs on to clients and consumers, often with fuel surcharges. However, more than half of the Districts cited some customer pushback, such as smaller volume purchases or substitution of less expensive brands. Surveys in two Districts pegged year-ahead increases of their selling prices as ranging from 4 to 5 percent; moreover, one District noted that its firms' price expectations have edged down for two consecutive quarters.\nHighlights by Federal Reserve District\nBoston\nEconomic activity in the First District increased slightly amid robust wage and price growth. Labor scarcity remained a widespread problem as headcounts increased only slightly. Restaurant profits fell on steep input price increases. The outlook for summer tourism was bright, but many contacts' optimism was tainted by growing fears of recession.\nNew York\nGrowth slowed to a modest pace, with much of the slowing attributed to supply disruptions, worker shortages, and a COVID resurgence. Businesses added staff amidst high turnover. Tourism strengthened, but consumer spending and manufacturing activity weakened. Businesses continued to report widespread increases in prices and wages. Contacts were somewhat less optimistic about the near-term outlook.\nPhiladelphia\nBusiness activity grew slightly \u2013 at a slower pace than in the prior Beige Book period, and some sectors remained below pre-pandemic levels. Rising prices and recession fears have turned consumers and firms more cautious. The labor market remained tight with modest growth. Wage and price growth continued to expand at a moderate and strong pace, respectively, although the pace of both eased somewhat lower.\nCleveland\nBusiness activity decelerated and was slightly positive as firms grappled with ongoing supply chain challenges, tight labor market conditions, and escalating costs. Employment rose moderately. Contacts reported broad increases in wages, costs, and prices. Overall, contacts were less certain about the economic outlook and expected upward pressure on prices to persist.\nRichmond\nThe regional economy grew modestly over the last several weeks. Consumer spending remained strong while manufacturers and service providers reported modest to moderate growth. Import activity slowed slightly, as did trucking demand. New vehicle and home sales were limited by low inventory levels. Employment increased modestly and wages continued to rise moderately. Overall, price growth remained robust.\nAtlanta\nEconomic activity expanded at a modest pace. Labor markets remained tight, and wages continued to rise. Nonlabor costs rose. Retail sales moderated somewhat. Tourism activity remained strong. Housing demand softened slightly. Commercial real estate conditions remained mixed. Manufacturing activity was strong. Banking conditions were mixed.\nChicago\nEconomic activity increased modestly. Employment increased strongly, manufacturing was up moderately, consumer spending moved up modestly, business spending was slightly higher, and construction and real estate activity declined slightly. Wages and prices rose rapidly, while financial conditions deteriorated some. Agriculture income expectations for 2022 were little changed.\nSt. Louis\nEconomic conditions have improved at a modest pace since our previous report, although the outlook has weakened. Prices for raw materials and fuel increased robustly. Consumer spending showed increased signs of price sensitivity and a shift from goods to services. Manufacturing firms reported that a backlog of orders should sustain production even as orders slow due to higher prices.\nMinneapolis\nThe region's economy grew moderately since mid-April. Demand across sectors remained strong but higher input and labor costs put downward pressure on profit margins. Construction and real estate contacts reported some slowing due to interest rate increases. Demand for credit among minority- and women-owned business enterprises was down amid uncertainty about the economy.\nKansas City\nThe Tenth District economy grew at a moderate pace, but expectations for future growth softened somewhat due to a variety of factors. Contacts noted a number of shifts in consumer behavior as prices continued to rise at a robust pace. Labor demand remained elevated, and the number of hours worked increased in recent weeks. Wage growth aimed at retaining workers was much faster than observed in recent years.\nDallas\nEconomic growth in the district slowed to a moderate pace. Growth remained largely broad-based, except for home sales and retail activity, which dipped. Prices rose at a rapid clip, though several firms noted diminished ability to fully pass on cost increases. Employment and wage gains generally remained solid. Outlooks weakened, and uncertainty increased because of rising headwinds.\nSan Francisco\nEconomic activity strengthened moderately over the reporting period. Conditions in the labor market remained tight. Wages and price levels increased significantly. Retail sales continued to increase while demand for services rose considerably. Conditions in the agriculture sector deteriorated somewhat. The residential real estate market remained robust overall, and lending activity was little changed.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

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"June 1, 2022\nSummary of Economic Activity\nBusiness activity decelerated and was slightly positive as firms grappled with ongoing supply chain challenges, tight labor market conditions, and escalating costs. These challenges also clouded the near-term outlook for the economy, a situation leading firms to be conservative with their investment spending. The soft growth of demand was evident in most sectors save for professional services, which grew strongly. In a change from recent reports, concerns about COVID-19 were largely absent from commentaries, and contacts were mainly concerned about the uncertainty of the economic outlook and the inflation environment. Employment rose moderately, but firms continued to report that they were understaffed. Contacts suggested they were more focused on employee retention than in the recent past and had broadly raised wages and bonuses. Costs rose for a wide range of items, most notably for energy and food. Firms generally had little difficulty raising prices to offset cost increases, and many contacts expected upward pressure on prices to persist over the next 12 months.\nLabor Markets\nEmployment rose moderately. A few manufacturing and hospitality firms observed a slight increase in the number of job applicants. That said, many firms said it remained difficult to find workers and that they were operating below desired staff levels. One manufacturer said that the firm's hiring activity was maintaining its staff level and that it was 10 percent short of its desired level. Staff turnover was high for many firms, a fact which they attributed to a variety of factors including retirements, employees' leaving for other higher-paying jobs or opportunities to work remotely, and burnout with workloads. Several contacts observed an increase in workers' quitting their jobs without having lined up another one. One workforce development agency said that it had become so difficult to find workers that the entity resorted to essentially knocking on doors in the community to find potential workers.\nAmid tight labor market conditions, reports of wage increases remained widespread. Many reported that they were more focused on retaining workers and that in addition to raising wages, they were boosting variable pay. Some firms instituted retention bonuses, while others shifted from giving bonuses annually to giving them more frequently to aid retention. A few firms reported that employees had become more concerned about rising living costs and were demanding more pay. One university let employees work from home more often to reduce the impact of rising fuel costs. Contacts generally expected wage pressures to remain high over the next 12 months.\nPrices\nMost contacts reported that nonlabor costs rose for a broad range of items. Higher energy costs were a particular pain point, but other inputs, including food, paper products, building materials, and IT equipment, also increased in cost. There were more reports that vendors were adding fuel surcharges, even in instances in which that was not the norm. A few contacts reported that lumber prices declined and that steel prices plateaued. However, these decreases were outweighed by increases in other input costs. Contacts generally expected upward pressure on nonlabor costs to remain high over the next 12 months. One contact at a business association noted that its members had been hopeful in the recent past that cost pressures would abate sometime this year, but that optimism had waned recently.\nMost firms raised prices as they passed through higher costs of labor, materials, and energy to customers. Contacts generally reported that they had little difficulty passing through costs to customers. However, some consumer-facing firms observed that customers were starting to trim expenses because of higher food and gas prices. One large grocery chain said that \"customers have recently taken aggressive steps to save. They've shifted from national brands to cheaper store brands. They are also doing things such as purchasing half a gallon of milk instead of a gallon.\" Contacts broadly expected to continue to push up their prices over the next 12 months to keep up with rising costs.\nConsumer Spending\nReports suggested that consumer spending was little changed overall, although there was variation by segment. General merchandisers and apparel retailers reported improved demand, while restaurateurs reported a pickup in sales related to improved weather and the onset of wedding and event season. By contrast, auto dealers reported that sales declined even though demand was elevated. One contact explained that auto dealers were selling every car they received from manufacturers, but the number of sales was lower because of limited inventory. Retailers expressed concern that high inflation could weaken consumer spending in the near term, but hospitality contacts remained optimistic that activity would continue to increase going into the summer.\nManufacturing\nDemand for manufactured goods softened following strong growth in the previous period. High inflation, supply chain disruptions, labor shortages, the war in Ukraine, and COVID-19-related shutdowns in China contributed to heightened uncertainty about the economic outlook and caused some manufacturers' customers to reduce orders. Despite softer demand, many manufacturers noted that they still could not meet demand because of shortages of workers or inputs. The unreliability of supply chains motivated several firms to temporarily move away from just-in-time inventory management and to stockpile supplies where they could. Spending on capital equipment was modestly positive, with firms saying they were preserving cash, could not get equipment, or were cautious because of rising prices and economic uncertainty. On balance, manufacturers expected demand to increase modestly in coming months.\nReal Estate and Construction\nDemand for residential construction and real estate softened. Contacts reported that higher home prices and interest rates had reduced affordability and that many potential buyers had become increasingly concerned about the economic outlook. Although contacts expected housing demand to soften further, they noted that demand remained strong overall. One homebuilder expected rising interest rates would have less of an impact on demand for residential construction than it would for other industries because of the shortage of available homes.\nNonresidential construction activity slowed because of rising interest rates and construction costs, although it remained positive. One general contractor noted that building costs have escalated to the point that prevailing rents are no longer able to support development costs. As a result, some clients delayed or scaled back projects. Contacts anticipated that nonresidential construction activity would diminish further as higher interest rates and cost pressures persist in the near term.\nFinancial Services\nOverall, loan demand increased modestly. Contacts reported some improvement in commercial and industrial loan demand. By contrast, demand for mortgages declined, a situation which bankers attributed to low housing inventory and higher mortgage rates. Demand for auto loans also declined, and this decline was attributed to the limited inventory of vehicles for sale. Lenders noted that delinquency rates for commercial and consumer loans remained low but that they expected higher borrowing costs would lead to an uptick in delinquency rates in the months ahead. Core deposits remained steady, although multiple bankers said they expected deposits to decrease in the next couple of months as households draw on their savings to cope with rising prices. Looking ahead, bankers expected loan demand to slow as interest rates rise.\nProfessional and Business Services\nProfessional and business services firms continued to report strong activity. Demand for IT-related services such as artificial intelligence, software services, and authentication services, was especially strong. One software provider indicated that labor shortages pushed some firms to seek software and cloud-based solutions to assist with administrative tasks. Contacts anticipated demand for professional and business services would remain strong in the near term.\nFreight\nFreight demand remained soft following a decline in the previous period. Supply chain challenges had variable impacts on firms. While COVID-19-related shutdowns in China reduced the need for freight from port cities, demand for air freight was reportedly strong. One airport contact reported a recent double-digit increase in air cargo volume. Looking forward, contacts expected demand to improve slightly in coming months.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nJune 1, 2022\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded moderately during the April through mid-May reporting period. Overall labor market conditions remained tight, accompanied by wage increases that showed some signs of leveling off. Price levels increased briskly, driven by food and energy price increases. Retail sales continued to increase, while conditions in the consumer and business services sector improved significantly due to pent-up demand for leisure travel and other services. Activity in the manufacturing sector remained strong, while conditions in the agriculture and resource-related sectors deteriorated a bit. The residential real estate market remained robust overall, while conditions in commercial real estate improved somewhat. Lending activity was little changed over the reporting period.\nLabor Markets\nConditions in labor markets were little changed and remained tight across all sectors. Many employers mentioned difficulty attracting skilled workers, such as IT and finance professionals, data scientists, mechanics, pilots, underwriters, and loan officers. Hourly workers, especially in the leisure and hospitality sector, have also been hard to find, which has led to rising burnout among existing workers. A few contacts noted a slight decrease in employee turnover, although levels remain higher than before the pandemic. In addition, recent hiring freezes at a few large tech firms combined with the tightening financial conditions have led a few employers to expect the labor market to cool down in the near future. Several contacts also mentioned a resurgence of unionization efforts in the health-care, retail, and distribution sectors.\nWages continued to rise, although with some slight signs of leveling off. Contacts in the health-care, agriculture, food services, and financial services sectors reported the highest wage increases. Some contacts mentioned budgeting several more wage increases in the middle of the year to keep pace with price inflation, while others mentioned having no such plans. A few small companies reported difficulty competing for talent with larger companies able to absorb more costs. A retailer in the Mountain West recently stopped increasing wages after noticing no significant impact in the number of applicants from previous wage increases.\nPrices\nPrices continued to increase briskly over the reporting period, most notably for food and energy products. Price increases were noted across many industries, including manufacturing, construction, food services, and health care. Cost pressures associated with energy price increases were expected to be passed on to consumers relatively quickly. Prices for agricultural products, such as seafood and tree fruits, also continued to rise, partly due to elevated shipping and fertilizer costs. On the other hand, price levels for steel and other manufactured metals were noted to have edged down in the past few weeks compared to their highs following the onset of the Russia-Ukraine war.\nRetail Trade and Services\nRetail sales continued to increase, although with some moderation. Consumer demand for food and energy products slowed down somewhat due to pricing pressures, and a few contacts observed that consumers are curbing their spending and focusing more on necessities, especially in lower-income households. However, spending of higher-income households has not yet been affected as much, and auto sales were noted to have increased. Going forward, contacts across the District expected further pullback in demand due to increased uncertainty and concerns over high inflation.\nConditions in the consumer and business services sector improved considerably thanks to low reported numbers of new COVID-19 cases, warmer weather, and pent-up demand for services. Demand for domestic air travel is now above pre-pandemic levels and international travel is also on an upward trend. Despite increasing airfares, the strong recovery in leisure travel has also increased activity at hotels, restaurants, and entertainment venues. Business travel was also noted to have ramped up. Demand for food services was generally strong, although one contact in the Pacific Northwest noted a recent decrease in restaurant diners after the rapid increase in fuel prices. Demand for health-care services remained stable but showed signs of normalizing away from COVID-related services.\nManufacturing\nActivity in the manufacturing sector remained strong. New orders continued to increase, and manufacturers' capacity utilizations rates were either at or above pre-pandemic levels. However, supply chain disruptions and limited availability of raw materials as well as shipping issues continue to have a significant impact on production and delivery times. Several contacts expressed concern that recent COVID-19 lockdowns of major cities in China could exacerbate these issues further. To combat these disruptions, one contact mentioned maintaining approximately three months of additional inventory of supplies, while another manufacturer noted a modest inventory reduction in the past few months. A large equipment manufacturer in the Pacific Northwest observed that higher labor costs have led some businesses to look into automation.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors deteriorated a bit. Exporters of agricultural products faced more challenges due to further shipping bottlenecks and container shortages stemming from an appreciating dollar, the war in Ukraine, and the lockdowns in China. Growers throughout the District noted rising costs for labor, fertilizer, and transportation, and one contact expected costs to continue accelerating in the near future. Another contact in the Pacific Northwest mentioned that these export challenges have led them to look at markets within the United States or Canada and Mexico. While demand for energy remained stable over the reporting period, a public utility contact noted that price increases in natural gas have not yet been passed on to consumers due to regulatory lags\u2014once they do, demand is expected to decrease.\nReal Estate and Construction\nResidential real estate activity remained robust overall despite some signs of easing. Demand for existing and new single-family homes, while still strong, has slowed down somewhat as higher prices, rising mortgage rates, and low inventories thwarted some potential buyers, especially those at the entry level. In addition, supply chain disruptions and rising labor and construction costs contributed to further price increases. As a result, several contacts noted a significant increase in demand for multi-family properties as they tend to be more affordable than single-family homes. In fact, a contact in the Pacific Northwest observed an increase in repurposing commercial downtown real estate into high-density residential units. Both single- and multi-family rental markets continued to be strong, with increases in rental prices and low vacancy rates.\nConditions in the commercial real estate market improved slightly. Demand for industrial and warehousing space continued to be strong, and a few contacts noted a pickup in construction of commercial real estate. However, a contact in the Pacific Northwest observed that some potential commercial projects are being reevaluated due to rising interest rates. Furthermore, a few others expressed uncertainty over demand for office space going forward as leases expire and hybrid work leads companies to downsize their footprint.\nFinancial Institutions\nLending activity was little changed on balance. Several contacts observed a slowdown in deposits and refinancing activity, most of which was driven by fixed-rate mortgages due to rising interest rates. On the other hand, commercial, construction and auto loans were noted to have increased over the reporting period. Several contacts in California also mentioned a notable increase in home equity line of credit activity as homeowners take advantage of higher home values. Many banks continued to experience strong competition for new loans, although asset quality and liquidity remained high. One contact in the venture capital space noted that cleantech public company valuations have decreased notably in the past few months, although private company valuations remained strong.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2022/2022-06-bo

"June 1, 2022\nSummary of Economic Activity\nEconomic activity in the First District increased slightly on balance. Employment increased slightly as many firms struggled to hire and retain workers, and labor shortages contributed to above-average wage growth. Price inflation persisted at a moderate to fast pace. Retail contacts posted flat or somewhat better sales, while restaurants saw slight revenue gains, and tourism contacts expect record-breaking occupancy rates this summer. Manufacturers reported a wide range of results, and some were hurt by softer demand from Europe and China. Business at staffing firms was restrained slightly by labor scarcity and changes in demand composition. Home sales were steady at a slow pace amid a slight seasonal uptick in inventories, and commercial real estate activity was healthy but offered some signs of a slowdown. While many contacts remained optimistic, an increasing number expected a recession by year's end.\nLabor Markets\nEmployment was flat or up slightly among First District contacts amid persistent hiring and retention difficulties, and labor scarcity fueled above-average wage increases. Restaurants faced acute worker shortages and responded with sharp wage increases. Tourism industry contacts face a looming shortage of seasonal workers owing to an ongoing lack of temporary work visas, and some are planning to cut capacity (such as restaurant seating) as a result. In the retail sector, worker headcounts were flat, hours were down, and wages increased moderately on average as some retail firms reportedly poached employees away from childcare positions. In the New Hampshire auto industry employment was flat and wage pressures, previously muted, started to intensify. Manufacturers mostly had strong labor demand but only a few managed to increase their staffing levels, as all complained that hiring was difficult, and turnover was high. Manufacturing wage increases were moderate to strong, and some sought to compensate workers for inflation with one-time bonuses rather than\u2014or, in some cases, on top of\u2014 permanent wage increases. The hiring outlook was mixed, as some contacts expected labor market tightness to ease, and others expected persistent labor shortages.\nPrices\nPrices increased at a moderate to robust pace at most contacted firms, although pricing pressures eased for used cars in response to increased inventories. Restaurants faced steep food price increases, especially for meats, eggs, and oils, and incomplete pass-through to menu prices resulted in weaker profits. A salvage retailer exposed to high freight costs raised its own prices by moderate margins. In advance bookings, hotel room rates on Cape Cod reached record highs. Most manufacturers enacted above-average price increases to defray inflation in the prices of a variety of inputs, including semiconductor chips, plastics, glass, energy, logistics, and labor. Yet the war in Ukraine still lends uncertainty to the pricing outlook.\nRetail and Tourism\nRetail and restaurant contacts reported flat to moderately higher sales, and tourism contacts enjoyed robust summer bookings activity. An online retailer had flat recent sales but said that supply chain pressures eased. A salvage store enjoyed a better-than-expected increase in recent sales but rejected some potential inventories over high freight costs. A contact in the New Hampshire automobile industry reported a moderate increase in used car inventories but also observed that supply chain issues in the new car industry had spread to a broader set of auto manufacturers. A Massachusetts restaurant industry contact reported a slight recent increase in sales but said that cost pressures had crimped profits. Boston restaurants, which have lagged suburban restaurants in the recovery, were happy to see healthier sales thanks to the ongoing return of office workers and travelers to the urban core. Some Cape Cod restaurant owners plan to curtail service this summer due to labor shortages, but hotels and B&Bs on the Cape are planning for record-breaking occupancy and room rates based on advance summer bookings. The outlook was a mix of optimism and concerns about ongoing inflationary pressures and labor shortages.\nManufacturing and Related Services\nContacts offered mixed results. Three of the seven firms reached this round reported robust increases in sales, one had strong but stable sales, and the others saw slightly to moderately weaker sales. Among the firms with the strongest results, a manufacturer of laboratory equipment said that business was up across all product lines except those related to COVID testing, and a semiconductor manufacturer continued to enjoy record-breaking sales growth. At the other end, a garden hose maker lamented that supply chain issues were driving up prices and that retail customers increasingly balked at paying them. Two contacts experienced recent softness in overseas sales, which were hurt by the war in Ukraine and lockdowns in China. Firms continued to invest despite higher interest rates. The outlook was mostly unchanged and mostly positive, but the Ukraine war presented downside risks for some contacts, and one perceived a high chance of recession in the next six months.\nStaffing Services\nAmong the three staffing firms reached this round, two experienced slight and sharp revenue declines, respectively, and another enjoyed a moderate uptick in receipts. All described the labor market as extremely tight, yet also shifting in terms of demand composition. For example, positions at COVID testing sites have mostly evaporated, a shift that explained the large decline in business at one firm. Although upward wage pressures persisted for most positions, some employers sought to reverse \"COVID wage premiums\" but faced resistance from workers seeking compensation for inflation. Competition for scarce labor was intense, particularly in specialized roles, as workers were reportedly \"besieged\" with offers. Contacts reported high rates of temp-to-permanent conversions and noted that salaries for junior level professionals increased very steeply from a year earlier. Looking ahead, two firms predicted that their revenues would rise as conditions continued to normalize, and one worried that the shortage of workers would restrain their business. The state of the national economy was a point of concern, although two noted that worsening macroeconomic conditions could alleviate the worker shortage.\nCommercial Real Estate\nCommercial real estate activity in the First District was steady at a healthy level, but signs of a potential slowdown became more prominent. Investors were reportedly slower to spend, suggesting they expected deal terms to turn in their favor. Industrial activity, while still very strong, slowed further since last round as big players sought less space than they did at the height of the pandemic. Higher-end and suburban office spaces enjoyed improved leasing demand, but activity remained limited for downtown and older office buildings, and uncertainty concerning return-to-work plans lingered. Contacts described retail activity as \"chugging along\" at a steady pace thanks to the release of pent-up consumer demand, but some wondered how long such demand would hold up. Apartment rents climbed further at a fast pace, but in other sectors contacts reported no significant changes in rents or vacancy rates. Most contacts expressed greater pessimism about the outlook for commercial real estate than they did last round, and only one remained very positive. Several perceived that the Fed's interest rate increases had already slowed the economy, and a few contacts expected a recession by year's end.\nResidential Real Estate\nResidential real estate sales in four New England states (Connecticut and Vermont offered no data) held roughly steady at a slow pace in April, despite slight seasonal improvements in inventories. Closed sales were down over the year for single-family homes and condominiums, at about the same pace as in March. Median sales prices increased over the year in all reporting markets, at rates that were on par with March results for single-family homes and moderately higher for condos. Year-over-year, inventories were down in all reporting markets, but by slightly smaller margins than in the previous report. All contacts mentioned that higher mortgage rates have created affordability issues for many prospective buyers, cooling demand. The Massachusetts contact noted again that competition was highest for lower-priced homes and observed that increasing numbers of buyers are shifting to the condo market after being priced out of the single-family market.\nFor more information about District economic conditions visit: www.bostonfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2022/2022-06-mi

"June 1, 2022\nSummary of Economic Activity\nNinth District economic activity grew moderately since mid-April. Labor demand remained strong since the last report, but overall hiring was restrained by tight labor supply. Wage and price pressures remained elevated, and added costs were being passed on to consumers through higher selling prices. Consumer spending grew slightly, remaining at high levels; tourism and hospitality activity increased slightly from a year ago despite unfavorable weather. Commercial construction grew slightly, commercial real estate was mixed, and residential construction and real estate slowed, with rising interest rates a factor in each of these sectors. Agricultural conditions remained strong. Reports from minority- and women-owned business enterprises were mixed, as demand for services improved but margins narrowed.\nLabor Markets\nEmployment grew strongly since the last report. Demand for labor was even higher, but hiring was restrained by tight labor supply. Several surveys found continued strong hiring demand by employers. Among more than 200 Minnesota hospitality and tourism firms, three of four were hiring in some capacity, and close to half were hiring more year-round staff. In the construction sector, 40 percent of firms were hiring to increase headcount, and a majority were hiring to replace turnover. Labor demand in the sector was also expected to accelerate in coming months. In a cross-sectoral pulse survey, significantly more firms saw an increase in labor needs over the previous month compared with those that saw a decrease. However, employee headcounts have grown more slowly than labor demand, as firms continued to report significant difficulty in hiring workers for open positions.\nWage pressures remained strong. A large majority of manufacturing firms reported increases of at least 5 percent. More than half of hospitality and tourism firms reported wage hikes of 5 percent or more. In the construction sector, roughly one-third said wages have risen by more than 5 percent, which was notably higher than a similar poll six months earlier. A large Minnesota manufacturer said turnover in low-skilled \"is very high. They keep chasing wages and don't show up for their job. It's hard to keep a low-skilled job filled for one year.\"\nPrices\nInflationary pressures remained elevated since the previous report. About 70 percent of respondents to a District-wide business survey reported that their nonlabor input prices increased in April from a month earlier. More than half said they increased their selling prices over the previous month; a slightly lower proportion expected to increase prices in May. About three-quarters of manufacturers at a recent event indicated that their input prices have risen faster since the beginning of this year than last year, compared with fewer than 10 percent who reported that prices increased at a slower pace. Retail fuel prices in District states increased swiftly since the previous report. Agriculture contacts continued to report significant increases in prices for both agricultural commodities and agricultural inputs.\nWorker Experience\nIndividuals moving through the labor market were mainly looking for better pay. Some workers were considering taking second jobs to meet the higher cost of living but faced constraints with balancing existing responsibilities. Preliminary results from a survey of workers in South Dakota indicated that rising prices have significantly strained family budgets. Most said they were mainly experiencing pressure from fuel, grocery, and electricity prices. Several reported forgoing activities like eating out or traveling for leisure to reduce expenses. Overall, workers saw their cost of living increase. A worker in the finance sector said that \"a 3 percent raise is not keeping up with the cost-of-living.\u2026We are definitely living more of a paycheck-to-paycheck lifestyle than a year ago.\" A construction industry job seeker shared that gas prices were further reducing his mobility and employment options.\nConsumer Spending\nConsumer spending grew slightly since the last report, remaining at high levels. Retail contacts reported modestly higher revenues compared with the previous month, but somewhat lower profits. Tourism and hospitality firms said that recent activity was slightly improved compared with the same period last year, but an unseasonably cool spring dampened what might have otherwise been stronger activity. The summer outlook was quite positive, contacts said, though travelers were booking later than normal, and COVID-19 surges and gas prices created some uncertainty. Airports also reported rising passenger levels, including rebounding business travel. Consumer and business contacts said it was still too early to gauge the net effects of interest rate increases on consumer spending. A vehicle dealership said new car sales were more affected by inventory shortages than interest rates.\nConstruction and Real Estate\nCommercial construction grew slightly since the last report. Marginally more firms reported higher recent revenue than those reporting a decrease. However, the general pace of activity appeared to be slowing due to persistent supply chain problems, high input costs, higher interest rates, and lack of labor. Contacts reported a noticeable increase in project cancellations, and delays continued to worsen. New projects out for bid held mostly steady with some increase in public projects; in general, contacts were optimistic heading into the summer season. Residential construction was flat. The sector reported higher levels of project cancellations and delays; however, new permitting activity remained healthy, particularly for multifamily units.\nCommercial real estate activity was mixed. Several industry contacts said rate increases have started to negatively affect deal pricing by as much as 10 percent. Industrial space has seen less impact due to the current strength of that market. Contacts also expected more sales to come into the market over the next month or two in order to beat expected future rate hikes. At the same time, some sales have been pulled off the market due to a decrease in the number of bids and active buyers. Residential real estate fell moderately. Closed sales in April fell across most markets, the result of low inventories, rising prices, and higher mortgage rates. Several contacts said that they expected some demand to get pulled forward to get ahead of rate increases. Contacts reported an increase in the use of adjustable-rate mortgages.\nManufacturing\nManufacturing activity was strong since the last report. A regional manufacturing index indicated increased activity in Minnesota, North Dakota, and South Dakota in April relative to the previous month. Manufacturers generally reported robust demand; however, a greater share of firms noted decreased new orders in April than in recent months. Industry contacts continued to report long delivery times and difficulty securing inputs, such as aluminum, stainless steel, and packaging.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions remained strong. According to the first-quarter (April) survey of agricultural credit conditions, 87 percent of respondents reported increased farm incomes relative to the same period a year earlier. Farmland values increased briskly. However, due to an exceptionally cold and wet spring, crop planting and progress were well behind schedule in much of the District, except for Montana and western portions of the Dakotas, where drought conditions were rampant. District oil and gas activity increased modestly since the last report, as drilling and production gradually responded to surging crude prices.\nMinority- and Women-Owned Business Enterprises\nReports from minority- and women-owned business enterprises (MWBEs) in the District remained mixed. Warmer weather brought increased traffic to many service industry businesses, but input costs continued to put downward pressure on their margins. A restauranteur in the Minneapolis\u2013St. Paul region expressed concerns about their ability to continue raising menu prices, as customers faced higher inflation. A restaurant equipment distributor noted healthy demand from their MWBE clients and highlighted a slight loosening of supply chain bottlenecks. A media company executive said that finding competent talent was a barrier to their growth, highlighting the persistent hiring challenges faced by many. Nonprofit finance contacts shared that demand for loans was down overall because entrepreneurs were feeling uncertain about the economy.\nFor more information about District economic conditions visit: minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/2022/2022-06-ph

"June 1, 2022\nSummary of Economic Activity\nOn balance, business activity in the Third District grew slightly \u2013 at a slower pace than during the prior Beige Book period. Activity in a few sectors remained below pre-pandemic levels. Since the prior Beige Book, the rate of COVID-19 cases has grown fourfold. Moreover, official statistics appear to be underestimating the actual incidence of COVID-19, as more people take home tests and recover at home. Employment grew modestly, and some firms have begun reassessing their future staffing needs in fear of a recession. Wage and price inflation moderated for most firms, as have inflation expectations; however, wages continued to rise at a moderate pace and prices at a strong rate. Firms continued to cite hiring difficulty and supply chain disruptions as their key challenges; coping with COVID-19 cases has become routine. On net, expectations for continued economic growth over the next six months fell for all firms and were well below their nonrecessionary historical averages. Among manufacturing firms, expectations nearly turned negative.\nLabor Markets\nEmployment grew modestly \u2013 at a slower pace than in the prior period. The share of firms reporting employment increases fell below one-fourth of the nonmanufacturing firms and fell to nearly one-fourth among the manufacturers. Contacts described many firms as \"hunkering down\" in anticipation of a recession \u2013 hiring managers are more carefully assessing their future needs, and firms are deploying automation wherever possible. Also, the share of manufacturers that expect to hire more workers fell to one-third from over one-half in December.\nEmployers and staffing firms tended to describe hiring and retention of employees as their biggest challenge. Firms that can't or won't raise their starting wage reported few applicants and high turnover. Many employers described losing experienced workers to firms offering much higher salaries and to full-time remote opportunities. Firms that carefully calibrate their wage rates above the market averages tended to report fewer difficulties.\nOn balance, wages continued to increase moderately. However, most firms, including staffing firms, noted that the pace of wage growth is slowly subsiding, as they have reported since year-end. Wage increases remain widespread. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee edged higher to about three-fifths in May; a small percentage reported lower compensation costs.\nFirms also expect lower wage growth in the future. On a quarterly basis, firms reported lower expectations for the one-year-ahead change in compensation cost per worker \u2013 the second consecutive decline. Expectations (measured as a trimmed mean of all firms reporting) fell to 5.2 percent from 5.5 percent in the first quarter of 2022 and from 5.8 percent in the fourth quarter of 2021.\nPrices\nOn balance, price increases attenuated throughout the supply chain \u2013 to a moderate pace for nonmanufacturers and to a still-strong rate among manufacturers. Moreover, while price increases remained pervasive, they were less widespread than during the prior period.\nContacts reported that price increases received for their own goods and services over the past year slowed for the first time in the past six quarters. The trimmed mean for reported price changes in our quarterly survey questions fell to 6.3 percent from a peak of 7.3 percent in the first quarter of 2022 for all firms. Price increases fell to 4.8 percent from 5.5 percent for nonmanufacturers and to 8.1 percent from 9.6 percent among manufacturers.\nIn addition, the share of firms reporting higher prices for their own goods and services edged down, as did the share of manufacturers that reported higher prices for factor inputs. The share of nonmanufacturers reporting higher prices for their inputs edged up.\nLooking ahead one year, the price increases that firms anticipate receiving fell for the second consecutive quarter \u2013 the trimmed mean for all firms was 5.0 percent in the second quarter of 2022, down from 5.6 percent in the first quarter of 2022 and 5.9 percent in the fourth quarter of 2021. The expected rate of growth was 4.1 percent for nonmanufacturers and 5.9 percent for manufacturers.\nManufacturing\nOn average, current manufacturing activity continued to grow modestly. The indexes for shipments and new orders trended lower but remained above historical averages for nonrecessionary periods.\nHowever, sentiment appeared to hover on the verge of turning negative. The index of current general activity fell to nearly zero \u2013 its lowest reading since spring 2020 as the pandemic gripped the economy. The index of future general activity also fell to nearly zero \u2013 its lowest reading in 13 years. Correspondingly, manufacturing firms lowered their expectations for future capital expenditures, with that index falling to a six-year low.\nConsumer Spending\nRetailers (nonauto) and restaurateurs reported slight sales growth overall \u2013 a weaker pace than in the prior period. Contacts noted that rising prices for food and fuel appear to have lowered the frequency of customer visits and reduced the average spend per visit. Moreover, sales may be weaker after adjusting for inflation.\nOn balance, auto dealers have reported a modest decline in sales since the prior period; sales are now significantly below the levels in 2019. With demand far outpacing supply, very high prices are ensuring ample profitability.\nOverall, tourism grew modestly, as the sector's key components continued their recovery. Domestic leisure travel remains strong \u2013 despite rising gas prices \u2013 while conventions and other group travel have been resuming with intermittent disruptions from COVID-19 outbreaks. Business travel is recovering more slowly, with less certainty.\nNonfinancial Services\nOn balance, nonmanufacturing activity grew slightly \u2013 slowing from the prior period's pace to that experienced at the height of the Omicron surge. Overall, the share of firms reporting increases in sales and in new orders fell, while the share of firms that reported decreases rose in both categories.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew modestly during the period (not seasonally adjusted) \u2013 a similar pace as seen during the same period in 2019. However, inflation is contributing more to the growth during the current year relative to past years \u2013 overall and for the lending categories that follow.\nLoan volumes grew moderately for home mortgages, home equity lines, and commercial real estate. Auto lending grew modestly, as did commercial and industrial lending. Other consumer loans fell modestly. Credit card volumes grew moderately. Typically, credit card volumes grow modestly during this season of the year.\nBankers, accountants, and attorneys noted that the combined impacts of labor market challenges, inflation, supply chain issues, the war in Ukraine, and lingering COVID-19 disruptions have caused some firms to put plans on pause and to consider their strategic options.\nReal Estate and Construction\nExisting backlogs will keep homebuilders active into 2023; however, contacts reported that sales traffic and contract signings for new homes fell moderately. If the trend continues, contacts noted, repricing, restructuring, and layoffs are under consideration; already, some land deals have been halted.\nExisting home sales fell slightly but remained near recent high levels. Contacts reported that demand remained strong despite some buyers \u2013 especially first-time buyers \u2013 exiting as prices and interest rates have risen. Quick sales featuring cash offers and waived inspections continued to outpace new listings \u2013 suppressing inventory levels and further reducing housing affordability.\nOn balance, construction activity and leasing activity for commercial real estate held steady and were busy for industrial/warehouse space, multifamily housing, and institutional projects. A contact noted that the rising costs of materials and labor are driving a wedge between project estimates and eventual bids \u2013 often resulting in modifications to lower the total expense. Ongoing COVID-19 cases have further delayed return-to-office plans for some firms.\nFor more information about District economic conditions visit: www.philadelphiafed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"June 1, 2022\nSummary of Economic Activity\nEconomic activity in the Sixth District expanded at a modest pace from April through mid-May. Labor market tightness and wage pressures continued for some. Most nonlabor costs rose, and firms' pricing power was sustained. Retail sales softened somewhat, and auto sales were down from year-earlier levels. Leisure travel was robust, and business travel and convention bookings picked up. Demand for housing slowed slightly as rates picked up, inventory levels remained low, and home prices remained elevated. Commercial real estate activity remained mixed. Manufacturing activity was strong. Conditions at financial institutions were mixed as lending activity strengthened and deposit levels declined.\nLabor Markets\nMost contacts continued to report tight labor market conditions. Turnover rates remained elevated. Reports on the pool of candidates for open positions were mixed. Among professional positions, the availability of candidates improved by most accounts; however, for firms seeking to fill skilled trades, manufacturing, and hourly service jobs, talent remained in short supply. Businesses continued to respond to labor constraints in a variety of ways including increasing wages, bonuses, and benefits; offering scheduling flexibility; curtailing capacity; offshoring jobs; and slowing growth. Many noted the speed of hiring had increased dramatically across all position types and wage levels to secure talent; strong salary offers were typically in-hand at the time of the interview to offset counteroffers from existing and other employers.\nExpectations about faster wage increases remained mixed. Some firms anticipate wage growth will increase this year across all jobs, while others plan to be more targeted with raises, and yet some expect growth will slow a bit.\nPrices\nReports of cost increases were widespread over the reporting period, including the cost of freight, labor, nonlabor inputs, and food. Supply chain constraints continued to plague firms, and some noted a shift to shipping freight by air, though it was much more costly. For some businesses, the volatility of the current pricing environment has impacted the variety of products available and reduced contract negotiations to shorter terms with more \"cost plus\" conditions. Margins largely remained at record highs for many firms as price increases were met with little resistance; however, several contacts noted a slight dampening of demand or consumers \"trading down\" to second tier products. The\u202fAtlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth was relatively unchanged at 4.2 percent, on average, in May. Firms' year-ahead inflation expectations also remained relatively unchanged at 3.7 percent, on average.\nConsumer Spending and Tourism\nDistrict retailers reported some softening in unit sales and a shift in discretionary spending since the previous report. Contacts noted that some customers began foregoing discretionary spending to cover the rising costs of rent, food, and fuel. Though demand for luxury goods continued to hold up, demand for items such as home decor slowed among lower- and middle-income customers. Year-over-year automotive unit sales remained well below 2021 levels amid persistently low inventories.\nDemand for leisure travel remained robust and hospitality contacts reported strong advanced bookings through the summer. Consumer spending at tourism destinations was described as having returned to (or in some cases, surpassed) pre-pandemic levels. Business travel and convention bookings continued to improve.\nConstruction and Real Estate\nHome sales throughout the District slowed somewhat as housing prices and mortgage interest rates rose. Inventory levels remained low in most areas, and homes new to the market continued to sell quickly. On balance, home price acceleration continued, as markets like Nashville, Tampa, and Atlanta experienced very strong growth over the past year. Declining homeowner affordability remained a major concern among market participants. Contacts indicated that, although buyer interest remained robust in many markets, higher prices and rising interest rates resulted in a shrinking pool of eligible buyers, and contract cancelations slightly increased as fewer buyers qualified for mortgage loans. Although housing starts rose, builders indicated that supply chain disruptions remained a challenge.\nDistrict commercial real estate (CRE) conditions remained mixed. Contacts reported continued robust activity in the multifamily and industrial sectors. Lower-tier office demand was identified as cooling somewhat. Employers' return-to-office stances appeared to be mitigating some of the downward trend in the office sector; however, heightened levels of sublease space remained an impediment to recovery. While overall transaction levels were healthy, CRE contacts reported shrinking pools of buyers, more instances of buyers seeking greater concessions, and price declines in some property sectors.\nManufacturing\nManufacturing activity in the District remained strong. However, some contacts noted an inability to meet demand due to staffing constraints and shortfalls of supplies, notably steel sourced from Ukraine. Several manufacturers reported spreading supply purchases across multiple sources to alleviate supply chain constraints and implementing advance supply ordering to avoid depletion of parts inventories. Half of manufacturing respondents participating in the Atlanta Fed's Business Inflation Expectations Survey reported increasing capacity by adding staff or shifts to meet demand, while others simply turned away customers.\nTransportation\nTransportation activity remained mixed. Inland barge companies reported increased shipments of refined petroleum products, chemicals, and aggregates. District ports experienced further growth in container volumes. In the spot market, freight brokers reported a slight pullback in the van sector, which was attributed partially to a shift from the purchasing of goods to services by consumers; demand for flatbeds was steady as housing and construction activity remained high. Despite continued year-over-year declines in freight volumes, railroad contacts reported double-digit increases in revenue due to pricing gains. While most transportation contacts expect activity to remain steady over the next 6-12 months, some voiced concerns that elevated inflation and higher fuel prices could slow activity in the sector.\nBanking and Finance\nConditions at District financial institutions were mixed. Bankers reported higher loan growth, a decline in deposits, and a shift in the interest rate environment. Consumer, commercial, and industrial lending strengthened, but construction loans fell. Residential mortgage lending moderated due to a combination of low housing inventory and a move toward higher interest rates. Deposits declined further, leading to increased short-term borrowings among financial institutions. Provisions for credit losses increased as delinquencies rose slightly but remained below historical norms.\nEnergy\nEnergy contacts reported that demand for crude oil fell over the reporting period. At the same time, oil production picked up, helping global crude markets withstand the loss of Russian supplies. Still, for many producers, increasing production remained a challenge as labor shortages and supply chain bottlenecks inhibited access to equipment and raw materials for drilling. Refinery utilization remained strong. Demand for some chemical and petrochemical products declined. Utility contacts reported that rising natural gas prices are expected to result in higher utility bills for consumers. Across utility segments, commercial and industrial activity were up, while residential activity was flat, the latter attributed to customer growth being offset by falling residential usage as customers returned to work in offices space. Investment in renewables remained robust, particularly in solar and offshore wind.\nAgriculture\nAgricultural conditions remained mixed. Most of the District remained drought free. On a month-over-month basis, the May production forecast for Florida's orange and grapefruit crops were below last year's production. The USDA reported year-over-year prices paid to farmers were up for cattle, corn, cotton, eggs, milk, soybeans, rice, and broilers. On a month-over-month basis, prices increased slightly for cattle, corn, cotton, boilers, milk, and soybeans, but decreased for eggs; rice was unchanged.\nFor more information about District economic conditions visit: www.atlantafed.org/economy\u2010matters/regional\u2010economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"June 1, 2022\nSummary of Economic Activity\nEconomic activity in the Seventh District increased modestly overall in April and early May, though contacts expected a slower pace of growth over the coming months. Labor and materials supply constraints continued to weigh on the expansion. Employment increased strongly, manufacturing was up moderately, consumer spending moved up modestly, business spending was slightly higher, and construction and real estate activity declined slightly. Wages and prices rose rapidly, while financial conditions deteriorated some. Agriculture income expectations for 2022 were little changed.\nLabor Markets\nEmployment increased at a strong pace over the reporting period, and contacts expected moderate growth over the next 12 months. Despite robust hiring, there were reports of difficulty in finding workers across sectors and at all skill levels, and a number of firms indicated that a lack of staffing prevented them from operating at desired capacity. High turnover rates continued to be an issue for some contacts, and there were multiple reports of new hires never showing up for work. One contact noted that they were able to hire but had to settle for less-qualified candidates. A contact in manufacturing reported investing in robotics to substitute for labor in some of their production processes. Overall, wage and benefit costs increased rapidly, both to attract new workers and to retain existing talent. In addition to labor market tightness, contacts cited high inflation as an impetus for workers requesting higher wages. Many contacts indicated that they were offering workers more flexibility in terms of hours and work-at-home arrangements.\nPrices\nOverall, prices rose rapidly in April and early May, and contacts expected price increases to continue at a strong pace over the next 12 months. There were large increases in producer prices, spurred by passthrough of higher costs for labor, transportation, energy, some metals, and other materials. That said, some contacts reported that the pace of growth in raw materials and energy prices had slowed. Consumer prices generally moved up robustly due to solid demand, limited inventories, and passthrough of higher costs. Most contacts indicated that they were experiencing only limited pushback on price increases from customers, but some said they were seeing more resistance to higher prices than in previous reporting periods.\nConsumer Spending\nConsumer spending increased modestly over the reporting period. Nonauto retail sales were up moderately, though much of the increase reflected higher prices rather than greater volumes. There were reports of a shift in the mix of purchases from discretionary items toward essential goods. Moreover, a growing number of consumers were picking less expensive options when purchasing products. In addition, a regional food bank reported a considerable increase in demand. Among product lines, grocery sales increased modestly, but spending was flat on appliances and electronics and at discount stores. Spending on furniture and home furnishings fell. Leisure and hospitality results were mixed overall, though future bookings indicated that demand for summer travel was strong. Light vehicle sales were flat and still constrained by low inventory levels. Elevated prices continued to support high dealer profit margins.\nBusiness Spending\nBusiness spending increased slightly in April and early May. Retail inventories were up a bit overall but remained at low levels in many sectors as supply chain bottlenecks persisted. Only spotty improvement was expected by the end of the year. Manufacturing inventories were comfortable overall, though some contacts said lead times lengthened. A wide range of inputs remained difficult to find. Manufacturing and retail contacts expressed concern that the COVID-19 outbreak in China would result in further supply disruptions. Demand for transportation services was little changed as the industry continued to operate full out. Capital expenditures grew slightly, with many contacts reporting purchases of new equipment and technology for hybrid work environments. Lead times remained lengthy for some types of capital equipment. Commercial and industrial energy consumption increased slightly, led by manufacturing, while residential energy consumption decreased slightly.\nConstruction and Real Estate\nConstruction and real estate activity decreased slightly on net over the reporting period. Contacts in both residential and nonresidential construction noted that higher labor and material costs continued to encumber activity, and that rising interest rates had also begun to weigh on demand. Multiple contacts mentioned that it was more cost effective to buy materials in advance of a project start than to purchase materials as needed once building began. Residential construction decreased slightly. While demand remained strong on the multifamily side, activity levels in the single-family segment fell, including for remodeling. Residential real estate activity decreased modestly as rising prices and mortgage rates hurt affordability. Low inventory levels continued to put upward pressure on home prices. Rents increased moderately. Nonresidential construction activity rose slightly. Demand for industrial projects, specifically for warehousing and infrastructure, remained robust. Overall, commercial real estate demand was unchanged, as were prices and rents. However, contacts noted that demand for smaller spaces, particularly in freestanding buildings, had increased.\nManufacturing\nManufacturing production increased moderately in April and early May despite challenges with supply chain shortages and securing labor. Auto output increased some, though contacts were still reporting shortages of microchips and other materials. Heavy truck demand rose slightly; production was also up a bit, but high prices persisted amid very low inventories. Demand for heavy machinery was strong, outstripping availability because of manufacturers' capacity constraints. Steel production increased a bit, and demand moved up, with contacts highlighting greater sales to the energy industry. Sales of fabricated metals decreased slightly overall.\nBanking and Finance\nFinancial conditions deteriorated on balance over the reporting period. Participants in the equity and bond markets reported rising interest rates, greater volatility, and net declines in asset values. Business loan demand increased slightly, with contacts reporting growth in lending for commercial vehicles, restaurants, and construction. Business loan quality and standards remained unchanged on net. In consumer markets, loan demand decreased modestly, with contacts noting large declines in mortgage refinancing. Loan quality was unchanged on balance, while credit standards tightened slightly over the reporting period.\nAgriculture\nFarm net income expectations for 2022 were little changed overall during the reporting period, as prices and costs increased by similar amounts. Corn, soybean, and wheat prices were all up, as were prices for diesel and propane. Cool, wet weather slowed spring planting for corn and soybeans. In addition, concerns lingered about whether fertilizer would arrive at farms on time. Strong dairy exports helped boost milk prices. Bird flu continued to ravage poultry farms, pushing up egg prices. Hog prices moved sideways, while cattle prices were lower. As with crop farmers, livestock producers also faced higher input costs. Agricultural land prices continued to rise strongly.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nJune 1, 2022\nSummary of Economic Activity\nEconomic conditions have improved at a modest pace since our previous report. The outlook for the remainder of the year weakened due to concerns about continued price increases and softening demand. Competition for workers continued to place upward pressure on wages. Prices for raw materials and fuel increased at a robust pace; firms passed on prices to consumers and adjusted behavior to try to mitigate the impact of price volatility. Consumer spending shifted from goods to services and became more sensitive to prices; retailers reported that credit card usage rose. Manufacturing firms reported that a backlog of orders should sustain production even as the rate of new orders declines due to higher prices. Residential real estate demand has cooled slightly due to rising mortgage rates, but inventory remains low due to supply constraints that have limited construction projects. Banking contacts reported that consumer lending demand has softened.\nLabor Markets\nEmployment has increased modestly since our previous report. Labor shortages remain widespread, with firms noting difficulty hiring and retaining workers. Contacts in industries with predominantly in-person roles noted particular difficulty hiring. Some contacts remarked that remote work was allowing coastal firms to hire workers in the District for higher wages than local employers were willing to pay, causing an in-place \"brain drain.\" Firms expanded benefits, increased outreach, turned to automation, and considered offshoring to handle the scarcity; one healthcare contact reported that he had to start his hiring process two to three months earlier than usual to find sufficient workers.\nWages have continued to grow strongly. One transportation contact reported that wages had increased for both low-skilled, hourly workers and skilled employees by 20% or more in the past six months. Some healthcare contacts reported that raising wages was more difficult due to the industry's contract and payment structure, but nevertheless reported that labor costs had increased substantially in the past year.\nPrices\nPrices have increased robustly since our previous report. Contacts in the construction industry reported high price volatility for plumbing materials, roofing materials, and asphalt. One such contact reported that prices for those items are, in some cases, increasing every 10 days. Contacts reported a decline in lumber prices. Contacts are hopeful the price of steel will decline in the near future. Contacts in the manufacturing industry have started announcing price increases to customers several months in advance. A Missouri manufacturer noted that industry attitudes toward price increases have shifted, with sales staff and customers \"numb\" to continued increases.\nConsumer Spending\nGeneral retailers, auto dealers, and hospitality contacts reported slightly higher business activity and a mixed outlook. April real sales tax collections decreased in Missouri and Arkansas relative to March and increased in Kentucky and west Tennessee. St. Louis retailers noted that business activity has been consistent over the past month, but reported a negative outlook for the upcoming months, citing inflation and stronger demand for travel. One luxury car dealership in Northern Mississippi said that they are starting to sell fewer large cars and more small, fuel-efficient cars as demand shifts due to rising gas prices. Restaurants in Louisville saw a return to normal business activity during the Kentucky Derby, which was greatly affected by the pandemic in previous years. Hospitality contacts noted higher business activity compared with last month and last year, citing pent-up demand for travel. They also had a mixed outlook for the upcoming months, citing higher prices.\nManufacturing\nManufacturing activity has increased moderately since our previous report. Survey-based indices suggest that production, capacity utilization, and new orders have all moderately increased, and firms expect slight increases in the coming quarter. The primary concerns within the manufacturing industry continue to be the availability of labor and inputs. Firms continue to explore automated processes, though substantial lead times on robotics mean they are not a short-term solution. There is cautious optimism about future sales due to high order backlogs from pent-up demand and high inventory from the limited availability of key inputs.\nNonfinancial Services\nActivity in the nonfinancial services sector has increased since our previous report. Airport traffic increased in April, with seaport bottlenecks increasing demand for air freight in Missouri. While business travel is rebounding, rising ticket prices are expected to cause slower growth in leisure travel across Northwest Arkansas and Tennessee. Transportation has seen a push toward automation, but contacts report struggling to train workers to maintain and repair the required technology. The nurse shortage has increased wages across the District, but nursing school enrollments are still down in Eastern Missouri.\nReal Estate and Construction\nThe industrial and warehouse market has remained strong since our previous report. Rents have increased faster than input costs due to high demand. Multiple contacts reported optimism that input costs would come down after Amazon announced slowing their expansion of distribution centers.\nThe residential real estate market has seen demand begin to cool now that mortgage rates are increasing. However, with inventory still low, it remains a seller's market. One contact reported that many prospective homeowners are favoring new builds despite elevated input costs, because they can buy the house at asking price without competing against other buyers. According to multiple contacts in Louisville, first-time home buyers are dipping into their 401(k)s or drawing from their parents' retirement savings to enable cash offers.\nConstruction activity remains strong despite continued supply chain issues and increased input costs. Contacts reported that banks are hesitant to agree on rates for any projects not beginning immediately, given the uncertain outlook. One contact complained that paint is the only input available at a normal price.\nBanking and Finance\nBanking conditions have weakened slightly since our previous report. Although commercial lending has remained relatively strong, consumer lending has softened. Borrowing rates and secondary-market rates have begun increasing. Several large retailers reported that credit card usage increased. Mortgage and other lending rates increased significantly. Liquidity and deposits remain very high within the banking system, causing little pressure on banks to increase deposit interest rates. The combination of rising lending rates and stagnant deposit rates has allowed many banks to increase margins slightly from what have been persistent all-time lows.\nAgriculture and Natural Resources\nAgriculture conditions have improved slightly since our previous report. Contacts reported thin margins despite increased commodity prices due to rising input and labor costs, but remain optimistic due to persistent high demand. Contacts noted that rising energy prices have created an unprecedented opportunity for alternative energy products and other new technologies in the sector. The percentage of row crops planted has increased since the previous reporting period, but is down from this time in 2021. Progress of acres planted is down this year for every crop and all states in the District, which reflects production issues due to staffing and supply chain concerns.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

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"Beige Book Report: Kansas City\nJune 1, 2022\nSummary of Economic Activity\nThe Tenth District economy grew at a moderate pace, but expectations for future growth softened somewhat due to rising costs, worsening supply chain disruptions and heightened uncertainty. Several contacts reported shifts in consumer spending. Demand for goods slowed while demand for services grew steadily, particularly in leisure and hospitality. Businesses also reported lower expected spending on more expensive discretionary items as prices continued to rise. Although expected growth softened generally, construction activity grew at a robust pace and backlogs for future projects extended further. Labor activity expanded moderately with solid job growth and increases in the average number of hours worked. Above average wage gains aimed at retaining workers were reported widely. Prices rose at a robust pace. Contacts in food manufacturing indicated that consumer prices for food are likely to increase further over coming months. Large retailers and grocers are reportedly accepting planned cost increases from food distributors that will be passed on to consumers through the summer and fall. Restaurant owners also indicated they are raising prices frequently, but with limited ability to fully offset rising costs.\nLabor Markets\nJob growth continued at a moderate pace, led by hiring in services sectors. Employment at leisure and hospitality businesses expanded to near pre-pandemic levels across the District. Hiring in manufacturing and other goods-producing sectors grew slightly, though contacts reported that labor demand and the number of jobs open in these sectors remains elevated. Employers noted that the average hours worked by employees each week grew moderately and is higher than pre-pandemic norms. The higher average number of hours worked was reportedly due to both strong labor demand conditions as well as fewer workers being employed on a part-time basis.\nMost contacts reported solid wage growth. Businesses indicated that wage increases were being used more frequently to retain workers in recent weeks, as compared to previously offering bonuses, enhanced benefits or more flexible schedules to attract and retain workers. Moreover, the majority of contacts characterized the size of wage gains aimed at retention as larger than typical increases from recent years.\nPrices\nPrices rose at a robust pace. Recent increases in commodity prices are leading to price pressures for food that have not fully passed through to consumers. Large retailers and grocers are reportedly taking price increases from food manufacturers with 90-day lags, so that additional increases in consumer food prices are likely. Some restaurants reported taking advantage of digital menus to implement \"real time pricing\" on most items, but noted that customers have been unwilling to fully accept higher prices when dining out. Contacts at craft breweries noted that higher wheat costs may lead to losses as consumers substitute to lower cost options.\nConsumer Spending\nConsumer spending continued to grow at a moderate pace in recent weeks, but several contacts noted shifts in spending habits. Sales of food in grocery stores grew faster than at restaurants, but contacts were uncertain if this was due to labor shortages at restaurants continuing to restrict operating hours or because higher food prices led consumers to limit how often they frequent restaurants. Other contacts noted that spending on clothing and appliances declined slightly. Though demand for some goods softened, spending on leisure travel and other services continued to expand at a robust pace.\nManufacturing and Other Business Activity\nManufacturing production grew modestly and new orders for products continued to rise. Overall demand for trucking and transportation remained elevated, even as logistics businesses reported raising shipping rates in recent weeks. Transportation parts and services businesses faced ongoing difficulties sourcing needed parts, challenges that worsened following Russia's invasion of Ukraine. Contacts indicated that lockdowns in China would increase input prices and worsen supply chain issues, leading some importers of consumer products to slightly reduce their orders for products to be delivered later in the year. Businesses indicated expectations that difficulties in procuring parts and materials will persist for the next 6-12 months, or longer. Facing ongoing labor shortages and raw material shortages, most manufacturing contacts indicated they expect production levels to remain at their current high levels over the next six months.\nSeveral businesses reported slowing growth in their planned capital expenditures on equipment and less buildup in their inventories. Retailers highlighted shifting consumption patterns as a key reason they will undertake less inventory buildup over the summer. Prices for transportation vehicles and other production equipment on secondary markets increased rapidly over the past several months. Several contacts indicated that, although overall demand remains elevated, they see a heightened risk that demand could fall and cause their businesses to take losses on equipment purchases given their current high prices. These headwinds to business investment emerged recently alongside standing concerns about rising material costs and rising interest rates. On average, businesses in the District expected no changes in investment in inventory buildup over the next six months.\nReal Estate and Construction\nNon-residential construction activity expanded at a robust pace in recent months. Expectations for future growth in non-residential construction remained elevated as backlogs of orders were widespread and longer than seen in recent history. Contacts noted strong demand conditions are likely to maintain wage pressures over the medium term because companies are more willing to pay premiums to retain workers amid long backlogs. Also, several contacts noted their clients are more willing to accept price increases due to wage pressures than due to materials costs or overhead costs, leading some companies to be more likely to increase wages recently.\nCommunity and Regional Banking\nLoan demand remained stable over the past month, although customer appetite for residential mortgage loans weakened as interest rates increased. Contacts noted that commercial and industrial loan demand held steady, despite a reported increase in interest rates. Credit quality remained sound and problem loan levels were low amidst stable cash flow positions. Deposit growth moderated this month as customers pursued higher rates and utilized excess cash. Despite sound credit conditions, a moderate share of contacts' outlooks for loan quality over the next 6 months deteriorated modestly due to inflation concerns and supply chain pressures on consumer and small business loan segments.\nEnergy\nTenth District energy activity expanded at a moderate pace in recent weeks. Active rig counts increased across District states in April and early May. Drilled-but-uncompleted wells declined across the Anadarko and Niobrara regions as additional wells came online. With more active rigs, regional oil production increased slightly over the past month, though new well productivity fell modestly. Oil prices are slightly higher from a month ago and drilling remains profitable for most District firms, despite rising costs. Natural gas prices continued to rise swiftly over the last month. District energy firms reported higher revenues in early 2022 along with higher materials and labor costs. Mining jobs, including the oil and gas sector, picked up across most District states in recent months, but continued to lag pre-pandemic levels. Expectations for future production, employment, and capital expenditures remained positive.\nAgriculture\nAgricultural commodity prices remained at multi-year highs, providing ongoing tailwinds to the Tenth District farm economy. Market conditions remained favorable for prices of all major commodities in the region and prices of wheat, corn, soybeans, cotton and cattle increased modestly from the previous month. Farm income and credit conditions also improved further during the most recent survey period. However, contacts expected conditions to soften slightly in the coming months and many cited concerns about rising input costs, broad inflationary pressures and severe drought. The western and southern portions of the region have been most exposed to drought, affecting wheat, hay and grazing conditions that could reduce profit opportunities for both crop and livestock producers in those areas.\nFor more information about District economic conditions visit: www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

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"June 1, 2022\nSummary of Economic Activity\nSince our previous report, the regional economy grew at a modest rate. Manufacturing activity increased at a modest to moderate rate as producers continued to face challenges meeting demand due to supply chain disruptions and labor shortages. Fifth District ports reported an increase in loaded exports but a slight decline in imports, although import volumes remained historically high. Similarly, trucking demand eased slightly but remained strong relative to prior years. Retail sales remained strong while new vehicle sales remained low due to low inventory levels. Leisure travel held strong with some increases noted for group travel, weddings, and small events. Residential real estate activity slowed modestly, and some potential buyers were getting priced out of the market as interest rates and home prices rose. Meanwhile, commercial real estate activity remained strong, particularly for Class A office and industrial space. Financial institutions reported a slight slowdown in lending across most loan types, one exception being used vehicle lending, which continued to grow. Nonfinancial service firms saw moderate growth in sales but expressed some concerns that inflation could hamper growth in coming months if it remains elevated. Employment increased modestly and wage growth remained moderate, overall, as many employers continued to cite challenges finding and retaining workers. Price growth remained robust in recent weeks.\nLabor Markets\nEmployment in the Fifth District increased modestly amid ongoing reports of worker shortages and high turnover. A majority of contacts continued to cite difficulties finding and retaining workers across all skill levels. Among the small number of contacts reporting improving worker availability, most said that improvements came after raising wages. Additionally, one contact said that they recently made a change to their payroll policy that allowed hourly, part-time employees to be paid in a much shorter amount of time and that helped increase interest in those positions. Overall, wages increased at a moderate rate, with some reports of larger increases for highly specialized positions and for those in very short supply.\nPrices\nOverall, price growth remained significantly elevated in recent weeks. According to our surveys, service sector firms reported that price growth picked up from an already robust rate. Manufacturers, on the other hand, reported a slight moderation in price growth, but compared to last year, prices were still growing at a strong rate. Firms in both manufacturing and nonmanufacturing sectors continued to cite material shortages and rising fuel costs as contributors to price escalation. Labor costs also contributed to price growth as many firms continue to increase wages and benefits to recruit and retain workers.\nManufacturing\nSince our previous report, Fifth District manufacturers reported a moderate increase in shipments and a modest increase in new orders. Several contacts noted that supply chain issues and worker shortages limited their productive capacity and added to their backlogs. In response to labor challenges and continued strong demand, some companies looked to invest in automation and technology to increase production and reduce dependence on labor. A few manufacturers, however, said that demand softened slightly, which was attributed to inflation and consumers shifting spending away from durable goods.\nPorts and Transportation\nOverall, ports experienced continued strong container volumes, with solid growth in loaded containers and empties for export. Meanwhile, import volumes declined slightly, which relieved some of the congestion at the ports. Spot shipping rates continued to decline slightly but remained well above 2019 levels. Fifth District ports were watching for a potential summer surge in imports caused by Asian ports reopening after COVID disruptions and carriers potentially diverting ships to East Coast ahead of the West Coast longshoreman union negotiations in July. Air freight volume declined slightly while air freight rates increased this period.\nTrucking companies reported that demand remained strong, but that the number of booked orders decreased despite businesses' inventory levels still being low. Capacity loosened slightly, through still tight, and spot rates declined this period; however, fuel surcharges offset much of the cost savings. Most trucking companies noted improvement in their ability to hire new drivers. Trucking firms were receiving deliveries of the new equipment they ordered in 2021, though they still had to rely on older equipment to meet demand.\nRetail, Travel, and Tourism\nSince our last report, retail sales remained strong with most stores able to pass on increased costs to consumers. However, labor availability continued to be a headwind for most retailers with wages increasing in order to attract and retain workers. Rising inventory and materials costs were an issue in terms of future pricing as well. With automotive manufacturers unable to maintain production due to supply chain issues, automobile dealers stated that their inventory of new cars continued to be extremely low, negatively impacting their sales revenue.\nIn the Fifth District, leisure travel remained strong, and contacts reported that group travel had started to come back. More weddings and smaller events occurred, but conventions have not fully returned yet. Both hotel occupancy rates and average daily rates were increased in recent weeks. Passenger counts at airports had almost fully recovered to their pre-pandemic levels despite ticket prices being far higher than in 2019. Overall, the hospitality sector continued to experience strong demand, but were still grappling with staffing shortages despite increased wages and benefits.\nReal Estate and Construction\nSales and buyer traffic decreased this period compared to the first quarter of 2022 as housing inventory levels remained constrained and home prices continued to rise. Since our last report, some potential homebuyers were starting to be priced out of the market by higher interest rates combined with elevated home prices. Residential construction costs for both materials and labor continued to rise, but availability of construction materials improved. Real estate agents noted that it still was very competitive market for buyers.\nOverall, commercial real estate activity remained strong this reporting period. Class A office leasing activity was robust, especially in suburban markets. Supplies of existing buildings in most commercial real estate categories were tight. Availability of industrial properties continued to be constrained due to demand outpacing supply, despite slowing absorption rates and rising rental rates. Commercial property sales were strong with lots of investment money reportedly chasing too few deals. New commercial construction was hampered by escalating costs and availability of materials, as well as shortages of skilled labor.\nBanking and Finance\nThere continued to be strong loan demand across most commercial loan types, but there are signs of a slowing due to rising rates. Residential mortgage demand continued to slow, which was observed as a byproduct of increasing rates and rising home prices. New auto lending was still being impacted from inventory shortages, however, used auto lending demand continuing to increase. Deposits continue to trend upward, but at a slowing pace. Commercial credit quality remained good, and delinquencies remain low. Some institutions noted that consumer loan quality is beginning to weaken, and delinquencies are starting to increase slightly, especially from borrowers with limited discretionary income.\nNonfinancial Services\nNonfinancial service providers continued to report moderate growth in revenues and solid demand in recent weeks. Although many firms were experiencing positive growth, there was widespread concern that inflation could hamper growth in the near-term. One professional service firm said that their plans for hiring, and capital spending were put on hold because they saw their clients capping or cutting budgets out of caution. Additionally, a consultant was concerned that they might lose one of their major clients because that client was facing a contract renewal for electricity and might need to cut spending to offset increased costs of energy.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nJune 1, 2022\nSummary of Economic Activity\nEconomic growth in the Second District slowed to a modest pace in recent weeks, hampered by ongoing labor shortages, supply disruptions, and an upturn in COVID cases. Contacts have also become somewhat less optimistic about the near-term outlook. Businesses continued to report widespread increases in selling prices, input prices, and wages, as well as ongoing difficulty obtaining necessary supplies. The job market has remained exceptionally tight, with businesses continuing to add staff amidst high turnover. Both manufacturing activity and consumer spending slowed noticeably in recent weeks, although tourism continued to strengthen. While there were scattered signs of easing in the home sales market, it remained quite robust, and the residential rental market continued to strengthen. Commercial real estate markets were generally steady. Construction activity was little changed, with a good deal of multifamily residential development in progress. Finance-sector contacts reported little change in activity, while regional banks reported weaker loan demand but steady to lower delinquency rates.\nLabor Markets\nBusinesses continued to report widespread labor shortages, impeding both new hiring and retention\u2014particularly at small firms. Still, many businesses indicated that they continue to add staff\u2014particularly in retail & wholesale trade and in professional & business services. A number of contacts indicated that COVID has exacerbated worker shortages, due to illness-driven absenteeism and resistance to vaccination requirements. Businesses in all major industry sectors plan to add staff, on net, in the months ahead.\nA New York City staffing agency noted that demand for workers has remained strong across the board, despite recent financial market turmoil. An upstate staffing agency, however, suggested that the labor market, while still quite strong, had become less frothy. Likewise, a large business services firm noted some pullback in hiring in its industry.\nA majority of businesses continued to indicate that they were raising wages and anticipated further increases in the months ahead. Wage gains have been most noteworthy in the construction, wholesale trade, transportation, and leisure & hospitality sectors. One employment agency observed that job seekers in the finance sector have become somewhat more negotiable on pay.\nPrices\nMost business contacts noted ongoing escalation in input costs for a wide range of supplies, as well as energy and freight. Contacts in all major industry sectors expect input prices to rise further in the months ahead.\nThe vast majority of businesses reported recent hikes in their selling prices, most notably in the manufacturing, wholesale & retail trade, and transportation sectors. Selling price increases were not quite as widespread as in the last report. Businesses generally expect their selling prices to rise by about 4-5 percent over the next year, but they expect inflation overall to run closer to 6-7 percent. However, a top concern expressed by a number of business contacts was that price volatility and the related uncertainty made it difficult to plan ahead\u2014that is, set prices, negotiate contracts, and budget. When asked about longer-term inflation expectations, the typical firm expected inflation to be around 3 percent five years out.\nConsumer Spending\nConsumer spending slowed noticeably in recent weeks. Non-auto retailers reported a dip in sales activity, though a few contacts attributed this more to supply constraints than weak demand. Consumer confidence among New York State residents rose in April to its highest level in nearly a year, exceeding pre-pandemic levels.\nNew vehicle sales remained sluggish in recent weeks, still restrained by a dearth of inventory, reflecting the ongoing microchip shortage. Almost all new cars delivered to dealers are still being pre-sold 6-8 weeks in advance. Sales of used vehicles weakened, and prices have retreated somewhat though they remain high. One contact noted that high gas prices have shifted demand toward more fuel-efficient vehicles.\nManufacturing and Distribution\nManufacturing activity has turned down moderately in recent weeks, while the pace of growth slowed in the wholesale, transportation, and warehousing sectors. For the first time in well over a year, manufacturers noted some leveling off in unfilled orders. Contacts in these sectors continued to report widespread disruptions in transporting and obtaining goods. Wholesalers have grown less optimistic about the near-term outlook.\nServices\nActivity in the service sector has largely leveled off in the latest reporting period. Professional & business service firms indicated a pause in growth, while education & health providers and information firms reported subdued growth in business. However, contacts in the leisure & hospitality sector continued to see brisk growth, though not quite as strong as in the last report.\nSimilarly, tourism activity in New York City has continued to strengthen, despite the recent upturn in COVID cases, financial market turmoil, and strong dollar. The first half of May was exceptionally strong, buoyed mainly by domestic leisure visitors. One industry expert noted that hotel occupancy and average daily room rates, as well as attendance at Broadway theaters, have almost fully rebounded to pre-pandemic levels, and that there have been more trade shows and numerous gala events. While international tourism remains sluggish, visits from Canada and Europe have risen noticeably. However, visitors from Asia and countries where visas are needed remain sparse.\nReal Estate and Construction\nHousing markets have generally remained solid, though there have been some scattered signs of slowing in the sales market. Sales activity continues to be restrained by low inventory, but there are also signs that declining affordability has deterred some buyers. Still, real estate contacts in upstate New York cite bidding wars, all-cash deals, and homebuyers waiving inspections as signs that it is still a sellers' market. In Manhattan, apartment sales transactions so far this year have been the highest on record, and sales volume in the rest of the city has also been exceptionally high. Home prices continued to climb across the District.\nResidential rental markets have remained strong, as reflected in rising rents, brisk leasing activity, and low inventories\u2014particularly at the higher end of the market. In New York City, rents rose sharply in April, reaching a new record high. Rents on smaller and lower-end apartments had been lagging but are now catching up. Landlord concessions are no longer common, while bidding wars for both doorman and non-doorman apartments have become more frequent. With rents rebounding to well above pre-pandemic levels in New York City, affordability has been a widespread and growing concern.\nCommercial real estate markets have been mixed since the last report. Office markets across the District were steady to slightly weaker, with vacancy rates edging up in Manhattan but little changed elsewhere. In New York City, office rents remained flat and well below pre-pandemic levels. Elsewhere across the District, office rents are holding at or above pre-pandemic levels and are trending up in northern New Jersey. The industrial market has remained firm, with vacancy rates leveling off but rents continuing to rise briskly. However, the market for retail space has remained weak.\nConstruction activity has remained steady overall. Nonresidential construction starts have weakened for both commercial and industrial space. Industry contacts, however, were quick to note that much of the softness reflects widespread shortages of labor and materials, as well as escalating costs. New residential starts have also been somewhat sluggish, but a great deal of multi-family construction activity is in progress.\nBanking and Finance\nContacts in the broad finance sector continued to report little change in activity and remained fairly optimistic about the outlook. Small to medium sized banks in the District reported lower loan demand overall: Demand rose for commercial mortgages but declined for consumer loans, business loans, and residential mortgages. Refinancing activity also decreased. Credit standards were little changed. Loan spreads widened across all loan segments, and bankers reported higher deposit rates overall. Delinquency rates were lower on business loans and residential mortgages but steady otherwise.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"April 20, 2022\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to grow modestly in the current Beige Book period. Activity in a few sectors had not yet returned to pre-pandemic levels. Since the prior Beige Book, the rate of COVID-19 cases has remained relatively low, although a rising wave in the Northeast has been nearing the Third District \u2013 county by county. The rate of all persons being fully vaccinated edged up to 71 percent. Employment grew moderately as more job candidates began to apply, although the labor market churned further as workers continued to shift jobs and sectors. Wage growth continued to challenge most firms, but the pace of growth appears to have eased somewhat. Prices rose sharply again and remained a key concern for most employers \u2013 propelled by rising energy prices and by ongoing supply chain disruptions for manufacturers. On net, expectations for continued economic growth over the next six months fell somewhat for nonmanufacturers and are near their nonrecessionary historical average for all firms.\nLabor Markets\nEmployment grew moderately \u2013 a stronger pace than in the prior period. However, a few firms noted that they are reevaluating their employment level and may be ready for some attrition to reduce staff size. The share of firms reporting employment increases rose to near one-third of the nonmanufacturing firms and rose to over two-fifths among the manufacturers. Overall, about one-fourth of the firms reported a rise in average hours worked; a few reported a decline.\nStaffing firms as well as many employers noted that more job candidates were applying; however, on-the-job training was required more often, and retention remained a challenge. Contacts noted that many workers have switched fields, which has resulted in more training and more mismatches, followed by more churn in the labor market.\nAlthough wages continued to rise broadly, the wage rate appears to have risen moderately \u2013 somewhat less than the strong growth in the prior period. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee edged up to 56 percent in March from 54 percent in February. Virtually no firms reported lower compensation, as has been true in most recent months. However, many firms, including staffing firms, reported that the pace of wage growth has slowed. Still, the prevailing wage growth was sufficient to drive one small local coffee shop out of business when its workers shifted to a nearby chain coffee shop.\nPrices\nOn balance, strong price increases were evident throughout most of the supply chain, from manufacturing costs of production to those costs of nonmanufacturers. However, prices paid and received by nonmanufacturers rose for fewer firms than during the prior period.\nThe share of manufacturers reporting higher prices for factor inputs increased to 87 percent, while the share receiving higher prices for their own products edged up to 57 percent. The share of nonmanufacturers reporting higher prices for their inputs edged down to 67 percent, while the share receiving higher prices from consumers for their own goods and services fell to 37 percent.\nContacts most often cited the supply chain, followed by the labor supply, as their current key challenges, with the labor market easing for most firms and the supply chain easing for nonmanufacturers. Over the next quarter, most expect energy markets, followed by the supply chain, to represent the biggest constraints.\nNonmanufacturers tended to note that supply chain issues were easing, while some manufacturers noted further disruptions for specific commodities because of the Russian invasion of Ukraine and ongoing production shutdowns in China.\nAbout three-fourths of the manufacturers expect to pay higher prices for their factor inputs over the next six months. Nearly as many expect the prices they receive to increase as well.\nManufacturing\nOn average, manufacturing activity continued to grow modestly. Overall, the share of firms reporting increases in shipments and new orders edged higher than in the prior period. Backlogs continued to rise, and delivery times continued to lengthen.\nConsumer Spending\nRetailers (nonauto) and restaurateurs continued to report modest sales growth. Customer traffic patterns began normalizing as the Omicron surge eased, but contacts also noted the first hints of tighter wallets in response to fuel price increases.\nOngoing disruptions to the production and delivery of microchips and other key components continued to limit the availability and sales of new cars. While March sales levels improved slightly over February's, the two-month average remained well below the levels for the same two months in 2021 and also 2019.\nTourism resumed a modest pace of growth, as the Omicron surge dissipated and travelers rebooked business travel, group events, and some leisure travel. Contacts anticipate that domestic leisure travel will stay strong through the summer but that stays may be shortened and spending curtailed at destinations as prices of fuel, food, and rooms rise.\nNonfinancial Services\nOn balance, nonmanufacturing activity grew modestly \u2013 an improvement from the slight growth in the prior period. Overall, the share of firms reporting increases in sales held steady just below half, while the share reporting increases in new orders rose to two-fifths. Moreover, the share of firms reporting decreases in sales and in new orders continued to subside.\nFinancial Services\nThe volume of bank lending (excluding credit cards) grew moderately during the period (not seasonally adjusted); by comparison, loan volumes grew at a more modest pace during the same period in 2019. Inflation is contributing to some of this growth.\nLoan volumes grew moderately for home mortgages, auto lending, and commercial and industrial lending. Commercial real estate lending grew modestly, but home equity lines and other consumer loans fell modestly. A mortgage services contact noted that rising interest rates had dampened mortgage originations and precluded most home equity lending. Credit card volumes also grew moderately. Typically, credit card volumes fall during this season of the year.\nBankers, accountants, and attorneys noted that ongoing uncertainty and weariness stemming from inflation, COVID-19, and the war in Ukraine have created mental health issues for some households and small business owners. One attorney noted that foreclosures on residential mortgages rose following the end of the moratorium and that a further increase is expected. Another attorney noted that a credit counseling client was struggling to get out of bed. An accountant noted that one client was \"completely absent from his business\" because of the stress from uncertainty.\nReal Estate and Construction\nMost homebuilders reported that demand for new homes held steady; however, as costs rise, many customers are shifting toward smaller, less pricey homes. Demand for new rental units remains strong. Following the year-end surge in building permits ahead of the phaseout of a popular 10-year property tax abatement in Philadelphia, permits fell sharply below the norm as this year began.\nExisting home sales held steady at high levels. Demand continued to outstrip new listings, and quick sales continued to churn the market \u2013 lifting average closing prices to levels at or above average asking prices. Contacts noted that some potential buyers are searching for more affordable housing options in more remote locations and in mobile home parks, or by remaining in rental properties.\nConstruction activity and leasing activity continued at high levels for industrial/warehouse space, multifamily housing, and institutional projects. Contacts continued to describe concern for the office market. While workers were finally returning to offices, the extent to which firms and workers embrace full in-person, full remote, or hybrid work schedules remained unclear. Several contacts reported the emergence of new specialty stores in the retail sector, which had been dormant through most of the pandemic.\nFor more information about District economic conditions visit: www.philadelphiafed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"April 20, 2022\nSummary of Economic Activity\nBusiness contacts in the Sixth District indicated that economic activity expanded moderately, on balance, from mid-February through March. Labor market tightness and wage pressures persisted. Some nonlabor costs continued to rise and the conflict in Ukraine is expected to put additional pressure on commodities. Firms' pricing power was sustained. Retail activity was robust, but auto sales were down. Tourism activity strengthened. Housing demand was strong, though persistently low inventory levels, higher home prices, and rising mortgage rates constrained sales and further diminished affordability. Commercial real estate activity was mixed. Manufacturing saw continued solid demand. Conditions at financial institutions were steady, and consumer lending improved.\nLabor Markets\nMost contacts continued to report tight labor market conditions. Some firms reported proactively raising wages to reduce turnover or increasing the frequency of raises to keep in step with the market. Many noted that high turnover has been driven largely by workers chasing higher wages or workers' desire for greater flexibility. Several contacts who had previously resisted hybrid and remote scheduling began offering workplace flexibility to attract or retain staff. Government-funded and charity-based entities were especially challenged with reacting to market wage increases. To recruit and retain staff, employers reported offering more hybrid work arrangements, providing retention bonuses, and making part-time positions available to lure back retirees.\nExpectations about accelerating wage increases were mixed. Some firms anticipate wage growth will increase this year across the board, while others plan to be more targeted with raises. More contacts noted that inflation is creating upward pressure on wages. Among those planning to hold the line on wage increases this year, it was noted that sustained higher inflation could push them to re-think their plans.\nPrices\nDistrict contacts continued to note rising input costs, particularly for materials like lumber and steel. The conflict in Ukraine, in addition to impacting fuel costs, is expected to put upward pressure on other input costs such as nitrogen and wheat. Contacts reported implementing various mitigations to ongoing supply chain constraints affecting costs, including investments in technology to improve efficiency, consolidation of shipping routes or loads, and renting warehouse space to store more inventory. Margins largely remained elevated and pricing power was consistent with recent reports, though more contacts expressed concerns over the potential of further price increases dampening demand. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth was relatively unchanged at 4.1 percent, on average, in March. Firms' year-ahead inflation expectations increased significantly to 3.8 percent, on average, up from 3.6 percent in February.\nConsumer Spending and Tourism\nDistrict retailers reported solid demand during the reporting period. However, some softening is expected over the next few months amid expectations of smaller tax refunds (due to the advance in child tax credits) and rising gas prices. Automotive unit sales were down, and prices increased over the reporting period as a result of continued supply constraints.\nTourism contacts reported robust spring break activity and cited Florida's beaches as a top destination. Hotel average daily rates and occupancy levels were up over 2019 levels. Some improvement in business travel and conventions was reported, although this segment continues to lag leisure travel.\nConstruction and Real Estate\nThough demand for housing remained robust during the reporting period, rising costs and limited inventory continued to suppress sales. Cost inflation in the construction of new homes persisted as supply chain disruptions and labor shortages challenged homebuilders. Contacts reported that declining home ownership affordability was a growing concern for buyers. Nashville, Atlanta, Tampa, and Orlando experienced the sharpest declines in affordability over the past year, as mortgage rates rose and home prices in these markets reached record levels.\nDistrict commercial real estate (CRE) conditions remained mixed. Activity in the multifamily, industrial and tech-related (data centers, etc.) sectors experienced continued significant upward momentum. The office sector improved modestly as more employers reopened, but contacts indicated that elevated levels of sublease space could hinder market rent growth until absorbed. Contacts continued to report healthy competition among CRE lenders; however, some lenders reported a modest increase in underwriting standards. Smaller banks and non-bank lenders have been identified by market contacts as the more aggressive of CRE lenders.\nManufacturing\nManufacturing activity was consistent with the previous report. Contacts noted continued strong demand, though rising input and labor costs put pressure on margins for some. According to the Atlanta Fed's Business Inflation Expectations survey, most manufacturers surveyed reported moderate to severe supply chain disruptions including supplier delays, difficulties locating alternate suppliers, production delays and delays in the delivery/shipping of final inventories. Most respondents expect these disruptions to continue over the next 6-12 months. Manufacturers also reported that production levels were hindered primarily by a lack of workers and supply availability. Manufacturing contacts expect further strengthening in demand, but concerns over supply chain disruptions, labor shortages, and rising input costs remained.\nTransportation\nTransportation activity was mixed over the reporting period. Some District ports reported continued double-digit growth in container volumes resulting from a shift in cargo by shipping lines from the west coast to the east coast. Demand for industrial space increased, but capacity remained tight despite an increase in new warehouse construction. Air cargo contacts noted growing freight volumes; however, new COVID lockdowns in China diminished air carriers' ability to move cargo in and out of the country. Railroads saw a significant decrease in total rail traffic year to date as compared with year-earlier levels, led by double-digit declines in petroleum and petroleum products, motor vehicles and parts, metallic ores and coal. Intermodal volumes also fell.\nBanking and Finance\nConditions at District financial institutions remained stable. Loan growth improved, with consumer lending experiencing the strongest growth among loan portfolios. Deposit balances were flat. Some banks reported increases in short-term borrowings to fund the stronger loan growth. Asset quality remained strong. Delinquency rates were stable for most portfolios and net charge-offs held steady. With the increase in loan growth, provisions for loan losses also slightly increased.\nEnergy\nActivity continued to strengthen across energy sectors. Drilling increased as global demand boosted exports of crude and natural gas and kept prices elevated. Energy contacts noted that oil that would typically be sent to domestic storage hubs was being routed to the Gulf Coast for export. However, some contacts reported that labor and equipment availability challenges hindered oil and gas production. Refinery operations across the region were largely at full capacity. Utility contacts reported that the tight natural gas market kept the price of electricity elevated; still, demand for power across customer segments was stable. Investment in renewables continued to grow, particularly solar power projects and offshore wind planning in the Gulf of Mexico; however, contacts expressed concern about potential disruptions to domestic solar power manufacturing and development projects resulting from tightness in parts availability related to reduced imports.\nAgriculture\nAgricultural conditions remained mixed. Parts of the District experienced moderately dry conditions. On a month-over-month basis, Florida's orange crop and grapefruit productions were down 5 percent in February and both forecasts were below last year's production. Agriculture contacts noted fertilizer and chemical costs have doubled recently and are expected to remain elevated over the next six months. The conflict in Ukraine is expected to have a \"profound effect\" on commodity prices going forward, especially for potash, a critical component of fertilizer.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy\u2010matters/regional\u2010economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nApril 20, 2022\nSummary of Economic Activity\nEconomic growth in the Second District picked up to a moderate pace in recent weeks. Businesses continued to report substantial escalation in selling prices, input prices, and wages, and many noted difficulties obtaining necessary supplies. The job market has remained exceptionally tight, with businesses continuing to add staff amidst high turnover. Consumer spending picked up somewhat in recent weeks, though auto dealers noted that ongoing shortages of vehicles continued to restrain sales. There was also a pickup in tourism and manufacturing activity. The home sales and rental markets strengthened further in March, while commercial real estate markets were steady to stronger. Commercial construction activity remained depressed, while multifamily residential construction continued at a moderate pace. Regional banks reported a decline in household delinquency rates. With growing concern about supply disruptions, worker shortages, and the war in Ukraine, business contacts across the District\u2014especially those in manufacturing, distribution, and construction\u2014have become less optimistic about the near-term outlook.\nLabor Markets\nDespite ongoing worker shortages, businesses continued to report moderate job growth. Staffing agencies have seen an ongoing abundance of job openings across a wide range of industries and occupations. Business contacts have noted particularly severe shortages of truck drivers, construction workers, IT staff, and human resource professionals. Restaurants have had trouble maintaining adequate staff. Some businesses say they have grown less picky about required qualifications for open jobs and have become more flexible about remote work arrangements. Businesses in most major industries expect to expand their workforces in the months ahead.\nContacts in all sectors continued to indicate that they were raising wages and anticipated further increases in the months ahead. Some contacts observed that workers in high-demand occupations have seen outsized pay increases when changing jobs. With increasing focus on worker retention, some businesses noted that they have raised wages by 20 percent or more over the past year.\nPrices\nMost business contacts noted ongoing escalation in input prices for a wide range of supplies. In particular, costs for both energy and freight (ground and ocean) were widely cited to be high and increasing. Contacts in all major industry sectors expect input prices to rise further in the months ahead.\nA large and growing proportion of businesses report that they have raised selling prices, most notably in the manufacturing, wholesale & retail trade, transportation, and construction sectors. Some businesses have reportedly grown more optimistic about their business prospects after raising prices and seeing them stick. One retail chain noted that it has been able to raise prices on fashion merchandise but less so on more everyday offerings. A large and growing share of businesses plan to increase their selling prices in the months ahead.\nConsumer Spending\nConsumer spending picked up somewhat in March. Non-auto retailers generally reported stronger sales, though some contacts noted that inflation has eroded consumers' spending power, dampening demand. In New York City, weak international tourism and harsh winter weather have limited sales growth. Supply disruptions have reportedly prompted many retailers to order merchandise further in advance. Consumer confidence among New York State residents rose briskly in March and was roughly on par with pre-pandemic levels.\nNew vehicle sales remained sluggish in February and March, still restrained by a dearth of inventory, as the microchip shortage has limited production and kept inventories low. Almost all new cars delivered to dealers have been pre-sold 6-8 weeks in advance. Sales of used vehicles were steady, while prices appear to have plateaued.\nManufacturing and Distribution\nManufacturing activity picked up in March, following a winter slump, while activity in the wholesale, transportation, and warehousing sectors continued to expand at a solid clip. However, a number of manufacturers reported that the combination of the Ukraine war, sanctions on Russia, shutdowns in China, and a severe shortage of trucks and trucking services have impeded some key supply channels. Businesses in these sectors have grown less sanguine about the near-term outlook.\nServices\nActivity in the service sector has been steady to stronger in recent weeks. Education & health providers and information firms reported little change in activity, while professional & business service firms indicated a modest pickup in conditions. Notably, leisure & hospitality and related businesses noted a substantial pickup in business, following an Omicron-related slump during the winter months.\nWith COVID cases subsiding in New York City and restrictions being eased, tourism has picked up noticeably in recent weeks. Hotel occupancy rates have increased, even as average daily room rates continued to rebound. Moreover, most hotels have reopened citywide, with the number of rooms in inventory now down less than 3 percent from before the pandemic. Domestic visits to New York City have rebounded to about 90 percent of normal levels, while tourism from abroad has only recovered to about 65 percent. Museums have been increasingly busy in recent weeks, and Broadway theater attendance has rebounded to about 15 percent below normal, with performances occasionally disrupted by COVID. Finally, attendance at trade shows has been growing, and recent events, like Comicon, have seen great turnout.\nReal Estate and Construction\nHome sales and rental markets have continued to strengthen since the last report, though a low inventory of available homes has restrained sales transactions in parts of the District. Real estate contacts in upstate New York noted that a dearth of homes listed for sale has continued to drive up prices and spur bidding wars. Throughout the New York City area, resale volume has been increasingly robust, and prices have trended up briskly; inventories are very low, except in Manhattan, where they are still elevated but declining.\nResidential rents across the District have trended up briskly. New York City's residential rental market has continued to tighten, as vacancy rates have declined to pre-pandemic levels. Rents have fully rebounded to at or above pre-pandemic levels across most of the city, with greater escalation at the high end of the market. An industry expert noted that rental concessions have become less common across the city and estimates that bidding wars are occurring on about one in five new leases. Both industry contacts and community organizations have been expressing concern about the availability and affordability of housing.\nCommercial real estate markets were steady to stronger, on balance. Office markets across the District were essentially unchanged, with vacancy and availability rates steady and rents flat to up modestly. One New York City contact noted that many companies are sub-leasing excess space. The industrial market, however, has continued to strengthen, with vacancy rates steady at low levels, and rents continuing to trend up strongly. In contrast, the market for retail space has remained weak.\nConstruction activity remained sluggish overall, with activity reportedly hampered by unseasonably harsh winter weather, escalating construction costs, and shortages of both materials and workers. Non-residential construction starts remained particularly sluggish, with little new activity outside the industrial and warehouse segment. Multi-family residential starts have been steady at a modest level, though there continues to be a good deal of development in the pipeline. Looking ahead, construction sector contacts have become less optimistic about the general outlook, citing widespread shortages.\nBanking and Finance\nContacts in the broad finance sector reported little change in activity but remained fairly optimistic about the outlook. Small to medium-sized banks in the District reported little change in overall loan demand\u2014lower for consumer loans and residential mortgages but higher for commercial mortgages. Credit standards were largely unchanged, while loan spreads widened somewhat. Finally, bankers reported lower delinquency rates on consumer loans and residential mortgages but no change on other types of loans.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

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"April 20, 2022\nSummary of Economic Activity\nThe regional economy continued to grow moderately amid ongoing supply chain issues, shortages of labor, and rising prices; however, several contacts expressed concerns that increasing energy costs and the war in Ukraine posed risks to near-term business conditions. Manufacturers reported moderate growth in shipments and orders but continued to face inventory and supply chain challenges. Import volumes grew strongly and ports worked at full capacity but struggled to get containers out of the port due to transportation shortages. Trucking companies confirmed the difficulties at the ports, reporting robust demand but limited availability of equipment and drivers. Retailers reported strong demand and were largely able to pass along rising prices to customers. Auto sales remained constrained by low inventory levels of new vehicles. Leisure travel and tourism was strong while business travel started to pick back up but remained well below pre-pandemic levels. Demand for homes remained strong and low inventory levels persisted. Commercial real estate activity was robust, particularly in the industrial and multifamily sectors. Bank lending was also strong, largely driven by commercial activity. Nonfinancial services firms saw moderate growth as the decline in COVID cases and easing of restrictions helped improve business conditions. Employment rose moderately but demand for workers continued to exceed supply, leading to further wage increases to recruit and retain staff. Prices continued to increase strongly due in part to rising fuel and transportation costs in recent weeks.\nLabor Markets\nTotal employment in the Fifth District rose moderately since our previous report. Firms across a wide variety of industries continued to report labor shortages with many noting that it was particularly difficult to fill positions that required less than a four-year degree. Employers said that main challenges were applicants not having the skills or experience required or applicants dropping out during the hiring process. Some firms saw applicants turn down job offers because the proposed compensation was too low, or the job was not hybrid or fully remote. This led many to increase starting wages and benefits, expand recruiting efforts, and, where possible, provide more flexible working arrangements.\nPrices\nPrices continued to increase at a robust rate in recent weeks. According to our surveys, service sector firms reported year-over-year price growth of more than five percent, on average. Several firms noted that recent increases in fuel prices led to higher costs of doing business, which were being passed through to customers. Manufacturers reported strong increases in non-labor input prices, due in part by scarcities of raw materials as well rising fuel and transportation costs. Firms in both goods producing and service providing sectors also cited higher labor costs contributing to their price escalation and that strong demand has allowed them to pass costs along.\nManufacturing\nManufacturers in the Fifth District saw moderate increases in shipments and new orders in recent weeks. Several producers noted that the persistence of long lead times and low inventory levels led to increased backlogs. One manufacturer, on the other hand, said that new orders had softened but production was unchanged as they worked to reduce their backlog. Some contacts noted that higher fuel and energy prices, as well as the war in Ukraine, have led to higher prices with increased uncertainty for the near-term supply chain. One contact said they were beginning to see some European suppliers shut down due to the spike in energy costs.\nPorts and Transportation\nFifth District ports saw strong growth in import volumes with terminals operating at capacity. As such, there were more ships queuing up outside the port due to slower turn times caused by longer container dwell times clogging up the port. There continued to be delays getting containers out of the ports caused by shortages in inland transportation. Spot shipping rates have come off their peak, but new contract rates were much higher than last year. Imports and exports of automobiles and heavy equipment were volatile, which contacts attributed to the microchip shortage. There were also reports of increased use of air freight due to ocean shipping delays.\nTrucking companies reported that demand remained strong, leading to tight capacity. Several companies noted an ability to hire new drivers, and retention also continued to be an issue. Most trucking firms were just now getting the new equipment they ordered in 2021, but they still had to rely on aging truck tractors, chassis, and trailers to meet demand. Trucking firms indicated that they continued to increase shipping rates in response to higher fuel costs, wages, and equipment prices. Respondents indicated that they expect demand for freight to remain strong for the rest of 2022.\nRetail, Travel, and Tourism\nFifth District retailers continued to experience strong demand with most stores able to pass on the higher costs of goods, as well as increased labor costs, to consumers. Many retailers cited shortages of labor and inventory as constraints on growth. Auto dealers stated that the inventory of new cars continued to be extremely low. With consumers keeping cars longer, there was higher demand for services and dealerships were having trouble finding technicians despite increasing wages.\nTravel and tourism in the Fifth District continued to be strong, driven primarily by leisure travel. In most markets, hotel occupancy and average daily rates both were higher in March. Convention related business was starting to pick up, and events were retuning. Passenger count at airports rose and nearly matched their 2019 levels. Restaurants experienced strong demand but staffing was still a challenge. Overall, vacation travel remained strong, despite consumer concerns over gas prices and rising costs.\nReal Estate and Construction\nSince our last report, demand for homes in the Fifth District remained strong with a solid amount of buyer traffic. As such, housing inventory levels remained low and home prices continued to rise. There was not enough new home construction to meet demand, and some builders were either sold out for 2022 or were doing a lottery system for completed homes. The cost of some construction components continued to increase, but availability of materials improved slightly. Real estate agents noted that it continued to be a sellers' market and very competitive for buyers.\nOverall commercial real estate market activity was strong this period, especially in the multifamily and industrial sectors where demand was high, vacancy rates low and rental rates continued to increase. Class A office leasing activity picked up with tenants looking to \"right-size\" their space and lock-in longer term leases. Retail leasing strengthened, leading to falling vacancy rates. However, tenant improvement costs for retail and office spaces increased dramatically. Rising home prices have led to rapidly increasing multifamily rental rates. Land sales were extremely active, and prices increased across all property types. Feasibility was an issue with new commercial development due to high construction costs, the exception being for industrial and multifamily projects. Investment sales activity continued to be robust.\nBanking and Finance\nRespondents continue to report strong loan demand across all commercial loan types, while residential mortgage demand has started to ease. Respondents noted that while the slowdown in residential mortgages was mainly due to low housing stocks, some potential buyers were deterred by rising interest rates.. New auto lending was still being impacted from a lack of inventory, however, used auto lending demand was growing. Deposits continued to grow on pace with last year. Credit quality remained excellent, and delinquencies remained below pre-pandemic levels, but some respondents were seeing consumer loan delinquencies trending upwards.\nNonfinancial Services\nNonfinancial service firms reported moderate growth in revenues and strengthening demand in recent weeks. Several firms noted that the decline in COVID cases and the easing of COVID restrictions helped boost activity. A federal contractor, for example, said that easing made hiring and executing work easier. They also expected a boost in defense spending because of the war in Ukraine. A few service providers, however, noted increased uncertainty and risks to business conditions due to the ongoing conflict as well as from rising energy prices.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nApril 20, 2022\nSummary of Economic Activity\nEconomic activity in the Twelfth District expanded at a moderate pace during the reporting period of mid-February through March. Employment levels expanded, accompanied by higher wages. Overall labor market conditions remained tight. Price levels significantly increased, driven by growing costs and labor shortages. Retail sales and activity in the consumer and business services sector continued to expand, as local economies lifted COVID-related restrictions. Conditions in the agriculture and resource sectors strengthened a bit, while the manufacturing sector improved somewhat. Activity in the residential real estate market remained strong, while commercial real estate activity improved slightly. Lending activity was little changed over the reporting period.\nLabor Markets\nLabor markets remained tight over the reporting period. A combination of rising wage demands and reported lack of qualified candidates for both low- and high-skilled positions led to substantial worker shortages. Contacts in Alaska and Hawaii mentioned that migration out of their states further contributed to smaller pools of workers. The sectors reporting extreme difficulties filling positions include food services, hospitality, and health services. A few contacts highlighted the airline industry's staffing struggles, resulting in a notable reduction of flights. Firm contacts across sectors reported higher rates of employee turnover and early retirements and workers asking for higher pay, better benefits, and more work flexibility. Contacts also reported that more employees, particularly in larger companies, sought to unionize. In search for workers, the hospitality industry planned on hiring more foreign exchange students over the summer as well as younger workers.\nWage pressures remained high across all sectors. Contacts reported budgeting wage increases by an average of 5% for the current fiscal year. Contacts in health care and financial services noted even higher wage increases. Nonetheless, one contact in banking mentioned steady wages following adjustments made last year.\nPrices\nPrices grew notably over the reported period. Widespread price increases for food, housing, and energy were mentioned. Manufacturing costs, notably for raw materials, labor, and shipping, expanded considerably and resulted in higher prices for final goods and services. Additional price pressures were reported in services, including banking, legal services, housekeeping, and repair. Oil and gas prices spiked following the onset of the war in Ukraine, directly impacting the costs of fuel and transportation. Contacts from the airline industry expected higher air transportation prices over the next few years due to continued expected increases in fuel prices. Steel manufacturing saw sharp increases in the prices of raw materials. Agriculture was also impacted by the war due to the sizable increases in fertilizer costs.\nRetail Trade and Services\nRetail sales remained strong. Consumers continued to purchase goods at a high rate despite inflationary pressures. However, sales growth of durable goods such as electronics and vehicles has slowed as rising food and energy prices have eaten away at household budgets. Understaffing continued to be an issue for hospitality, food, and retail trade.\nSpending activity in the consumer and business services sector trended up, as Omicron infections declined, and local economies continued to lift COVID-related restrictions. Contacts from the hospitality industry noted robust demand for leisure travel and dining. Professional events and conventions slowly returned to being held in person but are not yet at pre-pandemic levels of attendance. Demand for air travel recovered further and, in some cases, outpaced pre-pandemic numbers, particularly for flights to Las Vegas and Hawaii. Some new restaurants opened to replace some of those that had closed down during the pandemic, as noted by a contact from the food industry in California. At the same time, many service providers, such as in travel and hospitality, continued to face labor shortages. A contact in legal services noted demand for talent had stabilized.\nManufacturing\nActivity in the manufacturing sector improved somewhat, and demand remained strong across the District. Packaging and renewable energy contacts reported notable growth for new orders. Many manufacturers are near capacity, and some reported order backlogs. Production continued to be affected by labor shortages and supply chain disruptions including the impact from the more recent COVID-19 outbreaks in China. Nevertheless, a contact from California mentioned a somewhat better ability to hire workers. Some manufacturers noted adjusting to a new normal by investing in automation to reduce their reliance on labor supply, increasing precautionary stockpiles of parts and supplies, and reshoring more of their production to counteract supply chain disruptions. The recent surge in fuel prices brought new concerns regarding shipping and distribution costs.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource sectors strengthened a bit. Strong demand for regional agricultural products contributed to elevated food prices that are expected to continue to rise. At the same time, input cost increases also accelerated with one contact projecting most farmers to break even as the best scenario this year. Greater costs were attributed to higher expenses for fertilizer, labor, and fuel. A stronger dollar contributed to a decline in agricultural exports over the first quarter of 2022. Additionally, multiple contacts reported periodic disruptions in agricultural exports due to lack of shipping containers and port congestion. Transportation costs were reported to increase two-fold over the last year. While these disruptions are expected to subside, many believed that prices will remain elevated relative to the pre-pandemic level. A contact from the petroleum industry reported declining production of certain oil derivatives, which could add additional price pressures. The recent surge of oil prices to elevated levels is expected to persist.\nReal Estate and Construction\nResidential real estate demand remained strong despite historically high prices and rising mortgage rates. Nonetheless, some contacts mentioned that they expect a slowdown in demand due to increasing mortgage rates. Widespread price surges are not limited to house sales, but also include rentals of single- and multi-family houses and apartment Supply chain disruptions caused uncertainty in material costs, forcing contractors in Alaska to limit bids to three days. Contributing to soaring housing prices were higher construction costs, lack of land availability, and low housing inventory. As a result, there is a severe housing shortage especially in California and Alaska. One contact in California even noted that the shortage of affordable housing is at crisis levels.\nCommercial real estate activity picked up somewhat over the reported period. Hybrid and remote work slowed down the recovery of office, retail, and hotel sectors. Commercial sales ticked up. Construction of multi-use properties began to rise as noted by a contact in Utah. Another contact from the Pacific Northwest mentioned high crime rates hindering the recovery path for commercial real estate in metropolitan areas.\nFinancial Institutions\nLending activity remained unchanged on balance. Consumer and commercial loans increased somewhat, while demand for residential mortgages edged down due to higher rates. Additionally, consumer mortgage loan refinancing has started to slow down. The majority of bankers report a very competitive environment that prevents banks from raising rates on most lending products. Some banks have eased credit standards to compete for loan customers. Liquidity remained high, supported by a steady growth in deposits and lending. However, one contact in California noted slowing deposit growth due to waning COVID relief payments.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

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"Beige Book Report: Kansas City\nApril 20, 2022\nSummary of Economic Activity\nGrowth in the Tenth District economy accelerated to a robust pace over the last several weeks. Manufacturing production grew rapidly bringing overall activity to its highest level in fifteen years. Services sectors also grew at a robust pace. In particular, demand at leisure and hospitality businesses bounced back quickly as the Omicron wave faded, and spring break activity significantly exceeded expectations for most contacts. Real estate activity and demand for mortgages remained at exceptional levels, even as interest rates rose in recent weeks. Contacts reported the invasion of Ukraine further disrupted global supply chains and led to higher input prices, but has not affected overall demand, hiring plans or planned capital expenditures. Uncertainty about ongoing effects of disruptions in Ukraine is elevated in the agriculture and energy sectors. Labor markets continued to tighten. District states concentrated in agriculture and energy sectors had exceptionally high numbers of vacancies per job seeker. Prices increased at a robust pace across the District. Moreover, contacts indicated that they increased their prices more frequently over recent months.\nLabor Markets\nTotal hiring grew at a moderate pace. While labor shortages remained challenging, some contacts reported an improvement in their ability to recruit or retain workers. Hiring in the services sector outpaced job growth among goods-producing businesses, driven largely by gains in leisure and hospitality employment. Labor markets continued to tighten across the District. The number of vacant jobs for each unemployed person was at all-time highs, and generally above the national average. States concentrated in agriculture and energy sectors had exceptionally high numbers of vacancies per job seeker, a trend that emerged as commodity prices rose in recent months.\nWage growth was robust and broad-based over the last month. Contacts reported that the pace of wage gains was relatively faster among lower-wage occupations, as measured on a percentage basis. The transportation sector also exhibited large wage gains. Contacts continued to report increasing non-wage benefits, such as more personal time off, in order to attract applicants. Expectations that wage growth would exceed its pace from recent years were unchanged.\nPrices\nPrices increased at a robust pace across the District. Moreover, contacts indicated that they increased their prices more frequently in recent months. Most businesses indicated that higher prices were insufficient to fully offset rising input costs. Businesses linked more closely to the production, processing or delivery of commodities exhibited greater ability to pass higher prices to their customers. Retail businesses and contacts in the agricultural sector noted that the costs of ongoing supply disruptions have yet to fully reach customers.\nConsumer Spending\nConsumer spending grew at a moderate pace in recent weeks. Contacts in the leisure and hospitality sector indicated that the spring season has been much better than expected as COVID-19 cases abated quickly, and that bookings extend throughout the summer. Moreover, several contacts noted that planned business travel grew moderately in recent weeks. Several retailers indicated that uncertainty about growth in consumer spending for the next several months is elevated, particularly for lower income households. Contacts noted that higher food and gasoline prices are expected to curb other retail spending as essential goods become more expensive.\nManufacturing and Other Business Activity\nThe manufacturing and services sectors in the District expanded at a robust pace in recent months, bringing reported activity well above levels exhibited over the past fifteen years. However, most contacts reported that profit margins decreased recently amid rising cost pressures. New orders among manufacturers outpaced growth in their inventories of materials, leading to rapid increases in backlogs. Expectations for growth over the next six months remained elevated broadly, but constrained by difficulties hiring workers and sourcing key inputs.\nContacts reported that the invasion of Ukraine further disrupted global supply chains and led to higher input prices, but has not affected overall demand, hiring plans or planned capital expenditures. The disruptions to supply chains due to the invasion were broad-based. For example, contacts in professional business service sectors highlighted losses in communication with Ukrainian software engineers supplying regional businesses. Also, deliveries of vehicles and other equipment to energy and manufacturing businesses have been delayed because key components fabricated in Ukraine were not available. Uncertainty remains elevated among District contacts about further disruptions tied to the conflict. Given Ukraine's prominence in supplying neon \u2013 a gas used in the manufacturing of microchips \u2013 several contacts noted exacerbated concerns about the availability of electronic equipment looking ahead. Uncertainty about future supply disruptions was also pronounced among agricultural contacts and steel manufacturers.\nGrowth in planned capital expenditures has not kept up with growth in overall production in recent months, expanding only at a modest pace. Several businesses highlighted cash flow constraints on investment activity. Strains in transportation prompted more suppliers to require upfront payment, rather than upon delivery. Alongside delays in production and sales, cash flows available for investment became less abundant.\nReal Estate and Construction\nDemand for construction of multifamily and single-family housing continued to grow at a robust pace. Development of single-family housing projects proceeded with most being completely pre-sold. New construction of multifamily housing faced challenges in securing financing as the repricing of both debt service costs and construction costs were occurring too rapidly to settle terms on lending. Housing markets remained extremely tight, with demand growth outpacing the inventory of new homes available for sale.\nCommunity and Regional Banking\nLoan demand grew moderately over the past month as banking contacts highlighted increased levels of commercial real estate financing. Demand for commercial and industrial loans and residential mortgages were stable amid rising interest rates. Credit quality was unchanged and contacts did not anticipate material changes going forward, although some noted concerns related to agricultural input costs and the effects of rising interest rates on borrowers. Deposits grew moderately from historically high levels. Several contacts noted near-term risks stemming from rising inflation, elevated home prices, increased labor costs, and considerable economic uncertainty.\nEnergy\nEnergy activity increased moderately across the Tenth District in recent weeks. Access to credit expanded in recent months, and most firms expected credit availability to expand further in the next six months. Higher crude oil and natural gas prices led regional firms to report higher profitability compared to late 2021, supporting access to credit. Prices rose significantly and production continued to rise. More oil and gas firms reported increasing jobs than at any time since 2014, and wages and benefits have also risen considerably. Several contacts also noted that rising prices for steel and the unavailability of piping inhibited production growth. The invasion of Ukraine, and a disruption to imports, further constrained the availability of pipe needed for drilling activities. Higher labor and materials costs led firms to report increases in the oil price levels necessary for a substantial increase in drilling to occur. Overall, the number of active rigs in the District increased slightly since February.\nAgriculture\nThe Tenth District farm economy remained strong alongside elevated commodity prices, but volatility and uncertainty in global markets emerged as a risk for the sector. The price of wheat and corn increased rapidly, and soybean prices increased modestly in March as the conflict in Ukraine led to expectations of substantial disruptions in global production and trade activity. The turmoil also led to rapid increases in the price of major inputs such as fuel and agricultural fertilizers. While crop prices supported farm revenues, concerns about the cost and availability of agricultural inputs intensified, and higher feed prices could also pressure profit margins for livestock producers. In addition, the surging grain prices increased costs for food processing facilities in the District.\nFor more information about District economic conditions visit: www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nApril 20, 2022\nThis report was prepared at the Federal Reserve Bank of Minneapolis based on information collected on or before April 11, 2022. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic activity expanded at a moderate pace since mid-February. Several Districts reported moderate employment gains despite hiring and retention challenges in the labor market. Consumer spending accelerated among retail and non-financial service firms, as COVID-19 cases tapered across the country. Manufacturing activity was solid overall across most Districts, but supply chain backlogs, labor market tightness, and elevated input costs continued to pose challenges on firms' abilities to meet demand. Vehicle sales remained largely constrained by low inventories. Commercial real estate activity accelerated modestly as office occupancy and retail activity increased. Districts' contacts reported continued strong demand for residential real estate but limited supply. Agricultural conditions were mixed across regions. Farmers were supported by surging crop prices, but drought conditions were a challenge in some Districts and increasing input costs were squeezing producer margins across the nation. Outlooks for future growth were clouded by the uncertainty created by recent geopolitical developments and rising prices.\nLabor Markets\nEmployment increased at a moderate pace. Demand for workers continued to be strong across most Districts and industry sectors. But hiring was held back by the overall lack of available workers, though several Districts reported signs of modest improvement in worker availability. Many firms reported significant turnover as workers left for higher wages and more flexible job schedules. Persistent labor demand continued to fuel strong wage growth, particularly for footloose workers willing to change jobs. Firms reported that inflationary pressures were also contributing to higher wages, and that higher wages were doing little to alleviate widespread job vacancies. But some contacts reported early signs that the strong pace of wage growth had begun to slow.\nPrices\nInflationary pressures remained strong since the last report, with firms continuing to pass swiftly rising input costs through to customers. Contacts across Districts, particularly those in manufacturing, noted steep increases in raw materials, transportation, and labor costs. In multiple Districts, contacts reported spikes in prices for energy, metals, and agricultural commodities following the Russian invasion of Ukraine, and several noted that COVID-19 lockdowns in China had worsened supply chain disruptions. A few reports noted that input suppliers were making use of more flexible contract terms or only honoring price quotes for 24 hours. Strong demand generally allowed firms to pass through input cost increases to customers, for example, via fuel surcharges for freight and airline fares. However, contacts in a few Districts noted negative sales impacts from rising prices. Firms in most Districts expected inflationary pressures to continue over the coming months.\nHighlights by Federal Reserve District\nBoston\nEconomic activity expanded at a modest pace on aver-age. Headcounts increased modestly despite significant layoffs by one large firm. Wages and output prices alike increased at a moderate pace, but some nonlabor input prices soared. The outlook remained optimistic, but several contacts perceived an increase in downside risks.\nNew York\nGrowth picked up to a moderate pace in recent weeks, despite supply disruptions, worker shortages, and un-seasonably inclement weather. Tourism, consumer spending, and manufacturing activity all picked up. Businesses continued to report substantial increases in selling prices, input prices, and wages. Overall, business contacts have become less optimistic about the near-term outlook.\nPhiladelphia\nBusiness activity continued to grow modestly during the current Beige Book period, and some sectors remained below pre-pandemic levels. Customer traffic resumed and workers began returning to offices, as the lull in COVID-19 cases continued. The labor market remained tight with moderate growth, while wages eased to a moderate pace and prices grew sharply.\nCleveland\nThe District's economy expanded at a moderate pace despite ongoing supply and labor constraints. The war in Ukraine had little meaningful impact on current demand for goods and services, but it added another layer of complexity to supply chains. However, contacts said that the war had significantly increased uncertainty and put further upward pressure on costs, particularly for energy, metals, and agricultural commodities.\nRichmond\nThe regional economy expanded moderately, but some businesses were concerned that rising energy prices and the war in Ukraine could have adverse effects on business conditions in coming weeks and months. Many Fifth District businesses reported increasing employment and that rising costs of labor, materials, transportation and energy contributed to strong price growth in recent weeks.\nAtlanta\nEconomic activity expanded at a moderate pace. Labor markets remained tight, and wages continued rising. Nonlabor costs rose. Retail sales were strong. Tourism activity strengthened. Housing demand was strong. Commercial real estate conditions were mixed. Manufacturing activity was robust. Banking conditions were steady.\nChicago\nEconomic activity increased moderately. Employment increased strongly, and consumer spending, business spending, manufacturing, and construction and real estate were up modestly. Wages and prices rose rapidly, while financial conditions tightened some. Agriculture markets experienced price increases and substantial volatility related to Russia's invasion of Ukraine.\nSt. Louis\nEconomic conditions have improved at a moderate pace since our previous report. Prices for food and raw materials increased at a robust pace. The pace of hiring rose slightly, but labor shortages continued to limit output and wage growth remained strong. Consumer spending on services rose, but some softening in retail spending pointed to a mixed outlook moving forward.\nMinneapolis\nThe region's economy grew moderately since mid-February. Despite continued price pressures, overall demand in most sectors remained healthy. Meeting that demand, however, was checked by tight labor, supply chain difficulties, and other challenges. Firms expressed rising interest in automation to address persistent pressures on wages and labor availability. Startup loans to Minority- and women-owned business enterprises in rural areas were on the rise.\nKansas City\nGrowth in the Tenth District accelerated to a robust pace. Prices increased rapidly and contacts reported changing prices much more frequently than is typical. Labor markets tightened further. The invasion of Ukraine disrupted supply chains and caused input prices to rise, but District businesses reported no effects on demand, hiring or planned capital expenditures.\nDallas\nEconomic activity expanded at a faster clip. Growth was broad-based across sectors, but many firms noted sup-ply-chain disruptions as a primary constraint on revenues. Employment and wages rose robustly. Supply-chain issues and energy prices continued to drive up costs. Optimism in outlooks waned, and uncertainty increased because of mounting headwinds.\nSan Francisco\nEconomic activity strengthened moderately over the re-porting period. Employment levels expanded while over-all conditions in the labor market remained tight. Wages and price levels significantly increased. Retail sales and consumer and business services sector activity continued to expand, while the agriculture and resource sectors strengthened a bit. Lending activity was little changed.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"April 20, 2022\nSummary of Economic Activity\nEconomic activity in the Seventh District increased moderately overall in late February and March, though contacts expected a more modest pace of growth over the coming months. Labor and materials supply constraints continued to weigh on the expansion. Employment increased strongly, and consumer spending, business spending, manufacturing, and construction and real estate were up modestly. Wages and prices rose rapidly, while financial conditions tightened some. Agriculture markets experienced price increases and substantial volatility related to Russia's invasion of Ukraine.\nLabor Markets\nEmployment increased at a strong pace over the reporting period, and contacts expected moderate growth over the next 12 months. Contacts across sectors reported ongoing difficulty in finding workers at all skill levels. High turnover rates continued to be an issue for some contacts, with one noting that several senior level managers resigned for permanent work-from-home opportunities at other firms. A lack of labor continued to prevent a number of firms from producing enough to meet strong demand, with one manufacturer expressing the desire to add a third shift but unable to find workers for it. Overall, wage and benefit costs increased rapidly, both to attract new workers and retain existing talent. Still, some contacts noted that despite higher wage offers, they were unable to fill open positions due to a scarcity of applicants. Others, however, indicated they were seeing improvements in their ability to hire, which they attributed to greater labor force participation. One contact noted that although they were able to hire, new workers required more training than they had historically.\nPrices\nOverall, prices rose strongly in late February and March, and contacts expected price growth to continue at a strong pace over the next 12 months. There were large increases in producer prices, driven by pass-through of higher costs for labor, transportation, energy, and materials, notably metals. Consumer prices generally moved up robustly due to solid demand, limited inventories, and pass-through of increased costs. Contacts continued to indicate that they were experiencing only limited pushback on price increases from customers.\nConsumer Spending\nConsumer spending moved up modestly on balance over the reporting period. Some retailers mentioned that foot traffic picked up and attributed the change to reduced concern about COVID-19. Nonauto retail sales increased slightly. Spending on furniture, appliances, and electronics rose modestly, but grocery sales were flat. Contacts also noted an increase in sales at discount stores. Light vehicle sales volumes decreased moderately and continued to be constrained by low inventory levels; profit margins remained strong due to elevated vehicle prices. Leisure and hospitality spending increased, led by greater tourism activity.\nBusiness Spending\nBusiness spending increased modestly in late February and March. Retail inventories remained low in many sectors due to supply chain challenges. For key items, retailers were taking extraordinary measures to get inventory, including ordering earlier and using air freight. Many manufacturers' inventories were not at desired levels, with the number reporting levels as too high about the same as the number reporting levels as too low. Manufacturing contacts continued to cite shortages of a wide range of inputs and expressed concern that the COVID-19 outbreak in China could cause further supply disruptions. Transportation services continued to operate at full capacity. Growth in capital expenditures was modest, with greater spending on equipment upgrades and intellectual property. Lead times remained lengthy for some types of capital equipment. There was little change in industrial energy consumption, while commercial energy consumption increased slightly, led by growth in office usage. Residential energy demand decreased slightly.\nConstruction and Real Estate\nConstruction and real estate activity moved up modestly on net over the reporting period. Contacts in both residential and nonresidential construction noted that higher labor and materials costs and rising interest rates were weighing on demand. Residential construction was up on net, with growth varying by location and segment. According to a survey of builders, single family home construction was flat, with many still limiting contract sales as they continued to navigate supply-chain bottlenecks. There were notable delays in deliveries of key items, such as windows, doors, framing, HVAC equipment, appliances, and cabinets. Multifamily construction strengthened as demand remained robust. Residential real estate activity was little changed. Inventory levels of homes for sale remained low, contributing to further increases in prices and rents. In the nonresidential construction sector, project costs escalated, and builders reported delays in receiving steel. Nonetheless, construction increased due to strong demand in the industrial, single-tenant retail, and medical office areas. Commercial real estate activity held steady, with little movement in transaction activity, prices, or rents. There was a modest increase in the availability of sublease space.\nManufacturing\nManufacturing production increased modestly in late February and March as challenges in securing labor and materials limited production despite strong demand for many products. Shortages of microchips and other materials resulted in an outright decline in auto output. Heavy truck demand increased moderately but there was only a small increase in production, which reduced inventories and boosted prices. Steel production was flat, though demand moved up, driven in part by increased orders from energy customers. Steel prices remained high, especially for stainless steel. Manufacturers of office furniture noted that demand for new, renovated, or reconfigured office space was supporting sales. Fabricated metals manufacturers reported little change in order books overall.\nBanking and Finance\nFinancial conditions tightened some on balance over the reporting period. Participants in the equity and bond markets reported rising interest rates, an increase in volatility, and net declines in asset values. Business loan demand increased modestly, with growth spread across sectors. Contacts highlighted greater usage of lines of credit to finance inventories as well as growth in acquisition financing. Business loan quality was unchanged overall, while business loan standards tightened slightly. In consumer markets, loan demand decreased slightly, led by lower demand for mortgage lending. Consumer loan quality remained unchanged on balance, while standards tightened slightly.\nAgriculture\nAgriculture markets experienced price increases and substantial volatility during the reporting period related to Russia's invasion of Ukraine. Prices for corn, soybeans, and wheat moved higher, as did input prices, particularly for fertilizer and diesel fuel. Some farmers switched to using manure as fertilizer, though availability was limited, particularly in areas without substantial livestock activity. Rising input costs led to a shift in planting plans from corn to soybeans, which require less expensive inputs. In addition, concerns deepened about whether input deliveries would be in time for planting. On average, prices for cattle, hogs, eggs, and milk were all up from the prior reporting period. Strong gains in farmland prices continued, in part because of greater interest by investors.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2022/2022-04-bo

"April 20, 2022\nSummary of Economic Activity\nEconomic activity expanded at a modest pace on average. Hiring remained difficult for most firms but eased for some, resulting in small employment gains. Wages increased at a moderate pace on average, but some firms offered robust pay increases. Output prices increased moderately amid intense cost pressures. Manufacturers reported softer sales, while retailers saw slightly higher sales. Tourism contacts enjoyed small gains in activity on average, and saw signs suggesting demand would accelerate in the coming months. Software and IT services firms posted moderate revenue growth and had generally robust demand. Home sales slid further amid historically low inventories. Commercial real estate activity increased at a slow pace as the office and retail sectors gained further momentum. The overall outlook remained optimistic on balance, but several contacts perceived an increase in downside risks.\nLabor Markets\nWages increased at a moderate pace on average, hiring activity was mixed, and headcounts increased modestly despite significant layoffs by one large firm. Most contacted firms in diverse sectors continued to face difficulties in hiring and/or retaining workers, but some experienced an easing of labor shortages in recent months. Moderate to robust wage increases were reported by the majority of firms contacted, but some manufacturers said wages were stable in recent months. One retailer increased its wage floor further following a similar increase posted in Q4 2021, and two firms quoted their starting pay for warehouse workers as having risen to roughly $18 per hour. Retention bonuses and non-wage incentives also increased. Regarding the outlook, software and IT services firms expected to either maintain or moderately raise employment levels moving forward, retail and tourism contacts hoped to raise staffing levels by modest to robust margins, and manufacturers' hiring plans were mixed but positive on balance. Some firms expected upward wage pressures to persist, while others saw the possibility of slower wage growth ahead.\nPrices\nOutput prices increased moderately amid robust ongoing cost pressures. Two software and IT contacts marked up their prices significantly and were either planning on or considering further price increases moving forward; other IT firms held prices firm, but one was mulling selective increases. Manufacturing contacts faced robust-to-extreme inflationary pressures across a variety of inputs, including food commodities, fuel, freight, metals, and paper. One held prices steady despite these pressures, as they feared that further price increases, on top of the substantial markups they enacted in 2021, would drive away customers. Two others raised prices on some or all outputs, by modest-to-strong margins, to cover specific cost increases. One firm lowered prices following weak sales. Retailers experienced somewhat slower input price inflation and held prices steady, although one planned to post moderate price increases later in the year. The war in Ukraine injected greater uncertainty into the inflation outlook among some contacts.\nRetail and Tourism\nFirst District retailers reported stable to modestly higher sales in the first months of 2022. At a clothing retailer, recent sales either matched or exceeded their year-ago levels, which had been among the store's strongest on record. A furniture seller saw a modest uptick in sales since mid-February following a slow start to the year, thanks to improved supply chains and increased foot traffic. Tourism contacts reported mixed recent results but expected the recovery to pre-pandemic activity levels to accelerate moving forward. Airline passenger traffic through Boston rose at a fairly brisk pace in recent months, and as of March 2022 had reached 80 percent of its March 2019 level. Advance bookings for April showed moderate further gains, and improvements were seen in all types of travel. Greater Boston hotel occupancy rates and room rates were moderately lower in February compared with November 2021 from a combination of seasonal and pandemic-related factors, but both rates remained well above those from one year earlier. Retail and tourism contacts expressed an optimistic outlook for the rest of 2022, as the resumption of long-dormant convention activity in Boston\u2014already apparent in March\u2014was expected to give renewed energy to the sectors.\nManufacturing and Related Services\nAmong firms contacted this round, sales softened on average despite mixed demand conditions. A biotechnology firm and a precision parts maker each suffered idiosyncratic (negative) shocks to demand, resulting in flat or lower sales for the quarter and steep revenue declines from one year ago. A frozen fish producer and a packaging maker both said that, despite very robust demand, sales fell from last quarter owing in part to supply chain issues. A furniture producer saw a moderate increase in sales in the first quarter but noted that sales growth was held back by supply chain delays and labor shortages. Contacts experiencing strong demand wanted to invest in new capacity but said that supply chain issues limited their ability to do so. With the exception of the biotechnology firm, contacts were generally optimistic. Nonetheless, material and labor shortages remained a risk for some, and others faced increased uncertainty tied to government spending and sanctions on Russia.\nSoftware and IT Services\nSoftware and IT contacts experienced moderately higher demand recently, and revenues increased by robust margins year-over-year. One firm experienced a recent surge in hiring, compensating for previous staffing challenges, while others said that hiring and retention remained quite difficult. All firms made at least selective wage increases, and wage growth accelerated to a robust pace at two firms. Wage pressures crimped margins at one firm, but others enjoyed stable or higher margins following recent price increases and/or cost-cutting measures. Capital and technology spending was steady or up slightly. Demand outlooks were generally optimistic, but uncertainty increased. The Russia-Ukraine war worried two contacts, but so far neither firm has been significantly impacted by the conflict. Other risks mentioned included supply chain issues, inflation, and the emergence of a new COVID-19 variant.\nCommercial Real Estate\nCommercial real estate activity increased at a modest pace on average as the office and retail sectors gained further momentum. The industrial property sector continued to see very strong leasing and investment demand, driven by e-commerce users. Industrial space remained very tight, spurring robust increases in planned development. Office leasing activity increased further, especially in suburban locations. A Boston contact said that urban tenants were seeking short-term leases given their uncertain space needs, and that landlords were competing with space upgrades more than with rent reductions. The same contact, however, said that real estate professionals in the Boston area were forecasting declines in office rents in the next year. Multifamily housing saw robust investment demand and construction activity, as low vacancy rates contributed to steep rent growth. Retail leasing improved on balance, surprising some contacts, but the number of vacant storefronts remained elevated. Despite some optimism for the next few months, the outlook turned more pessimistic and uncertain, as contacts saw risks to activity from rising construction costs and interest rates, the war in Ukraine, and a possible recession.\nResidential Real Estate\nResidential real estate sales slowed moderately in February, as the market was dogged by historically low inventories. Closed sales were down over the year (to February) for both single-family homes and condominiums in all states except Connecticut, which did not supply data. Year-on-year sales declines were somewhat steeper than those recorded in late 2021. Contacts attributed the weak results to a stark lack of inventories, as listings again posted year-over-year declines and reached record lows (since 1998) in Rhode Island and in the Boston area. Buyer demand remained strong, however, as properties spent very little time on the market and competition for lower-priced homes was especially fierce. Median sales prices continued to climb at a moderate to very fast annual pace, similar to the results recorded in late 2021, with the exception that Maine's condo prices fell. Contacts expected inventories and sales to increase in the coming months in line with typical seasonal patterns and due to the further easing of pandemic-related restrictions. Contacts noted that buyers wished to purchase homes ahead of further mortgage rate and price increases.\nFor more information about District economic conditions visit: www.bostonfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

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"April 20, 2022\nSummary of Economic Activity\nBusiness activity in the Fourth District continued to increase at a modest pace in recent weeks. While demand was generally positive, crosscurrents under the surface were buffeting firms within and across sectors. For example, some consumer-facing contacts reported that spending picked up as concerns over the latest COVID-19 wave subsided, while others noted that spending slowed as consumers became more concerned about rising prices. Meanwhile, lenders reported that higher interest rates pulled forward demand for new mortgage originations while simultaneously curbing refinance activity. For both service providers and goods producers, labor constraints and supply disruptions still hampered their ability to meet strong demand. The war in Ukraine had not yet had a meaningfully adverse impact on current demand for goods or services or on firms' near-term expectations for demand. However, contacts suggested that the war had added another layer of complexity to supply chain challenges and heightened uncertainty for demand in the longer term. In addition, the conflict put further upward pressure on input costs, particularly for energy, metals, and agricultural commodities.\nLabor Markets\nEmployment continued to increase moderately in recent weeks, even as firms struggled to find and retain qualified employees. Nearly half of contacts indicated that they had increased staffing over the prior two months, with an almost equal share reporting that staffing levels were unchanged. While a few firms reported more success in hiring, many were operating with more vacancies than they would like. Several contacts that were able to add staff suggested that they were hiring workers who were leaving other jobs to seek better opportunities rather than workers who were new to the labor force or returning to it. Looking forward, firms plan to add more workers in the near term; but with limited improvement in worker availability, many contacts have pushed back their timelines for meaningful relief from labor shortages.\nWages continued to rise across a wide array of industries and occupations, but the share of contacts reporting such increases has declined from around 70 percent toward the end of 2021 to less than 60 percent in recent weeks. With firms still competing for many currently employed workers, many firms expected pay rates to rise further in 2022. However, some firms said that prior pay hikes had not led to improvements in hiring or retention rates, and they could not afford to increase pay further.\nPrices\nAfter declining during the prior two reporting periods, the percentage of firms reporting higher input costs increased. Several contacts in manufacturing and construction cited the war in Ukraine as a factor in this reversal of trend. For goods producers, the war had pushed costs higher for a variety of inputs, most notably metals and energy. Moreover, many noted that fuel surcharges had increased, as well. These fuel surcharges were also cited by retailers and restaurateurs, who suggested that their vendors were passing through these cost increases. Outside of the effects of the war, firms said that previously existing supply chain constraints kept upward pressure on a broad array of inputs. Looking forward, more than 80 percent of contacts expected nonlabor input costs to continue rising in the months ahead.\nSelling prices continued to increase as firms sought to keep up with rising costs. Firms that sell to other firms reported using more surcharges and flexible contract language to keep up with volatility in costs, with little pushback from their customers. Similarly, goods retailers indicated that they were pushing through price increases to cover the higher costs of inputs and transportation. At the same time, some restaurants said that higher menu prices had led to fewer customers and lower sales.\nConsumer Spending\nReports suggested that consumer spending improved somewhat following weaker activity in the previous reporting period. Restaurateurs and hoteliers reported a pickup in activity in recent weeks as weather conditions improved and COVID-19 cases dropped, though some hospitality contacts said that inflationary pressures were causing some customers to hold back on spending. General merchandisers and apparel retailers said that demand for goods remained strong, though one general merchandiser said that sales softened in recent weeks. Auto dealers reported limited sales despite generally elevated demand as tight inventories and higher prices deterred buyers. Contacts were generally optimistic that nonauto consumer spending on goods and services would pick up in the coming weeks, though two contacts said that the ongoing conflict in Ukraine clouded their outlook on consumer demand. Auto dealers suggested that sales will remain weak until inventory levels recover.\nManufacturing\nDemand for manufactured goods increased strongly across a wide range of end-user markets. However, supply chains continued to be disrupted both domestically and abroad, with COVID-related shutdowns in China and the war in Ukraine adding additional new challenges. Worker shortages continued to restrict output growth. Manufacturers struggling to keep up with demand reported some success in doing so by using labor-saving technologies. Finished goods inventories fell modestly because extended lead times for inputs resulted in an excess of unfinished goods. Looking forward, most respondents expected demand to increase in coming months, though their optimism was tempered by continued difficulty sourcing inputs, fears over a recession in Europe, and general concern about rising inflation.\nReal Estate and Construction\nDemand for residential construction and real estate remained robust despite increasing interest rates. Even so, supply chain disruptions continue to hinder new home construction. One general contractor indicated that he has had no issue selling homes, though completing projects has remained a challenge. Going forward, contacts were optimistic that demand would remain strong in the near term, though the longer-term outlook is clouded by elevated prices and rising interest rates.\nNonresidential construction and real estate activity continued to increase. Contacts reported that leasing activity for industrial, retail, and apartment spaces remained strong. There has also been a recent uptick in leasing activity for office spaces. Leasing demand is expected to remain strong going forward, with continual improvements anticipated for office spaces. Nonresidential construction contacts reported strong demand for new construction, though they noted significant challenges around increasing costs and materials shortages (which in many cases have delayed project starts). Overall, contacts were optimistic that demand would remain strong, though they noted increased uncertainty because of the war in Ukraine that is expected to further exacerbate supply shortages and cost increases.\nFinancial Services\nLoan demand increased moderately during the reporting period. Contacts reported increased business lending, especially for commercial and industrial loans, and many bankers reported strong loan pipelines. On the household side, some bankers noted a mixed effect of higher mortgage interest rates as demand for new originations increased while refinancing activity dropped. Demand for auto loans was slightly down because of limited vehicle inventories. Lenders said that delinquency rates for commercial and consumer loans remained low and that core deposits increased. Looking ahead, bankers expected business loan volumes to increase further as clients make capital investments, but they expected mortgage refinancing activity to slow further as interest rates rise.\nProfessional and Business Services\nActivity for professional and business services remained strong. Software solutions and digital authentication firms reported that demand for their services remained elevated. Going forward, contacts were optimistic that current demand would persist. Wealth management and consulting firms were particularly optimistic, noting recent increases in early-stage business consultations.\nFreight\nDemand for freight services declined modestly from high levels. The softer demand stemmed from continued supply chain disruptions, especially at ports, and growing uncertainty surrounding the conflict in Ukraine. Many respondents reported being at capacity. Worker availability improved somewhat, but many contacts said that staffing was still below desired staffing levels. Looking forward, contacts expected conditions to improve modestly in coming months despite difficulties passing through rising fuel costs, continued difficulty filling driver positions, and the threat of a recession in Europe.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

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"April 20, 2022\nSummary of Economic Activity\nNinth District economic activity increased moderately since mid-February. Employment saw moderate growth, as robust hiring demand continued to be restrained by tight labor supply. Wage and price pressures were strong, with particularly strong pressure on input prices. Growth was noted in consumer spending, commercial construction and real estate, manufacturing, and energy. Residential construction was flat and residential real estate slowed. Agricultural conditions improved heading into the planting season, with strong crop prices offsetting high input costs. Reports from minority- and women-owned businesses were mixed, while rural startup loans were on the rise.\nLabor Markets\nEmployment grew moderately since the last report. Hiring demand remained strong according to both formal and ad hoc surveys of employers. Construction, hospitality, and manufacturing firms reported particularly robust labor needs. Most firms were interested in increasing the overall size of their full-time workforce, while a smaller share also noted openings to fill turnover or seasonal needs. However, firms struggled to fill open positions. Labor availability was considered poor by a majority of employers, with little expectation of near-term improvement. A North Dakota staffing contact said that for a job order of 10 workers, clients are told that \"we'll try to get you two or three.\" Among firms using work visa programs, a majority reported significant difficulties in filling labor needs through such channels.\nWage pressures remained strong. Surveys suggested that a large share of firms were giving raises, particularly in construction and hospitality sectors, and the size of wage hikes was growing as employers competed for labor. A small Minnesota health care firm said the inability to find workers required higher salaries \"to avoid [staff] poaching or resignations.\" Numerous contacts reported increased interest in automation to tackle growing wage pressure and lack of workers. Sources also reported that rapid wage inflation induced more turnover among lower-wage positions.\nPrices\nPrice pressures intensified further since the previous report. Two-thirds of District firms responding to a survey said they increased their selling prices in March from a month earlier, while 70 percent reported that their non-labor input prices increased from February. Manufacturing contacts noted that after a brief slowing of price increases for certain raw materials, prices increased suddenly and steeply with the onset of the war in Ukraine. Retail fuel prices in District states increased briskly since the previous report. Prices received by farmers in February increased from a year earlier for corn, soybeans, wheat, canola, dry beans, potatoes, hay, hogs, cattle, turkeys, chickens, eggs, and milk.\nWorker Experience\nLabor supply remained tight across the District. A recent survey of workers in Minnesota and North Dakota showed that better pay and benefits, increased flexibility, and career advancement were the main priorities among respondents looking to make occupational changes. Staffing shortages put pressure on some workers. \"My work life is stressful, we are understaffed, and I don't have the support I need to do my job,\" said an education industry worker. Many survey respondents reported making substitutions or reducing consumption of some food items and clothing in response to higher prices, but absorbing the added costs of more essential items such as medicine, rent, fuel, and electricity. Working parents struggled to find and afford childcare, and workers with student loans worried about their finances once the payment moratorium ends. A construction labor contact said that elevated vehicle and gas prices were of great concern to industry workers because of long commutes to working sites.\nConsumer Spending\nConsumer spending grew moderately since the last report. Overall, more hospitality and tourism firms reported higher revenues of late compared with those reporting a revenue decline. However, some reported that increased revenue was due to higher costs flowing through to customers. Firms in the Minneapolis-St. Paul region were more likely to report positive revenue growth, but many continued to report that revenues were below pre-pandemic levels. Nonetheless, these firms were expecting solid revenue growth in the coming months compared with last year. Retailers in general reported modestly higher sales, but noted higher costs were eating into profits and supply chain problems continued to hamper product inventory and related sales.\nConstruction and Real Estate\nCommercial construction grew moderately since the last report. Overall, contacts were positive about recent revenues and reported a healthy pipeline of work to bid on. Activity was robust in South Dakota. Numerous contacts reported that activity would have been stronger were it not for high material costs, significant delays in obtaining materials, and a lack of skilled workers. Growth in residential construction showed signs of slowing. Single-family permits in February and March were mixed across the District's larger markets. A western South Dakota contact said that pricing and subsequent sales of speculative homes were being delayed until completion to keep up with rising costs.\nCommercial real estate improved modestly since the last report. Downtown employers continued their return to offices, which helped nearby retail and other businesses. Industrial space remained at low vacancies despite considerable new construction. Residential real estate demand remained healthy, though overall sales were slow due to low inventories of homes for sale. An eastern South Dakota contact said that anything \"remotely close to good condition\" sells in less than 24 hours without having to list. Higher mortgage interest rates were expected to dampen demand, and sources reported slightly more home price reductions compared with the previous month.\nManufacturing\nManufacturing activity increased moderately, while contacts noted worsening input availability challenges. A regional manufacturing index indicated increased activity in Minnesota, North Dakota, and South Dakota in March relative to the previous month. Most manufacturing respondents to a survey of District businesses reported increased sales in March from the previous month, along with continued input cost and availability challenges. Several contacts noted that raw materials suppliers were only holding price quotes for 24 hours in some cases. A few contacts noted a decline in new orders because of price increases or limited inventory, while a metal fabricator reported a sharp drop in new orders since the Russian invasion of Ukraine.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions improved moderately heading into planting season. Strong crop prices appeared to outweigh increases in input costs, bolstering incomes, according to contacts; however, livestock and dairy producers were seeing their margins squeezed. Early reports indicated a reduction in District corn acres planted and an increase in wheat and soybean acres in 2022. District oil and gas exploration activity was steady since the last report, despite a crude price surge. Industry contacts suggested that labor availability challenges were constraining oilfield activity and that drilling would respond only gradually to oil prices greater than $100 a barrel, even if sustained. An iron ore facility in northern Minnesota announced that it would idle operations in the spring.\nMinority- and Women-Owned Business Enterprises\nReports from minority- and women-owned business enterprises (MWBEs) in the District were mixed. In Minneapolis-St. Paul, some downtown retailers were hopeful as more workers transitioned back to the office, but also uncertain about the impact of hybrid work. Staffing continued to be a challenge for MWBEs. \"Employees are practically setting their own schedules; they otherwise don't take the job,\" shared a Minnesota contact. The director of a nonprofit serving MWBEs said it was also struggling to hire talent despite offering generous pay and benefits. The same contact reported higher entrepreneurship in rural areas. Higher input costs became reportedly harder to pass on to consumers among smaller businesses, as the cost of fuel and other necessities\nFor more information about District economic conditions visit: minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"April 20, 2022\nSummary of Economic Activity\nExpansion in the Eleventh District economy accelerated during the reporting period as the impact of the Omicron wave faded. Most notably, growth in nonfinancial services, particularly the leisure and hospitality sector, strengthened. Manufacturing output growth was solid, while retail sales dipped slightly. Loan demand increased strongly, and home sales remained solid despite a spike in mortgage rates. Activity in the energy sector expanded further in part due to the recent run-up in energy prices, while worsening drought hampered agricultural conditions. Employment rose robustly, and wage growth continued to be highly elevated due to labor market tightness. Supply-chain issues remained acute, driving up input and selling prices. Outlooks were mixed, and uncertainty climbed, with rising concern about the effects on future growth of escalating geopolitical tensions, climbing wages, rising interest rates, inflation, lingering supply-chain disruptions, and labor shortages.\nLabor Markets\nEmployment expanded strongly, with job gains widespread across sectors. Worker shortages remained endemic, and many firms noted continued difficulties in hiring and/or retaining employees, particularly those in the healthcare, IT, and education sectors. One contact noted an uptick in workers being poached by large tech companies offering sizable (up to 50 percent) salary increases. Nearly two-fifths of the more than 300 Texas business executives responding to a Dallas Fed March survey cited staffing shortages as a key restraint to revenue growth.\nWage growth remained at or near record highs, driven largely by labor shortages. Firms said that workers were looking for higher compensation, better benefits, and increased flexibility to work from home. According to the above-mentioned March survey, Texas businesses expect wages to rise by 6.9 percent on average this year, after increasing 7 percent in 2021.\nPrices\nInput and selling prices continued to increase at a rapid clip. Contacts cited supply-chain issues, rising wages, and/or high energy prices as mainly driving the rising costs. A manufacturer commented that many vendors were either not providing price quotes or were quoting prices that were valid for less than 24 hours, making it difficult to process both existing and new orders. Sustained pricing pressures were impacting small firms more than large firms, and a contact noted that large discount retailers were fining suppliers for late or incomplete deliveries. Transportation costs surged, and there were widespread reports of transportation firms raising rates and/or instituting fuel surcharges. Airline contacts said air fares have increased recently, and they plan to add surcharges due to the spike in fuel prices.\nManufacturing\nExpansion in the Texas manufacturing sector continued at a solid pace, despite enduring supply-chain issues and labor challenges. Output growth was led by durable goods such as machinery and construction materials manufacturing. Strength was also seen in high-tech, fabricated metals, and food manufacturing. Gulf Coast refinery utilization rate rose to 93.8 percent in March supported in part by surging margins. Manufacturing outlooks were mixed as uncertainty arising from geopolitical tensions, inflation, high energy prices, supply-chain delays, and labor shortages weighed on manufacturers' sentiment.\nRetail Sales\nRetailers reported a slight reduction in overall sales in March due to low inventories and ongoing challenges with supply chains. A wholesaler in food services noted difficulty sourcing proteins, and auto dealers cited continued declines in sales stemming from low inventories, particularly for new vehicles. Availability of auto parts was also cited as a factor hampering revenues in the auto repair side of the business. In contrast, contacts in the Rio Grande Valley noted that an increase in border crossings had boosted retail traffic in the area. Overall, however, outlooks were pessimistic, with continued concern regarding supply side stresses.\nNonfinancial Services\nActivity in the service sector accelerated after slowing in the previous reporting period due to the Omicron surge. Revenue growth was robust and broad-based, with strong increases seen in the leisure and hospitality, transportation and warehousing, other services, and professional and business services sectors. Staffing firms noted continued strong demand, particularly for healthcare and IT workers. Air travel picked up during the reporting period, with demand primarily driven by leisure travel, particularly spring break travelers, though business travel ticked up as well. A major Texas seaport continued to post strong increases in container traffic, and air cargo shipments also rose. Service-sector outlooks were less optimistic due to increased uncertainty surrounding the impact of the Russia-Ukraine war on inflation and supply-chain issues and concerns surrounding new COVID variants and labor shortages.\nConstruction and Real Estate\nActivity in the housing market remained solid, despite a sharp rise in mortgage rates. There were scattered reports of slowing traffic, which contacts attributed to rate sensitivity, but by and large sales were holding up well. A few builders noted providing closing cost incentives that could be used by buyers to buy down rates. Prices continued to trend upward, keeping pace with rising costs. Operational challenges were ongoing, keeping new home supply limited. Outlooks were cautiously optimistic, with contacts expressing concern about the impact of rising mortgage rates and higher home prices on affordability and future sales.\nApartment leasing remained solid, further bolstering occupancy and rents, and contacts foresee continued strong growth in rents. On the commercial side, office leasing was slowly bouncing back from the COVID-induced slump, pushing down vacancy rates. The retail market continued to see measurable gains in absorption, and industrial construction and demand remained near historic highs. While investment sales activity remained robust, rising rates were noted as a headwind.\nFinancial Services\nLoan demand continued to increase at a robust pace over the past six weeks, despite a sharp rise in loan pricing. Loan volume increases spanned lending types, and growth remained strongest for commercial real estate loans. Nonperforming loans continued to decrease, and credit standards and terms tightened slightly. Contacts expressed concerns about the effects of interest rate increases, inflation, rising wages, and staffing shortages. Respondents expect increases in loan demand and decreases in nonperforming loans over the next six months. While general business activity continued to improve, expectations for six months from now were mixed.\nEnergy\nOilfield activity increased during the reporting period, with the Eleventh District rig count climbing further and oil and natural gas production rising. Many upstream contacts said their firm's oil production will expand this year, with smaller firms expected to ramp up activity at a faster pace than larger ones. Lead times for machinery orders were extended, and oilfield equipment manufacturers and servicers said that capacity remained constrained due to labor shortages and supply side challenges. While uncertainty surged, outlooks were optimistic, bolstered by strong consumer demand and expectations of limited global supply growth this year.\nAgriculture\nDrought continued to worsen across much of the district, hampering agricultural conditions. Higher input costs\u2014including fuel, fertilizer, and machinery\u2014are pinching the financial position of many agricultural producers. While higher crop prices can help alleviate some of the financial pressure, it remains to be seen if prices will still be high at harvest time when producers have a crop to sell, and drought risk is deterring many from forward contracting at current prices. On the livestock side, cattle prices have been flat to down over the past six weeks and feed costs have risen sharply, and as a result some herd culling has begun.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nApril 20, 2022\nSummary of Economic Activity\nEconomic conditions have improved at a moderate pace since our previous report. The pace of hiring rose modestly, and wage growth remained strong. Prices, particularly for raw materials and food, increased at a robust pace. Reports on consumer spending were mixed, with notable signs of improvement in the tourism sector and softening growth in retail sales. Reports from manufacturers remain positive, with continued strong growth in new orders despite labor shortages and supply-chain disruptions restraining production. Real estate contacts reported a surge in seasonal buying activity coincided with a rise in mortgage rates, creating an uncertain outlook. Banking contacts reported a slight increase in loan demand and expect competition among lenders to put downward pressure on rates.\nLabor Markets\nEmployment has risen modestly since our previous report. Although some contacts reported early signs of improvement, labor shortages all along the supply chain continued to hinder firms' expansion and output. One Indiana contact reported that an air pilot shortage was causing economic difficulties for their whole region. Companies, nonprofits, and local governments alike tried to connect employers to potential employees with career fairs and other programs.\nWorker preference for telecommuting was so strong\u2014and so at odds with employer preferences\u2014that one local Chamber of Commerce offered separate employee and employer seminars on the topic to ease the tension. One major corporation incentivized workers' return to the office with a new coffee shop, decorative improvements, more collaborative spaces, and an arcade-style area.\nWages have grown strongly. The tight labor market continues to drive up wages and related benefits across industries and skill levels. Workers increasingly cited inflation when demanding higher wages. One food service employee cited their relatively low pay as a primary driver in recent unionization efforts.\nPrices\nPrices have increased robustly since our previous report. Lumber prices are once again at record highs after declining in the second half of last year. Contacts reported a surge in steel prices since our previous report. Some construction suppliers have several planned price increases for the near future; increases range from 6% for roofing materials to 75% for glass fiber felt sheets. Some suppliers and trucking companies are adding fuel surchargers or delivery fees to orders, which most contacts are passing on to consumers. Agriculture contacts noted higher fuel and fertilizer costs, which will be passed on to consumers. A contact in the restaurant industry reported that chicken and butter prices have increased since the beginning of the year.\nConsumer Spending\nGeneral retailers, auto dealers, and hospitality contacts reported mixed business activity and a mixed outlook. West Tennessee consumer sentiment about current and future conditions has worsened since December. Memphis general retailers experienced a slow first quarter, citing ongoing supply chain and product availability issues, and have a mixed outlook for the upcoming months. A St. Louis auto dealer reported that business activity was up in March compared with February; however, they noted that new vehicles are slow to leave factories due to shortages in parts previously sourced from companies that went out of business during the pandemic. One restaurant in Louisville reported that, despite rising prices and energy costs, they believe their business activity won't be greatly impacted because of a shift to more profitable takeout orders. Tourism has started to rebound throughout the District with hotel bookings showing notable improvements, although contacts noted that risks to further recovery include rising gas prices and future COVID surges.\nManufacturing\nManufacturing activity has strongly increased since our previous report. Firms in both Arkansas and Missouri reported moderate to strong upticks in new orders and production. Demand has continued to remain strong despite significant price increases, exceeding production capacity and creating order backlogs. Some firms are concerned demand may soon soften due to these continued price increases. Labor inputs and wages also remain high due to worker shortages. One contact in trailer manufacturing noted that they \"could double their sales if they had the workers.\" Firms continue to invest in process automation to reduce their reliance on human labor.\nNonfinancial Services\nActivity in the nonfinancial services sector has increased since our previous report. Airport passenger traffic increased in March, nearing 90% of pre-pandemic levels. Transportation sector contacts have implemented fuel surcharges to partially offset the rapid rise in fuel prices and continue to face a shortage of drivers; some are testing autonomous vehicles as a long-term solution. An Arkansas transportation contact reported revenues exceeding pre-pandemic levels due to increased demand, although a shortage of parts for needed repairs has been an issue. Hospitals continue to face shortages of nurses and lab supplies, although declining COVID-19 cases have improved morale. A community college in Southwest Tennessee is experiencing an uptick in overall applications after three semesters of dropping enrollment.\nReal Estate and Construction\nThe residential real estate market has remained strong since our previous report. Apartment rental rates have continued to increase strongly. Multiple contacts reported high competition, with rental properties getting as many as 50 contacts in the first day after posting. Despite climbing interest rates since our previous report, home buyers have remained undeterred. Demand has held strong; inventory has fallen and remains around 25-30% lower than this time last year in the District's major MSAs. One contact believes that higher interest rates should help soften demand throughout the year but real estate will continue to be a seller's market in the short-term because of low inventory.\nReports on commercial construction have been mixed. One contact previously believed that demand would have tapered off by now, but despite increases in input costs and supply chain problems demand continues to be strong. However, a Memphis area banker reported two instances where customers delayed or cancelled developments because of high input prices. A contact in Arkansas mentioned that the shortage of skilled labor coupled with shipping delays is hampering project completion. One example is the lead time for electrical switchgear, which has risen from 20 weeks pre-pandemic to 60 weeks.\nBanking and Finance\nBanking conditions have improved slightly since our previous report as banks reported an increase in overall lending activity. Commercial and industrial loans increased slightly, while consumer and real estate loans increased moderately. Deposit levels remained elevated, but deposit growth slowed. A Memphis banking contact reported an influx of customers asking to fix their adjustable-rate loans or extend their fixed-rate loans in light of the recent interest rate increase and uncertainty around future rates. At least one large lender continues to lend at low rates for long terms. Overall, banking contacts expect high liquidity throughout the system to keep downward pressure on interest rates.\nAgriculture and Natural Resources\nAgriculture conditions have improved slightly since our previous report. The number of acres planted across the District for corn, cotton, rice, and soybeans was little changed from last year. Tennessee saw the most growth of all District states, with a moderate increase of 10% in acres planted. Corn and rice were planted in lesser quantities compared with last year, while cotton and soybeans increased in acreage. Contacts have expressed concern about a continued rise in input costs and availability of inputs, particularly fertilizer.\nNatural resource extraction conditions saw little change from February to March, with seasonally adjusted coal production decreasing by 0.5%. March production went down moderately compared with a year ago, decreasing over 8%.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nMarch 2, 2022\nSummary of Economic Activity\nGrowth stalled in the Second District in early 2022, with ongoing supply disruptions, worker shortages, and the Omicron outbreak impeding activity. Despite these challenges, contacts expressed fairly widespread optimism about the near-term outlook. Businesses continued to report substantial increases in selling prices, input prices, and wages. The job market has remained exceptionally tight, with businesses continuing to add staff, on net, and dealing with unusually high absenteeism. Consumer spending weakened noticeably in January, though retailers noted some rebound in business toward the latter part of the month and into early February. The home sales and rental markets remained robust in early 2022, and commercial real estate markets were slightly stronger. While commercial construction activity remained dormant, there was some pickup in multifamily residential construction. Finance-sector contacts reported some pullback in activity, while regional banks reported some weakening in household loan demand, along with steady to lower delinquency rates.\nLabor Markets\nDespite ongoing worker shortages, job growth picked up to a moderate pace. Staffing agencies reported that job openings remained plentiful, particularly for technology, sales, and human resource workers. One agency in New York City noted that many job candidates are being selective based on telecommuting policies, while an upstate New York agency noted that vaccination policies are a major sticking point. Worker shortages persist across a wide range of industries and occupations. Businesses in most major industry sectors plan to add staff, on net, in the months ahead.\nContacts in all sectors reported that they were raising wages and planned to do so in the months ahead. An upstate New York employment agency noted particularly rapid wage growth, and a New York City agency reported that companies have become somewhat more flexible on pay. The January 1st hike in minimum wages across New Jersey and much of New York State reportedly prompted many businesses in manufacturing, distribution, and leisure & hospitality to raise wages more than they otherwise would have\u2014not just for workers at the threshold but for those somewhat higher in the wage distribution as well to mitigate wage compression.\nPrices\nThe vast majority of businesses continued to report rising input prices. Businesses noted shortages and exceptionally high costs of freight, as well as a wide range of supplies. Contacts in all major industry sectors expect input prices to rise further in the months ahead.\nA large and growing proportion of businesses report that they have raised selling prices, most notably in the manufacturing, wholesale & retail trade, and leisure & hospitality sectors. One large retail chain indicated that its selling prices in most categories would be ratcheted up over the course of 2022, reflecting higher merchandise acquisition costs. A large but steady share of businesses indicated plans to raise selling prices in the months ahead.\nConsumer Spending\nConsumer spending weakened somewhat in early 2022. Non-auto retailers reported that sales fell in January due to the Omicron outbreak and harsh winter weather, but showed signs of rebounding late in the month and into early February. Supply disruptions have continued to cause pockets of stockouts, but inventories overall have remained at or near desired levels. New York City continued to lag the rest of the region, hampered by the Omicron wave. Consumer confidence among New York State residents declined in January but remained at a fairly high level.\nNew vehicle sales remained weak in early 2022, restrained by the ongoing lack of inventory. The microchip shortage, which has kept inventories low, is not expected to abate until the second half of the year. Moreover, sales of used vehicles, which had been fairly solid in late 2021, also weakened, reflecting a combination of depleted inventory and exceptionally high prices, which have deterred some prospective buyers.\nManufacturing and Distribution\nManufacturing activity was essentially flat in early 2022, whereas businesses in the wholesale, transportation, and warehousing sectors continued to report fairly brisk growth. Contacts in these areas have indicated that continued worsening in supply disruptions and escalating prices have further impeded activity. Still, businesses in all of these sectors continued to express optimism about the near-term outlook, though to a somewhat lesser degree than in the last report.\nServices\nActivity in the service sector contracted in early 2022. In particular, leisure & hospitality businesses noted further weakening in activity\u2014apparently driven largely by the Omicron outbreak. Education & health providers also noted some slowing. However, businesses in the information and professional & business services sectors reported that activity was steady to slightly higher. Still, businesses in all these industries remained broadly optimistic about the near-term outlook.\nThe Omicron outbreak led to a slump in both tourism and related service-sector activity in New York City in January, though there were scattered signs of a pickup in February. Hotel occupancy and revenue, which fell sharply in January, have begun to rebound, and trade shows have picked up, and this trend is expected to continue into March. A record low number of Broadway shows were open in January, but a dozen new shows are slated to open soon. Subway ridership, which had turned down sharply in December, began to resume its upward trend in January and through mid-February.\nReal Estate and Construction\nHome sales and rental markets have been robust, though activity has been constrained thus far in 2022, due to harsh weather, the Omicron wave, and a dearth of homes on the market. However, demand has remained strong, and prices have risen. Real estate contacts in upstate New York indicate that inventories remain exceptionally low, driving up prices and spurring multiple offers and bidding wars. Housing affordability is a growing concern in the region, and efforts are underway to rehabilitate \"zombie\" homes in some areas and convert some commercial space to residential.\nNew York City's residential rental market has picked up steam in recent weeks, as vacancy rates have continued to edge down and rents have accelerated. Rents have fully rebounded across much of the city.\nCommercial real estate markets were mixed but, on balance, slightly stronger. Office markets were mostly steady, with both office availability rates and market rents essentially flat throughout most of the District. However, there were scattered signs of improvement in northern New Jersey, Lower Hudson Valley, and Fairfield County. The industrial market has continued to strengthen modestly, with vacancy rates steady but rents continuing to escalate. In contrast, the market for retail space, which had shown signs of picking up in late 2021, has weakened in the first few weeks of this year.\nConstruction activity was sluggish, likely reflecting unseasonably harsh winter weather. Non-residential construction starts weakened from already low levels, while multi-family residential starts picked up modestly. There continues to be a good deal of multi-family construction in the pipeline. Looking ahead, construction sector contacts expressed a good deal more optimism than in recent months about the general outlook, despite the ongoing challenge of elevated materials prices, supply bottlenecks, and shortages.\nBanking and Finance\nContacts in the broad finance sector reported some weakening in business conditions but remained fairly optimistic about the outlook. Small to medium-sized banks across the District reported weaker demand for consumer loans and residential mortgages, but steady demand for commercial loans and mortgages. Refinancing activity was unchanged on net, though one contact noted strong demand from the commercial segment, reportedly driven by the potential for higher rates in the coming months. Credit standards were largely unchanged across all loan segments, while loan spreads narrowed slightly. Delinquency rates held steady for consumer loans and residential mortgages and decreased for commercial loans and mortgages.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2022/2022-03-cl

"March 2, 2022\nSummary of Economic Activity\nThe Fourth District economy grew at a slower, more modest pace in recent weeks. Demand was generally solid, but the surge of Omicron-related coronavirus infections temporarily dampened activity in some high-contact services such as restaurants and retail stores. Contacts reported that their outlooks were largely unchanged and that they continue to expect a strong year for sales. There were scattered reports that supply chain disruptions may have eased for some materials. That said, contacts expected it could be the second half of this year or even 2023 when supply chains normalize. Amid persistent labor shortages, employment increased moderately, while pay increases were widespread. Reports of rising input costs and prices were also widespread. Contacts expected that nonlabor costs will continue to increase in the near term, possibly at a slower rate than last year. However, they expected price pressures to remain elevated in the coming months as they keep up with cost increases and, in some cases, as they try to recover lost profit margins.\nLabor Markets\nEmployment rose moderately during the reporting period. A few firms indicated it had become slightly easier to hire, but for the most part reports of labor shortages remained widespread. Contacts with customer-facing operations noted that the spread of the Omicron variant had temporarily disrupted operations in early January as staff absences increased. However, such disruptions quickly abated as the month progressed. Many firms commented that employee turnover was high for various reasons, including a greater desire to work remotely, receive higher wages, change careers, or find better working conditions. One university representative expressed great concern that educators were leaving the profession in large numbers because the current work environment was \"not what they had signed up for.\" Generally, contacts saw few reasons to believe labor supply will soon improve meaningfully.\nReports of wage increases were widespread across sectors as firms struggled with the scarcity of workers. Contacts indicated that recent pay raises were often in the high single-digit or low double-digit percentages and that wage pressures were broad across the pay scale. Despite substantial pay raises, contacts had mixed results in attracting or retaining workers. A few staffing agents expected wage growth for lower-paid workers to slow in the coming year, saying that businesses cannot afford to pay much more. However, contacts expect wage pressures for higher-skilled workers to remain elevated.\nPrices\nNonlabor input costs rose for most contacts. In a few instances, contacts noted that some costs, such as for steel, had stabilized or come down somewhat. However, such reports were the exceptions. Higher transportation costs were commonly cited as a major strain on firms. One manufacturer noted that freight costs had almost doubled in the past two months. Also, builders noted that lumber prices trended back up after a brief respite late last year. Materials shortages forced some firms to purchase in spot markets or from retailers (as opposed to wholesalers), a situation which greatly added to their costs. Contacts generally expect costs to rise in the coming months, but some indicated the rates of increases could slow from what was seen last year.\nMost firms raised prices as they passed through higher costs of materials, labor, and transportation to customers. A little less than half of contacts who had tried to raise prices indicated that customers had been more accepting of price increases in the past few months, partly because they were seeing cost increases everywhere and had few alternatives. Contacts expected price pressures to remain elevated in the coming months as they keep up with cost increases and, in some cases, as they try to recover lost profit margins.\nConsumer Spending\nReports suggested that consumer spending softened following the holidays. Retailers noted that spending was strong in November and December, but the rapid spread of the Omicron variant following the holidays weakened sales. Restaurateurs reported that concerns about the pandemic and poor weather conditions weakened dine-in activity, although some restaurateurs said that the impact of the new variant waned toward the end of the January as case rates dropped. Auto dealers reported limited sales despite generally elevated demand as tight inventories and higher prices deterred buyers. Contacts were optimistic that nonauto consumer spending on goods and services would pick up in the coming weeks as concerns about the Omicron variant abate, and multiple auto dealers expected sales to increase along with inventory levels in coming months.\nManufacturing\nManufacturing orders increased slightly from already high levels. Contacts noted that output was stifled by shortages of raw materials and workers. Aerospace equipment manufacturing continued to recover, but auto suppliers said that carmakers purchased less than they had expected because of shortages of microchips and other parts. High staff turnover and rising wages prompted some firms to spend more on labor-saving technology. That, in addition to increased overtime hours and alternative work arrangements (for example, having non-floor staff step into hands-on roles) allowed some firms to boost production. Most manufacturing contacts expected demand to increase in the coming months, although they expected supply chain disruptions to persist.\nReal Estate and Construction\nHousing demand remained strong despite rising home prices. One homebuilder compared current housing demand to a fever and noted that customers were buying houses at any price without pushback. An increasing number of homebuilders noted that demand has been so strong that they no longer have the capacity to build spec homes. In addition, supply chain difficulties impeded construction activity. Contacts anticipated that housing demand would remain robust in the near term, although supply chain challenges would continue to constrain construction.\nNonresidential construction and real estate activity continued to increase, driven largely by the heightened demand for industrial space. One contractor indicated that demand for industrial space was so great that rental prices for existing spaces have been increasing to rates comparable to those for newly constructed spaces. Contacts were optimistic that nonresidential construction would increase further, though persistent supply chain disruptions and labor shortages were expected to be constraints.\nFinancial Services\nOverall, loan demand increased modestly. Contacts reported growth in business lending, especially for commercial and industrial loans, and many bankers reported strong loan pipelines. By contrast, demand from households for auto loans and residential mortgages was stable or slightly down as limited inventories in both markets dampened activity. Lenders said that delinquency rates for commercial and consumer loans remained low and that core deposits increased. Looking ahead, bankers expected business loan volumes to improve as clients make capital investments.\nProfessional and Business Services\nDemand for professional and business services remained robust. Contacts noted that clients continued to invest in software upgrades and that demand for cybersecurity services increased. Activity related to mergers and acquisitions was strong, as was demand for human resource services. Furthermore, increased infrastructure investments by state and local governments lifted demand for engineering services. Contacts anticipated demand would remain strong as businesses continue to invest in technology improvements and as infrastructure investments become more widespread.\nFreight\nFreight volumes increased slightly from already high levels amid strong demand for goods and large backlogs at distribution facilities. Persistent shortages of drivers and vehicle parts was a common complaint among contacts, who noted such shortages restricted their ability to meet demand. One contact said that a third of the firm's drivers reduced their driving hours when awarded a higher wage, thus driving fewer miles while earning the same salary. Looking forward, contacts expected demand to remain strong and their ability to move freight to remain constrained.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2022/2022-03-ri

"March 2, 2022\nSummary of Economic Activity\nThe regional economy grew moderately in recent weeks, but growth continued to be constrained by supply chain and transportation issues and labor shortages. Manufacturers reported a modest increase in new orders, but shipments declined slightly as production was impacted by weather, long lead times for inputs, truck and container shortages, and an increase in employee absenteeism due in part to the Omicron variant. Ports and trucking companies continued to report strong volumes but challenges meeting it because of shortages of truck drivers and transportation equipment. Retailers saw moderate growth in sales and foot traffic in recent weeks. Travel and tourism, on the other hand, declined slightly due to winter weather and the recent surge in covid cases. Residential real estate markets were little changed as demand remained strong but low inventory levels persisted. Meanwhile, commercial real estate activity picked up moderately. Industrial real estate remained the hottest sector, but sales and leasing of multifamily and office properties grew strongly this period. Bankers reported rising loan demand across all loan types, although auto and mortgage lending was constrained by the inventory shortages in those markets. Nonfinancial firms reported a modest increase in revenues but continued to struggle hiring enough workers to meet demand. Employment grew moderately, overall, but a large number of firms reported shortages of workers. In response, firms increased wages and looked to benefits and flexible arrangements to attract and retain talent. Price growth remained elevated in recent weeks.\nLabor Markets\nEmployment continued to increase at a moderate rate in the Fifth District. Demand for labor remained strong and, for many firms, far exceeded the supply of available workers. This led firms to increase wages moderately and to offer additional benefits, including flexible working arrangements, to attract workers and to retain existing staff. Some firms noted that even after doing so, they lost employees to companies who were willing to pay higher wages or were fully remote. Some employers were willing to loosen requirements on education and experience in favor of on-the-job training to fill open positions. One employer added that advancements in technology allowed them to hire workers without a four-year degree in computer science.\nPrices\nPrice growth slowed slightly in recent weeks but remained at an elevated rate. According to our surveys, prices received by nonmanufacturing firms were about five percent higher than last year, which was down slightly compared to the peak rate of growth reported in December of 2020. The majority of firms indicated that they were raising prices in response to rising costs of both labor and non-labor inputs, including shipping and energy. A small number of firms, however, were concerned that customers may not be willing to accept further price increases, and if costs continued to rise they would have to find a way to absorb them.\nManufacturing\nFifth District manufacturers reported a modest increase in new orders since our previous report. Firms reported a slight decline in shipments, however, which was attributed to winter weather, workforce challenges, availability of shipping containers and trucks, and delays in receiving inputs from vendors. Some of the workforce challenges were due to employees testing positive for covid during the surge of cases from the Omicron variant, while some were simply due to not having enough workers to meet an elevated level of demand. Although most manufacturers reported growth in new orders, one firm said that new orders slowed for them because some of their customers' inventory levels were back up to normal.\nPorts and Transportation\nFifth District ports saw strong growth in import volumes with the terminals at capacity and containers sitting at the ports for extended times. These delays were caused by shortages in inland transportation and a scarcity of warehouse space. Loaded exports were down moderately with the exception of forest products. Spot shipping rates remained elevated, but declined slightly from their 2021 peak. Meanwhile, contract negotiations by shipping lines with cargo shippers for one-year and multiyear contracts signaled that rates were expected to be higher than in the past. There also were reports of increased air freight due to higher costs and cargo delays with ocean-going shipping.\nTrucking companies in the Fifth District reported strong growth since our last report, leading to tight capacity and a continued shortage of drivers. Longer lead times and higher prices for both new truck tractors and trailers led to companies relying more heavily on prolonged use of older equipment, but this has been hampered by delays in receiving repair parts. Trucking firms indicated that they increased shipping rates in response to higher fuel costs, wages, and equipment prices.\nRetail, Travel, and Tourism\nFifth District retailers reported moderate growth in demand and revenues in recent weeks. Shopper traffic increased and many stores were able to pass on the higher costs of goods as well as increased labor costs to customers. Auto dealers stated that profitability remained at historically high levels, but that the inventory of new cars continued to be extremely low. Several respondents noted that the Omicron variant led to challenges with employee absenteeism and supply chain disruptions.\nTravel and tourism decreased slightly due to weather as well as concerns over the Omicron variant. Contacts noted that group and business traveled remained soft, with passenger counts at airports down since the last report. Tour operators stated that the latest Covid variant caused cancellations of booked business along with large reductions of new bookings. However, visitation was strong at outdoor venues and ski resorts. Prices at hotels were up slightly and average daily room rates have returned to 2019 levels in many places in the Fifth District. Restaurants experienced good demand but many had to limit service because of a lack of staffing.\nReal Estate and Construction\nDemand for Fifth District homes remained strong since our last report. Low inventory levels persisted and home prices continued to rise; it continued to be a sellers' market and very competitive for buyers. Construction costs increased and shortages of skilled trade labor and materials slowed new residential construction. Buyers were not having any difficulty obtaining mortgages and appraisal have not been an issue because of strong comparable sales.\nCommercial real estate activity expanded moderately in recent weeks; however, firms continued to face challenges from higher construction costs, skilled trade labor shortages, and supply chain disruptions. Investor purchases have been robust with high demand especially for multifamily properties and office building with stabilized occupancy. The industrial segment remained very strong with low vacancy rates, escalating rental rates, increasing sale prices, and continued new construction. Multifamily rental rates have risen rapidly this period. Retail leasing strengthened, leading to falling vacancy rates. Land sales were extremely active and prices increased across all property types. Office leasing activity improved, especially for Class A space with lots of amenities, as tenants are looking to \"right-size\" due to an increasing hybrid workforce.\nBanking and Finance\nMost respondents reported that overall loan demand is beginning to increase from the last part of 2021. These increases are being seen across all loan types, including commercial real estate and business loans. One respondent attributed this to the anticipation of higher rates and the winding down of the Omicron variant. Auto and mortgage lending was still being constrained from a lack of inventory. Deposit levels increased, but at a slower pace than previously reported. Credit quality continued to be excellent, but some respondents noted a slight uptick in delinquencies mainly in their consumer portfolio.\nNonfinancial Services\nNonfinancial services firms saw a modest increase in revenues in recent weeks and several businesses said that demand was starting to pick up. One professional service firm said that being able to attend conferences again was helping boost business. Many firms continued to struggle with employee turnover and hiring difficulties, making it challenging to meet demand. One contact also noted that turnover among project managers at their clients' businesses caused disruptions to projects flows.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"March 2, 2022\nSummary of Economic Activity\nExpansion in the Eleventh District economy moderated, with the COVID-19 surge exacerbating labor and supply-chain shortages and disrupting demand in certain sectors. Growth in manufacturing and nonfinancial services continued but at a slower pace, and retail sales declined slightly. Loan demand growth decreased a bit amid rising interest rates. Home sales remained elevated. The energy sector saw further expansion, while worsened drought hampered agricultural conditions. Employment rose fairly robustly, and wage growth pushed to new highs due to widespread labor shortages. Supply-chain issues continued to drive up costs, and prices rose at a rapid clip. Outlooks remained positive, though uncertainty surged and businesses expressed concern that labor market tightness and supply-chain disruptions will not soon be resolved.\nLabor Markets\nEmployment growth remained robust. Job gains were widespread across sectors and strongest in manufacturing, banking, real estate, and health care. Acute worker shortages persisted, however, and many contacts said the recent COVID-19 surge brought on new or worsened hiring difficulty. Contacts cited a lack of applicants as the primary hiring impediment, with significantly more saying the availability of applicants worsened than improved in January. Increased absenteeism was also a major problem over the reporting period, as workers called out sick due in large part to the Omicron surge. These absences resulted in significant widespread disruption to business operations.\nWage growth pushed to new highs over the reporting period, driven largely by labor shortages. Manufacturers noted persistent difficulties in retaining employees, saying they were having to increase wages significantly to try to convince workers to stay. This sentiment was echoed in the service sector as well, with some firms being forced to give out significant pay increases or lose key employees. A bank raised their minimum wage to $18 per hour, slightly mitigating retention issues.\nPrices\nInput and selling price increases remained at or near historical highs. Contacts continued to cite supply-chain issues as the primary driver of rising costs. Construction contacts reported sizable increases in the price of concrete, steel, PVC, drywall, and lumber. A machinery manufacturer reported raw material increases of 10 to 20 percent each month. Transportation costs continued to surge, driven by a combination of supply-side constraints and higher fuel prices. A few contacts said broad-based price increases have led to a pullback in consumer demand and business capital spending.\nManufacturing\nExpansion in the Texas manufacturing sector continued but at a slower clip in January and February. Seventy percent of manufacturers noted a negative impact from the COVID-19 surge\u2014namely increased employee absenteeism and new or worsened supply-chain disruptions\u2014according to a Dallas Fed survey of nearly 100 Texas manufacturing firms. Demand and output growth remained robust, though, led by nondurable goods like food and chemicals. Strength was also seen in construction materials manufacturing, while weakness was seen in high-tech manufacturing. Outlooks improved modestly, though uncertainty escalated amid the Omicron surge.\nRetail Sales\nA marked decrease in auto sales prompted a slight reduction in overall retail sales over the past six weeks. Auto dealers cited low inventories and pandemic-related disruptions to both demand and employee availability as primary sales restraints. Sales among wholesalers increased slightly, though contacts noted supply-chain issues remained a strong headwind. While uncertainty surged, outlooks were largely unchanged and most retailers still expect to see higher sales six months from now.\nNonfinancial Services\nGrowth in Texas service-sector activity slowed sharply in January but rebounded in February. Seventy percent of firms noted a negative impact from the COVID-19 surge, and the biggest drag on January growth came from the leisure and hospitality sector, where revenues declined notably. Hotels reported cancellations and decreased business travel due to the Omicron variant, and restaurants experienced less business and severe worker shortages with employees out sick. Transportation services firms saw flat activity overall. An airport said passenger travel declined over the past six weeks due to the effect of Omicron, with many passengers cancelling or rescheduling trips for later in the year, though bookings have recently begun returning. A major Texas seaport posted record-high tonnage numbers in 2021, and developments in early 2022\u2014including new routes and equipment\u2014are expected to spur continued growth. A bright spot in the service sector was staffing services, which saw a pickup in revenues and broad-based, robust demand. Overall, pandemic-related weakness in the nonfinancial services sector was largely transitory, as revenue growth increased markedly in February.\nOutlooks held steady in January and improved in February. Headwinds include uncertainty surrounding the path of the pandemic, supply-chain stresses, and inflation.\nConstruction and Real Estate\nHome sales continued to be solid, and contacts said that rising mortgage rates have not yet impacted demand. Builders reported capping sales and/or holding off putting homes on the market until they had more clarity regarding their costs. Prices continued to trend upward, in part due to climbing material costs, particularly lumber. Operational challenges were ongoing, preventing builders from being able to finish as many units as planned. Outlooks were cautiously optimistic, with very low supply relative to demand.\nApartment leasing moderated slightly. On the commercial side, office leasing was picking up, the retail market was on a stable footing, and industrial construction and demand remained elevated.\nFinancial Services\nLoan demand increased over the past six weeks, as did loan volumes, though both rose at a slightly slower pace than in the prior period. Loan volume increases spanned lending types, led by commercial real estate. Nonperforming loans continued to decrease, and credit standards and terms tightened slightly. Loan pricing increased for the first time since mid-2019. Contacts expressed concerns about the effects of interest rate increases, inflation and staffing shortages. However, general business activity continued to improve, and outlooks for loan demand and general business activity six months from now remain optimistic.\nEnergy\nOilfield activity rose over the past six weeks, with a notable increase in the Eleventh District rig count. Lead times for machinery orders were stabilizing at high levels, but delays are expected to continue throughout the year. Industry sentiment improved with high oil prices, strong demand from consumers, and increasing confidence that global supplies will struggle to keep pace with demand for the remainder of the year. As such, firms revised up their expectations for oilfield activity in 2022.\nAgriculture\nDrought conditions worsened further, with severe drought expanding in much of the district. Agricultural commodity prices rose across the board over the reporting period, though input costs rose just as much. Producers fear profits will get squeezed with such high costs; good yields will be important for their financial position this year. On the cattle side, prices rose and consumer demand for beef remained solid. An annual inventory report from the U.S. Department of Agriculture showed fewer cattle in Texas; tighter supplies should buoy beef prices this year.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/2022/2022-03-sl

"Beige Book Report: St Louis\nMarch 2, 2022\nSummary of Economic Activity\nEconomic conditions have remained unchanged since our previous report. Employers reported robust wage increases and continued difficulties finding workers. Price increases were greater than expected across several industries, with supply chain issues and strong demand contributing to ongoing price pressures. Firms reported improved ability to pass on price increases and anticipate continued increases in the short term, although retailers reported signs of softening demand among lower income households. Winter weather, labor shortages, and Omicron COVID-19 disruptions led to decreased activity in the transportation and hospitality sectors. The real estate sector remained strong; although supply shortages continue to affect construction, demand for commercial and residential space is high throughout the District.\nLabor Markets\nEmployment has increased slightly since our previous report; on net, 5 percent of contacts reported increasing employment since last year. Firms continued to report a shortage of workers, with some contacts investing in labor saving automation, structural changes, or service reductions. Other contacts emphasized changes in their hiring practices; one industrial contractor, unable to find qualified labor, reached out to a local school district about an apprenticeship program.\nWages have grown robustly since our previous report. On net, 65 percent of contacts reported increasing wages. Small firms continue to struggle to match ever-growing market wages. Wage increases at firms with worker shortages were compounded by increased overtime; one manufacturer estimated a 5 percent to 20 percent increase in labor costs from overtime and hazard pay.\nPrices\nPrices have increased moderately since our previous report. A greater share of contacts than usual reported that price increases have been higher than expected. The majority of contacts noted the ability to increase prices charged to consumers in the near future. Several retail contacts indicated they were behind on raising prices to consumers. One retail contact reported that a shortage of in-store staff to physically change price tags has been an impediment to raising prices and that they had to enlist corporate employees to change price tags. Retailers also reported plans to utilize electronic price tags to reduce the labor needed to change prices. A furniture retail contact reported that a several-month lag on deliveries will result in elevated retail prices this year. An auto sales contact expects prices to fall as inventories build up.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported mixed business activity since our previous report and a mixed outlook for the immediate future. District retailers have noted that their sales are high in part because of a steady demand for higher-priced items. An Arkansas retailer noted that their sales are still being influenced by supply chain issues, as they recently received a shipment that was due in April 2021. An auto dealer in Louisville reported their manufacturer was unable to supply anticipated new vehicle stock and as a result their used vehicle trade-ins suffered. Restaurants in downtown Memphis are still dealing with the effects of the pandemic as of late January since convention business and travel have yet to recover.\nManufacturing\nManufacturing activity has slightly increased since our previous report. Survey-based indices suggest that production, capacity utilization, and new orders have all slightly increased. Firms in Arkansas and Missouri reported slight reductions in production and slight upticks in new orders. The Omicron COVID-19 variant applied pressure to manufacturing labor, both in terms of worker hiring and absenteeism. The easing of travel restrictions has increased the availability of raw materials from Europe, relieving some supply chain issues. Firms continue to invest in process automation to address the systemic workforce shortage, with one manufacturing company in Arkansas tripling their number of robotic welders. On average, firms reported they expect slight increases in production, capacity utilization, and new orders in the third quarter, and they remain optimistic about the level of production.\nNonfinancial Services\nActivity in the nonfinancial services sector has decreased since our previous report. Airport passenger traffic decreased slightly month-over-month, though it remains well above levels at this point last year. Several contacts attributed below-expected sales at this point in the quarter to the Omicron COVID-19 variant. A healthcare contact reported that the combination of COVID-19 and winter weather led to a decline in patient volumes of over 30%. Despite this, hospitals continue to deal with significant labor shortages. A transportation contact mentioned that a lack of qualified labor\u2014specifically, truck drivers\u2014has hindered business. A technology contact reported that rising interest rates are leading to purchasing hesitancy among customers.\nReal Estate and Construction\nThe residential real estate market has remained strong since our previous report. Home prices remain high relative to incomes and one contact believes many first-time buyers will be priced out this year. Inventory has remained extremely low, and contacts expect it to remain low through at least the next quarter. Apartment rental rates also remained high relative to incomes. One contact stated that the high demand for rentals has increased the rate per square foot substantially. The commercial real estate market has also remained strong, with very high demand for industrial real estate in particular. Demand for retail space has increased since our previous report. One contact believes institutional capital is currently shifting more toward retail spaces, due to continued high demand and diminishing returns in the industrial and residential sectors. Many contacts remain concerned about the uncertainty surrounding potential interest rate increases.\nDemand in the construction market remains strong despite supply chain disruptions. Residential construction demand is slightly higher than in our previous report. Input costs, delivery times, project backlogs, and project completion times have all increased in the past month. Contacts reported that the most important factor impeding business growth during the next few months is the labor shortage.\nBanking and Finance\nBanking conditions have improved slightly since our previous report. District banks reported an increase in loan demand since the previous survey period. Commercial, industrial, and auto loans increased moderately, while demand for credit card lending decreased. Liquidity remained elevated due to pandemic-related government assistance, but bankers reported difficulties in finding investments to deploy excess funds. Overall delinquency rates decreased modestly, and a contact reported asset quality metrics to be historically strong.\nAgriculture and Natural Resources\nDistrict agriculture conditions have improved modestly since our previous report. The number of acres of winter wheat planted in the District this season have increased 10% over the same period last year. This increase primarily came from Illinois, Kentucky, and Missouri, which saw their acreage rise an average of 20%. While contacts remain optimistic about 2022, there is continued concern about the increased costs of inputs such as fertilizer, pesticides, and machinery. Of particular concern is corn production, which uses significantly more fertilizer than other crops.\nNatural resource extraction conditions increased modestly from November to December, with seasonally adjusted coal production rising 10.6 percent. December production decreased slightly, by 3.1 percent compared with the previous year.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

/beige-book-reports/2022/2022-03-kc

"Beige Book Report: Kansas City\nMarch 2, 2022\nSummary of Economic Activity\nThe Tenth District economy expanded at a modest pace in the first two months of the year. Although the surge in COVID-19 cases associated with the Omicron variant slowed spending and hours worked in the leisure and hospitality sector, activity rebounded quickly as the surge diminished and grew steadily across other service and manufacturing sectors. Rising commodity prices supported farm incomes and growth in energy activities. Contacts reported that demand for commercial real estate construction grew, bringing project bookings to their highest levels in several years. Supply chain disruptions adversely affected most businesses, leading many retailers and manufacturers to adopt more costly sourcing strategies. Wages grew at a robust pace across industries and occupations. Although wages paid in lower-skill jobs increased, losses in hours worked associated with the pandemic slowed income growth for many low-income households near the start of the year. Contacts reported broad-based cost pressures, which they expect will persist through the coming year. Prices grew at a robust rate but most contacts indicated that they did not fully offset rising input costs.\nLabor Markets\nTotal hiring grew at a modest pace near the start of the year, constrained by labor shortages. Several businesses reported job openings in excess of twenty percent of their current workforce, with more jobs open than are actually posted. Employment growth at retail businesses offset temporary shortfalls in hiring at hotels and restaurants, resulting in greater services employment overall. Total hours worked in leisure and hospitality declined sharply in early January, but rebounded in recent weeks. Manufacturing employment grew at a moderate pace.\nWage growth remained robust and broad-based in recent weeks. Many low-wage workers reported wage gains obtained by job switching or union bargaining outcomes, but also noted inconsistent incomes due to lost working hours associated with school closures or family illness in early January. Contacts noted they continued to increase non-wage benefits offered to workers, but some reported that these benefits did not attract a larger number of applicants. In particular, applicants for entry-level or low-wage jobs favored higher wages over additional benefits. Most businesses expect wages to continue growing over the medium term.\nPrices\nPrices continued to increase at a robust pace. Input costs also grew robustly and generally outpaced growth in selling prices. Most businesses reported being able to pass only a small portion of increased costs to their customers, but some contacts indicated their ability to fully pass-through cost pressures. Nearly all firms reported price pressures were broad-based, citing increases in costs for materials, labor, energy, financing, real estate, and shipping, with expectations for additional increases in costs over the medium term.\nConsumer Spending\nOverall consumer spending slowed slightly at the beginning of the year amid the latest surge in the number of COVID-19 cases. However, expectations for growth in spending on services over the next six months remained elevated and contacts noted a quick rebound in activity at restaurants and hotels in recent weeks. Some contacts at retailers expressed concerns that consumers had already purchased several years' worth of goods, particularly those associated with leisure activities. As a result, many goods retailers reported they are \"hedging their bets\" with regard to ordering inventory for the coming year, even though consumer demand remained high.\nManufacturing and Other Business Activity\nGrowth in the manufacturing sector slowed to a modest pace, with total levels of activity near historic highs. The leisure and hospitality sector remained sensitive to developments related to the pandemic, but other business activity expanded throughout recent weeks. Expectations for growth remained elevated broadly. Nearly all contacts reported no expected changes in business plans related to the pandemic over the medium term.\nContacts across many sectors, geographies and sizes reported changes to their procurement plans for the coming year to include a broader network of suppliers, in an attempt to shorten or stabilize delivery times. Yet, most contacts expect that costs of sourcing from new suppliers will remain elevated. Some indicated that the new relationships with suppliers, or lack thereof, would increase procurement costs over the medium term. Others indicated procurement costs would remain elevated because of the need to double-order inventory, choosing to take on risks of having too much inventory to ensure delivery of needed materials.\nThe outlook for capital expenditures from business contacts was mixed across sectors. Planned investments among aerospace and other transportation businesses increased recently, and also at food manufacturing businesses. Many of these capital expenditures are aimed at automation to mitigate the effects of labor shortages. In healthcare, planned capital expenditures were suppressed and aimed at maintaining capacity, rather than expanding it. Contacts in hospitality sectors reported growth in plans to renovate and upgrade spaces to attract customers. In addition to capital expenditures, several contacts noted that spending on marketing and advertising is growing amid healthy consumer demand.\nReal Estate and Construction\nDemand for new construction in commercial real estate grew robustly in January and February. Most contractors reported the level of projects booked currently is at, or above, pre-pandemic levels. However, contacts reported that difficulties in sourcing materials are leading to costly redesigns or delays for their customers. As a result, recent contracts have eschewed commitments on delivery dates and committed only to a price, unable to guarantee both. Moreover, contacts in both the public and private sector reported difficulty in soliciting bids from contractors for projects, eroding their bargaining power that would otherwise mitigate price pressures.\nCommunity and Regional Banking\nLoan demand remained stable across a variety of sectors, although some contacts highlighted slight softening in demand for C&I and residential mortgage loans in recent weeks. Credit conditions remained benign with low levels of past due and non-performing loans. Contacts expected credit quality to remain sound over the near term, citing commodity price increases and improvement in pandemic-sensitive sectors as key drivers. Deposit levels also remained stable, with slight growth noted in demand deposit accounts at several institutions as commercial balances were bolstered by strong customer earnings. Contacts were attentive to the outlook for inflation and prevailing difficulties with staffing at their organizations.\nEnergy\nTenth District energy activity expanded modestly at the start of the year. The number of active rigs continued to increase in Oklahoma and total oil & gas production grew as crude oil prices reached a seven-year high. Natural gas prices also rose; however, future price expectations for natural gas remained more moderate. Higher natural gas prices also led to growth in coal mining activity in Wyoming as electricity utilities substituted toward the less costly fuel. Demand for coal mining equipment and maintenance was expected to remain elevated over the next eighteen months. Energy employment across District states continued to lag pre-pandemic trends but increased slightly from a year ago. Labor costs increased moderately, as many firms continued to report higher wages and benefits for workers.\nAgriculture\nPrices of most major commodities in the region increased modestly through early February from already high levels, continuing to support farm incomes. The prices of wheat, cotton and hogs increased modestly from the previous month while corn, soybean and cattle prices increased more sharply. Despite growing concerns about supply chain complications limiting shipping activity, U.S. agricultural exports remained strong and supported demand. Rising input costs have put some downward pressure on profitability for producers, but broad strength in the farm economy continued to support agricultural credit conditions, and farm finances were further bolstered by sharp increases in farmland values.\nFor more information about District economic conditions visit: www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nMarch 2, 2022\nThis report was prepared at the Federal Reserve Bank of St. Louis based on information collected on or before February 18, 2022. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic activity has expanded at a modest to moderate pace since mid-January. Many Districts reported that the surge in COVID-19 cases temporarily disrupted business activity as firms faced heighted absenteeism. Some Districts attributed a temporary weakening in demand in the hospitality sector to the rise in cases. Severe winter weather was also cited as disrupting activity. As a result, consumer spending was generally weaker than in the prior report. Reports on auto sales were mixed. Manufacturing activity continued to grow at a modest pace. All Districts noted that supply chain issues and low inventories continued to restrain growth, particularly in the construction sector. Reports from banking contacts indicated some weakening of financial conditions, although loan demand was generally unchanged. Demand for residential real estate was generally strong, although many Districts reported no change in home sales due to seasonal trends and low inventories. Agriculture reports were somewhat mixed, as some Districts experienced difficult growing conditions while others benefited from higher crop prices. Reports on the energy sector indicated modest growth. Among reporting Districts, the overall economic outlook over the next six months remained stable and generally optimistic, although reports highlighted an elevated degree of uncertainty.\nLabor Markets\nEmployment increased at a modest to moderate pace. Widespread strong demand for workers remained hampered by equally widespread reports of worker scarcity, though some Districts reported scattered signs of improving labor supply. Many firms had difficulty maintaining their staffing levels due to high turnover; this challenge was exacerbated by COVID-19 disruptions in January, though workers and firms recovered more quickly than during previous waves. Firms continued to increase compensation and introduce workplace flexibility to attract workers\u2014especially in historically low-wage positions\u2014with mixed success. Contacts reported they expect the tight labor market and consequent strong wage growth to continue, though a few Districts reported signs of wage growth moderating.\nPrices\nPrices charged to customers increased at a robust pace across the nation. A few Districts reported an acceleration in prices. Rising input costs were cited as a primary contributing factor across a broad swath of industries, with elevated transport costs particularly significant. Labor cost increases and ongoing materials shortages also contributed to higher input prices. Firms reported an increased ability to pass on prices to consumers; in most cases, demand has remained strong despite price increases. Firms reported they expect additional price increases over the next several months as they continue to pass on input cost increases.\nHighlights by Federal Reserve District\nBoston\nBusiness activity expanded at a slight to modest pace. Labor demand remained very strong, but employment appeared roughly stable. Upward wage pressures remained substantial but eased for some positions. Prices increased moderately. Contacts were optimistic for spring but noted downside risks tied to inflation and supply chain disruptions.\nNew York\nGrowth stalled in the latest reporting period, constrained by ongoing supply disruptions, worker shortages, and the Omicron outbreak. Moreover, unusually high absenteeism made it difficult for firms to maintain adequate staff. Businesses continued to report substantial increases in selling prices, input prices, and wages. Despite these challenges, contacts remained optimistic about the near-term outlook.\nPhiladelphia\nBusiness activity continued to grow modestly during the current Beige Book period, and some sectors remained below pre-pandemic levels. The surge in COVID-19 cases from the Omicron variant caused significant business disruptions before easing. The labor market remained tight with modest growth, while wages and prices grew sharply. However, there were signs that wage and price increases may be plateauing.\nCleveland\nThe District economy grew at a more modest pace as the Omicron wave temporarily dampened activity in high-contact services. Employment rose moderately. Labor shortages and supply chain challenges resulted in widespread increases in wages, nonlabor costs, and selling prices. Firms expected a solid year for sales, but they were concerned that labor scarcity and supply chain difficulties would persist.\nRichmond\nThe regional economy has grown moderately since our previous report. Firms across a variety of sectors reported modest to strong growth in demand, but many struggled to meet that demand due to shortages of labor and persistent supply chain issues. In many cases, higher costs to businesses were passed through to customers, leading to a continued elevated rate of price growth.\nAtlanta\nEconomic activity expanded moderately. Labor markets remained tight and wage pressures grew. Nonlabor costs rose. Retail sales were strong. Leisure travel softened somewhat. Housing demand was robust. Commercial real estate conditions were mixed. Manufacturing activity was robust. Banking conditions were stable.\nChicago\nEconomic activity increased moderately. Employment increased strongly; consumer spending, business spending, and manufacturing grew modestly; and construction and real estate activity was up slightly. Wages and prices rose rapidly, while financial conditions deteriorated some. Expectations for 2022 agriculture income moved up.\nSt. Louis\nEconomic conditions have remained unchanged since our previous report. Employers reported robust wage increases and continued difficulties finding workers. Firms reported improved ability to pass on price increases and anticipate continued increases. The Omicron COVID-19 variant contributed to decreased activity in the transportation and hospitality sectors.\nMinneapolis\nThe region's economy grew moderately over the first weeks of the year. Price pressures remained strong. Though employment increased overall, many firms reported decreased staffing levels due to higher turnover and recruitment difficulty. Contacts generally felt that wage acceleration was driven by tight labor markets rather than inflation expectations. New entrepreneurs reported quitting their outside jobs or cutting hours.\nKansas City\nThe Tenth District economy expanded at a modest pace in the first two months of the year. The temporary surge in COVID-19 cases slowed spending and hours worked in the leisure and hospitality sector, but activity rebounded quickly and grew steadily across other services and manufacturing sectors. Prices grew at a robust rate, and nearly all contacts reported they expect cost pressures to persist throughout the year.\nDallas\nExpansion in the District economy moderated, with the COVID-19 surge exacerbating labor and supply chain shortages and disrupting demand in certain sectors. Employment rose fairly robustly, and wage growth pushed to new highs. Supply chain issues continued to drive up costs, and prices rose at a rapid clip. Outlooks remained positive, though uncertainty spiked.\nSan Francisco\nEconomic activity strengthened moderately over the reporting period. Employment grew further while overall conditions in the labor market remained tight. Wages and price levels climbed notably. Retail sales increased strongly, while conditions in the consumer and business services sectors picked up following the peak of the Omicron wave. Lending activity was steady.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"March 2, 2022\nSummary of Economic Activity\nEconomic activity in the Sixth District expanded at a moderate pace, on net, from January through mid-February. Demand for workers remained strong, and labor market tightness endured. Upward pressure on wages was widespread, especially for lower-paid positions and skilled trades. Nonlabor costs grew, and firms' pricing power increased. Retail sales were healthy, but auto sales remained constrained by lack of supply. Tourism activity softened somewhat due to the surge in the Omicron variant, though advance bookings were strong. Demand for housing remained robust, but sales were constrained by low inventory levels. Activity in commercial real estate was mixed. Manufacturing activity was strong. Conditions at financial institutions were stable, though residential mortgage delinquencies rose somewhat.\nLabor Markets\nDemand for workers remained strong over the reporting period and tightness in the supply of labor persisted. However, many contacts indicated labor market conditions have eased modestly since the beginning of the year. Poaching of employees lessened somewhat. Most firms continued to hire to fill vacant positions while others looked to grow headcounts to meet strong business demand. A high-end restaurant noted moving to a scheduling system that utilizes employees' preferences for work, allowing them to \"shift surf\" among several restaurants to accommodate personal schedules and maximize income, which ultimately resulted in staffing shortages at some establishments. Reports also indicated a significant shortage of skilled technicians resulting in long waits for service calls and repairs to commercial equipment and vehicles. Several firms noted that while there was a spike in absenteeism related to the Omicron variant surge and more employees were impacted, the new variant moved through more quickly than earlier variants.\nAlthough upward pressure on wages was widely reported, particularly at the lower end of the pay scale and among skilled trades, bonuses were used to attract and retain employees as firms tried to hold the line on wage increases. Some contacts noted that positions which offered flexibility were easier to fill. Wages are expected to continue to rise this year, but there is a great deal of uncertainty around the pace of growth.\nPrices\nDistrict contacts noted increasing input costs over the reporting period, with considerable growth in the cost of freight, raw materials, and labor. Many contacts continued to describe supply chain issues, particularly a dearth of available labor, as the driving factor behind rising costs. The concerns over pricing power noted in the previous report eased, with most firms seeing higher margins from price increases with little to no impact on demand. Most contacts expect costs to remain elevated through at least the end of the year. The\u202fAtlanta Fed's Business Inflation Expectations survey showed year-over-year unit cost growth increased slightly to 3.7 percent, on average, in January. Firms' year-ahead inflation expectations remain unchanged at 3.4 percent, on average.\nConsumer Spending and Tourism\nDistrict retailers reported little change from the previous report. However, with the expiration of the advance on the child tax credit and the anticipation of smaller tax refunds, some softening in activity is expected over the next few months. Demand for vehicles remained strong, limited only by availability. Some contacts reported that trucks and trailers were pre-sold and just pending delivery.\nTravel and hospitality contacts reported a slight softening in activity during the first few weeks of January due to the Omicron variant surge. Advance bookings for leisure travel were reported to be strong through the second quarter. While business travel and conventions are expected to improve during the first half of 2022, this segment remains well below pre-pandemic\u202flevels.\nConstruction and Real Estate\nDemand for housing continued to outpace supply in the District. Many markets remained attractive to buyers relocating from more expensive regions of the country, such as the Northeast and West Coast. Rising interest rates motivated many buyers to purchase or refinance before rates moved higher, leading to increased mortgage originations. Credit quality among borrowers remained healthy, with lenders indicating stronger demand and looser standards for non-qualified and jumbo mortgages. Low inventory levels suppressed sales and pushed home prices higher throughout the District, putting further downward pressure on affordability. Homebuilder contacts indicated steady demand from non-primary buyers (i.e., investors, second home buyers) as well as continued cost pressures on materials and labor.\nCommercial real estate (CRE) activity was mixed. Conditions in the industrial real estate sector remained robust. The office sector improved modestly as more employers reopened, but contacts indicated that elevated levels of sublease space could hinder market rent growth until absorbed. After a robust year, multifamily activity slowed due to seasonality; however, occupancies remained at healthy levels. Contacts continued to report robust competition among CRE lenders; however, some reported a modest tightening of underwriting standards. Smaller banks and non-bank lenders have been identified by market contacts as the more aggressive of CRE lenders.\nManufacturing\nDistrict manufacturers experienced continued strong demand and healthy pipelines over the reporting period, with several noting historically high sales levels, profitability, and improved margins. Several contacts reported ongoing delays in the procurement of components and spare parts, particularly from China. The outlook for manufacturers, while optimistic about demand, was somewhat to the downside amidst growing geopolitical risks, continued supply chain constraints, and inflation.\nTransportation\nTransportation activity in the District strengthened, on balance, since the previous report. Demand for trucking services remained strong amid persistent shortages of drivers, trailers, and chassis. In some markets, warehousing was reported to be at capacity. Sea ports, most notably in Florida, experienced growing container volumes and new cargo vessel business as shipping lines shifted to east coast ports to avoid congestion on the west coast. The outlook among transportation contacts remains positive, with most expecting continued strong demand through the first half of 2022.\nBanking and Finance\nConditions at District financial institutions were stable over the reporting period. Loan growth across most portfolios was obscured by the number of forgiven commercial and industrial Paycheck Protection Program loans. Credit cards and other consumer loans experienced strong growth. Deposits slowed and institutions increased borrowings to provide additional liquidity. Institutions experienced some increases in delinquencies, particularly in the residential portfolio, but overall delinquencies remained below historical levels.\nEnergy\nDemand for energy products strengthened since the previous report, resulting in increased activity across energy sectors. Oil and gas production picked up across the region and contacts indicated that liquefied natural gas (LNG) export projects had returned after pandemic-driven delays. At the same time, domestic demand for LNG soared as a result of extremely cold weather in parts of the U.S. Utilities contacts reported that demand for power was up across customer segments. Energy industry contacts continued to describe efforts to develop lower carbon energy feedstocks and products, such as biofuels.\nAgriculture\nAgricultural conditions remained mixed. The southern parts of Louisiana and Mississippi experienced moderately dry conditions, while the rest of the District experienced mostly normal conditions. The January production forecast for Florida's orange crop was down from last year's production while the grapefruit forecast was unchanged from last year's production. However, while damages are still being assessed, it was reported that recent cold snaps in Florida are expected to have a material adverse impact on citrus crop yields. The USDA reported year-over-year prices paid to farmers in December and on a month-over-month basis, were up for corn, cotton, rice, soybeans, cattle, broilers, eggs, and milk.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy\u2010matters/regional\u2010economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"March 2, 2022\nSummary of Economic Activity\nEconomic activity in the Seventh District increased moderately in January and early February, and contacts expected a similar pace of growth over the coming months. Labor and materials supply constraints as well as the spread of COVID-19 continued to weigh on the expansion. Employment increased strongly; consumer spending, business spending, and manufacturing were up modestly; and construction and real estate grew slightly. Wages and prices rose rapidly, while financial conditions deteriorated some. Expectations for 2022 agricultural income moved up.\nLabor Markets\nEmployment increased at a strong pace over the reporting period, and contacts expected moderate growth over the next 12 months. Contacts across sectors reported persistent difficulty in finding workers at all skill levels. That said, one contact indicated it was easier to find workers now than in the fourth quarter of last year. A lack of labor was preventing a number of contacts from producing enough to meet strong demand. In addition, a construction contact reported that limited availability of higher skilled workers meant they were relying more on lower skilled workers, reducing productivity. Contacts also noted that the spread of the Omicron variant had pushed up absenteeism and slowed production; however, workers were typically recovering faster and returning to work sooner than in previous waves. Overall, wage and benefit costs increased robustly. A scarcity of applicants for open positions led numerous contacts to raise wage offers, yet not all were successful in filling open positions. In higher education, one contact noted that institutional policies were limiting wage offers and making it very difficult to hire. To retain workers, many employers increased the frequency of pay raises or profit sharing.\nPrices\nOverall, prices rose rapidly in January and early February, and contacts expected price increases to continue at a strong pace over the next 12 months. There were large increases in producer prices, driven by pass-through of higher costs for materials, labor, and transportation. However, some contacts in manufacturing said that pricing pressures appeared to have peaked, highlighting an easing of steel and overseas shipping costs. Consumer prices generally moved up robustly. Sources of higher prices included solid demand, limited inventories, increased costs, and a continued ability to pass cost increases on to customers.\nConsumer Spending\nConsumer spending increased modestly over the reporting period from already high levels. Nonauto retail sales were up some, and contacts indicated that sales exceeded expectations given the Omicron variant's negative impact on foot traffic. Sales of office furniture and building materials increased further, while lawn and garden and appliance spending remained elevated. Contacts noted a shift from eating out to eating at home, as grocery sales moved up and food service demand declined. There was a modest decrease in sales in the home furnishings and electronics sectors. Seasonally adjusted light vehicle sales were up, though sales continued to be constrained by low inventory levels. Dealer profit margins remained strong, reflecting higher vehicle prices. Leisure and hospitality spending was unchanged on balance.\nBusiness Spending\nBusiness spending increased modestly in January and early February. Retail inventories remained low in many sectors due to domestic and international supply chain challenges, and several contacts said they expected the issues to persist into the second half of 2022. Stocks of apparel and food and beverages were especially under pressure. Manufacturing inventories moved up some, though contacts continued to report shortages of a wide range of inputs. One contact indicated that materials availability was more predictable now than in the second half of 2021. Demand for transportation services was little changed as the industry continued to operate at full capacity. Capital expenditures increased moderately, with contacts highlighting technological upgrades (such as new automation equipment) and facility expansions. Lead times for delivery of capital equipment continued to be elevated. Residential and commercial energy consumption edged up. There was a small increase in industrial energy consumption driven by greater utilization by manufacturers.\nConstruction and Real Estate\nConstruction and real estate activity increased slightly over the reporting period. Labor shortages and long lead times for materials persisted for both residential and nonresidential builders, stretching project completion times. Residential construction activity increased slightly, and backlogs continued to build. One homebuilder said strong demand made it feel like the spring building season had already started. A nonprofit builder noted that American Rescue Plan money designated for affordable housing was being released more slowly than desired. Residential real estate activity was flat, held back by limited supply. Home prices ticked up, while rents were up moderately. Nonresidential construction activity increased slightly, with one contact highlighting greater demand for office buildout projects. Pricing increased slightly from already high levels. Commercial real estate activity increased slightly, buoyed by robust demand for industrial and multifamily buildings. Retail leasing also picked up. Commercial rents decreased slightly. Commercial prices and vacancy rates were unchanged, while sublease space availability increased moderately.\nManufacturing\nManufacturing production increased modestly in January and early February. Despite strong demand for the majority of manufacturers, capacity constraints due to challenges in securing inputs (particularly labor) limited production gains. Auto output dropped slightly, as assemblers and suppliers continued to face shortages of microchips and other materials. Demand for heavy trucks was steady at a high level, and tight inventories pushed up prices. Steel production ticked up amidst growth in demand from energy and construction customers. Steel availability increased due to large volumes of imports and rising domestic capacity utilization. Demand for building materials was modestly higher, supported by solid orders for commercial and residential construction.\nBanking and Finance\nFinancial conditions deteriorated some over the reporting period. Participants in the equity and bond markets reported an increase in volatility and net declines in asset values. Business loan demand was flat, and contacts continued to report strong competition for deals. Business loan quality was high and improved slightly, while business loan standards reportedly loosened a bit. In consumer markets, loan demand was unchanged overall. Volumes were largely flat across sectors, except for home mortgage refinancing, which declined. One contact noted that while the quantity of auto loans declined, loan values were up enough to result in an increase in the dollar value of auto lending. Consumer loan quality and standards were unchanged.\nAgriculture\nRising prices for agricultural products buoyed expectations for farm income in 2022, though input costs rose as well. Corn and soybean prices continued to move up, but prices for energy, fertilizers, and herbicides also rose, and concerns deepened about their availability at planting time given supply chain issues. One contact pointed out a planting decision dilemma: seeds that are more readily available do best when used with herbicides that are in short supply. Supply issues were also delaying some new tractor deliveries, possibly past spring planting. Prices for cattle, hogs, eggs, and milk were up again. Farm finances kept improving, and demand for agricultural loans was lower than a year ago. Farmland prices increased more in 2021 than they had in nearly a decade, with continued growth expected in early 2022.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"March 2, 2022\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to grow modestly in the current Beige Book period. Activity in several sectors had not yet returned to pre-pandemic levels. Since the prior Beige Book, the rate of cases from the Omicron variant of COVID-19 continued to surge to an all-time high in mid-January, then quickly receded to levels last observed in November. Many contacts noted that disruptions to business operations were significant and pervasive, as workers called in sick. The rate of all persons being fully vaccinated rose to 70 percent. Employment grew modestly as firms continued to face challenges in hiring and retaining workers. Wages rose sharply again, but there were signs that the increases may be plateauing. Prices also rose sharply overall, but among manufacturers, price expectations fell significantly in our quarterly survey. On net, expectations for continued economic growth over the next six months flagged somewhat for nonmanufacturers but held steady for manufacturers.\nLabor Markets\nEmployment grew modestly, with growth in most sectors more subdued than last period. The share of firms reporting employment increases remained near one-fifth of the nonmanufacturing firms and edged down to one-third among the manufacturers. Overall, about one-fifth of the firms reported a rise in average hours worked; less than one-tenth reported a decline.\nStaffing firms and most employers continued to report significant difficulty attracting and retaining labor, while the surge in Omicron cases created daily staffing challenges. One staffing firm noted that one staff member spent most of two weeks just keeping tabs on COVID cases among its placements.\nWages continued to rise substantially, but reports suggest that the rate of change may be plateauing. In our monthly surveys, the share of nonmanufacturing firms reporting higher wage and benefit costs per employee fell to 54 percent in February from 59 percent in December. Less than 5 percent of the firms reported lower compensation, and that represented an increase from prior months when almost no firms reported lower compensation.\nOn a quarterly basis, firms reported a somewhat lower expectation of the one-year-ahead change in compensation cost per worker, with a trimmed mean of 5.5 percent in the first quarter of 2022 \u2013 down from 5.8 percent in the fourth quarter of 2021.\nPrices\nOn balance, prices rose sharply over the period \u2013 more than the prior period's moderate increase \u2013 and were more pervasive. The share of manufacturers reporting higher prices for factor inputs increased to 74 percent, while those receiving higher prices for their own products edged up to 54 percent. The share of nonmanufacturers reporting higher prices for their inputs surged to 70 percent, while the share receiving higher prices from consumers for their own goods and services rose to 45 percent.\nContacts offered a mix of responses regarding inflation, with some expressing optimism that the cost side of inflation will ease first as supply chains improve, but that wage inflation may continue for longer.\nFrom our quarterly survey of firm price expectations, contacts reported further increases in the prices received for their own goods and services over the past year. The trimmed mean for reported price changes rose to 5.6 percent for nonmanufacturers and to 9.4 percent among manufacturers. These price changes have risen steadily since the fourth quarter of 2020, when contacts reported increases of 1.4 percent and 1.5 percent for manufacturers and nonmanufacturers, respectively.\nLooking ahead one year, the prices that firms anticipate receiving edged lower overall \u2013 the expected rate of growth fell significantly to 6.4 percent among manufacturers from 7.3 percent in the prior quarter \u2013 the first decline since price expectations began rising over one year ago. The rate for nonmanufacturers edged up to 5.0 percent from 4.9 percent in the prior quarter.\nManufacturing\nOn average, manufacturing activity continued to grow modestly. Overall, the share of firms reporting increases in shipments and new orders edged higher than in the prior period; however, reports softened in recent weeks. Reports of rising backlogs were more pervasive, but increases in delivery times and inventories were less widespread.\nConsumer Spending\nRetailers (nonauto) and restaurateurs continued to report modest growth, despite staffing disruptions and customer caution rising with the Omicron surge. Contacts noted rising costs as a threat, but that \"supply chains were better but fragile.\"\nLimited supply continued to constrain new auto sales at very low levels. Contacts broached no guess as to when the microchip shortage or the congestion at the Los Angeles and Long Beach ports would ease.\nOverall, tourism declined slightly, as the Omicron surge prompted firms to delay a resumption of business travel and to postpone group events, as well as cause a dip in some leisure travel. Ski resorts seemed exempt from fear of COVID and were constrained only by lack of staff.\nNonfinancial Services\nOn balance, nonmanufacturing activity grew slightly \u2013 contacts noted negligible growth early in the period but reported some recovery by the period's end. Overall, the share of firms reporting increases in sales fell from one-half to about two-fifths, while the share reporting increases in new orders edged down to about one-fourth. However, at the outset of the period, these shares were nearly equaled by the shares of firms reporting decreases in sales and in new orders. Reports of decreases subsequently subsided.\nFinancial Services\nThe volume of bank lending (excluding credit cards) was flat during the period (not seasonally adjusted); by comparison, loan volumes grew slightly during the same period in 2019. Loan volumes grew modestly in commercial real estate and auto lending and rose moderately for home mortgages and other consumer loans. However, commercial and industrial lending and home equity lines fell modestly. Credit card volumes declined moderately \u2013 similar to the seasonal decline observed during the same period in 2019.\nBankers, accountants, and attorneys noted a continued, if not an increasing, level of uncertainty on the part of their clients. Many are flush with cash and making no big plans, except for automating where possible. Finding and paying for labor remains their primary challenge.\nReal Estate and Construction\nHomebuilders reported steady contract signings and construction activity but continued to cite problems securing materials and labor, as well as rising costs for both. Amid a heated market for multifamily housing, a year-end deadline to qualify for a popular 10-year property tax abatement in Philadelphia prompted developers to pull permits for eight times more apartment or condo units than in 2019. Contacts noted that the nearly 23,000 permitted units will not all be built, but that completing even a fourth of the total would put downward pressure on apartment rents and condo prices.\nExisting home sales held steady at high levels; however, new listings remained scarce, and available homes continued to sell quickly near the asking price. Contacts noted that housing affordability continues to deteriorate for first-time buyers, generating strong demand for new rental units.\nConstruction activity and leasing activity held steady for most segments of nonresidential real estate. Contacts continued to cite multifamily housing, institutional projects, and industrial/warehouse space as the strongest markets. Prospects for office space and downtown retail will become clearer once workers return to offices on a consistent basis.\nFor more information about District economic conditions visit: www.philadelphiafed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2022/2022-03-mi

"March 2, 2022\nSummary of Economic Activity\nNinth District economic activity increased moderately since early January. Employment saw moderate growth, though hiring was constrained by tight labor availability. Wage and price pressures were strong, with particularly strong pressure on input prices. Growth was noted in consumer spending, professional services, commercial construction, manufacturing, and energy. Residential construction and commercial real estate were flat, while residential real estate fell. Agricultural conditions improved since the previous report, as strong crop prices offset higher input cost pressures. Minority- and women-owned businesses saw growth and were optimistic in their outlooks.\nLabor Markets\nEmployment grew moderately since the last report. Hiring demand remained bullish across most sectors, and particularly among large firms. Very few firms were cutting workers. However, actual hiring was more muted; a surprising number of firms reported that staffing levels had dropped due to turnover and an inability to fill openings. A South Dakota transportation company said, \"The amount of work I have to turn away due to lack of staff is staggering.\" Firms in accommodation, construction, manufacturing, and retail reported more difficulty hiring than those in other sectors.\nWage pressures remained strong. Among surveyed firms, half said wages have risen by 3 percent or more on an annual basis, and one-quarter cited increases of more than 5 percent. Some labor unions reported strong wage gains among new contracts. \"Everyone wants more [money] to take a job, and existing employees are getting antsy for more to stick around,\" a Minneapolis-St. Paul construction firm noted. Raises have been larger and more common among large firms, and smaller firms reported difficulty competing with those increases. Contacts said that wage acceleration was being driven by recruitment and retention challenges, rather than workers' inflation concerns. Contacts also reported increased interest in automation as a hedge against both labor availability and fast-rising wages.\nPrices\nPrice pressures remained strong, particularly for inputs. Manufacturers continued to report that prices were increasing rapidly for transportation, raw materials such as steel, and other inputs, including food. One contact noted that \"prices are increasing faster than we can keep up.\" More than a third of survey respondents reported that their nonlabor input prices were up by more than 10 percent from a year ago, with similar results for final prices charged to customers. Agricultural input costs also increased sharply, according to a survey of agricultural credit conditions, in which two-thirds of lenders responded that input cost and/or availability was their top concern for 2022. Retail fuel prices in District states as of mid-February were sharply higher than January.\nWorker Experience\nLabor supply remained tight across the District. A labor contact in Montana reported that low wages and salaries for many public sector workers are pushing them to seek employment elsewhere. \"Government employees may have benefits but working for lower pay than the pizza delivery guy is very demoralizing.\" According to another labor contact, more nurses in Minnesota took higher-paying traveling contracts, and some came out of retirement to meet demand. A workforce development contact working with underrepresented populations said that clients with limited digital literacy struggled making occupational changes, while more educated individuals increasingly looked for jobs that offered retirement plans, time off for self-care, and overall flexibility. A management consulting firm reported seeing a \"small but noticeable increase\" in the number of independent contractors looking for work, perhaps in response to their need for flexibility. Lateral moves among some professionals were reportedly on the rise.\nConsumer Spending\nConsumer spending grew moderately since the last report. A mid-January survey found that accommodation, retail, and entertainment firms saw softer business activity compared with most other sectors. A restaurant in Michigan's Upper Peninsula said the winter season \"relies on local customers and that number has greatly declined with the Omicron variant surging.\" However, some of that consumption was simply shifting. A Minneapolis-St. Paul grocer said foot traffic slowed due to Omicron, but basket size increased. \"We see some increase in sales when [Covid] fears prevent people from eating at restaurants.\" Supply chain disruptions and resulting low product inventories continued to hamper sales at many businesses. Winter tourism was healthy; Montana ski resorts have seen strong traffic, lodging tax receipts were above average, and regional airport activity in January was above pre-pandemic levels.\nProfessional Services\nProfessional services activity in the District was strong. According to an intellectual property law firm contact, demand for services picked up intensely after a slow January start, driven mainly by larger clients. Contacts in insurance and financial services reported challenges finding qualified talent. \"We recently hired two support staff and were able to do so easily by going outside of our industry to find them. But the pay is more than expected, and their training path will be longer,\" said a contact. A Minnesota specialty engineering services contact reported increased demand driven by high investments in water and sewer infrastructure and pointed out that ongoing supply chain issues and rising costs were stretching project timelines.\nConstruction and Real Estate\nCommercial construction grew moderately since the last report. Industry data showed that both new projects and active projects in January were higher than the previous two years. Firms reported that current demand was healthy and was expected to continue. However, many noted operational challenges related to lack of labor, including workers sidelined by Omicron, as well as higher materials costs and supply chain problems. A Wisconsin firm was projecting a very strong year ahead, but \"if inflation is not curbed and supply chain issues are not resolved, the outlook is very pessimistic.\" Residential construction was flat overall. Single-family permitting was strong in January in Minneapolis-St. Paul compared with a year earlier. However, permitting in other District markets was lower over the same period.\nCommercial real estate was flat overall. Industrial space continued to see strong demand, while office and retail vacancy rates continued to climb in many markets, including Minneapolis-St. Paul, and subleasing activity was also rising. Residential home sales remained slow in a majority of District markets amid very low inventories.\nManufacturing\nDistrict manufacturing activity increased moderately. Manufacturing survey respondents continued to report solid recent revenue trends, strong demand, and positive near-term outlooks. An index of regional manufacturing conditions indicated increased activity in Minnesota and North Dakota in January compared to a month earlier, while activity decreased in South Dakota.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions improved since the previous report. Farm incomes increased through the end of 2021, according to a survey of agricultural credit conditions. While contacts expressed concern about rising input costs, producers' finances benefitted from strong commodity prices. District oil and gas exploration activity increased since the previous report.\nMinority- and Women-Owned Business Enterprises\nReports from minority- and women-owned business enterprises remained optimistic overall. A professional working with minority entrepreneurs in the Twin Cities said that the volume of microloans issued for new and existing businesses remained strong. Well established food service businesses began investing in expansions and were looking to invest in commercial real estate. To address labor shortages, businesses have reportedly continued to adjust hours of operation, employee pay, and schedules. New entrepreneurs reported that they had reduced working hours or quit their jobs to prioritize their businesses. A food delivery service contact working with ethnic-specific restaurants said that many clients have adjusted their menus, portions, and prices in response to higher costs.\nFor more information about District economic conditions visit: minneapolisfed.org/region\u2010and\u2010community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2022/2022-03-bo

"March 2, 2022\nSummary of Economic Activity\nBusiness activity expanded at a slight to modest pace in recent weeks. Consumer spending on goods, including autos, increased at a moderate pace, but restaurants sales plummeted during the Omicron surge. Manufacturers enjoyed robust demand, and revenues increased slightly on balance. Revenues at staffing firms were mixed but up modestly on average. Office leasing activity gained some momentum, and rents for industrial and life sciences space reached record highs. Home sales slowed further in a return to seasonal norms. Labor demand remained very strong, but employment appeared roughly stable as some firms struggled to hire and/or retain workers. Upward wage pressures remained substantial but eased for some positions. Prices increased moderately on average. Contacts were almost unanimously optimistic for spring, although some mentioned downside risks tied to inflation and supply chain issues.\nLabor Markets\nFirst District labor markets remained tight on balance, as upward wage pressures persisted, and employment appeared stable. Headcounts were flat among retail contacts. Restaurant contacts noted a modest improvement in labor supply but did not report on headcounts. Manufacturing headcounts were up by modest to large margins on a year-over-year basis but were mostly stable recently. Manufacturers offered mixed descriptions of the labor market, as some experienced no hiring difficulties and others complained of high turnover or faced a scarcity of candidates. Staffing firms noted that turnover remained elevated at their own firms as well as at client firms. Staffing contacts also said that wages faced strong upward pressure across a wide variety of jobs and skill levels amid rising price inflation. However, wage growth appeared to slow or level off for selected positions and was relatively moderate among manufacturers. Contacts expected robust labor demand to persist but said that wage growth could slow moving forward in light of the substantial wage increases already seen in recent months.\nPrices\nPrices increased moderately on average, but reports varied widely across contacts. Buyers of computer chips complained of \"extortive\" pricing while other goods makers enjoyed stable input prices. Although some manufacturers held off on raising their prices, those selling directly to consumers said that they had been forced to increase their prices because demand was exceeding production capacity. High freight costs caused one retailer to forgo shipments of otherwise attractive merchandise. Restaurateurs relayed that in the last quarter food input prices increased at their fastest pace in 40 years. Restaurants' menu prices also increased, but incomplete pass-through led to lower profits. According to a New Hampshire auto industry contact, new and used car prices remained very high, but used car prices softened somewhat at recent auctions. Staffing firms' billing rates increased commensurate with increases in pay rates, leaving their margins roughly unchanged.\nRetail and Tourism\nContacts reported a strong holiday season and a solid start to 2022 for retail sales, while auto sales increased moderately, and restaurant sales dropped due to the rise of the Omicron variant. Among retailers, higher inventories boosted December 2021 and January 2022 sales at a salvaged-goods chain, and an online goods seller continued to enjoy volume and revenues well above pre-pandemic levels. The latter seller also said that inventories had stabilized somewhat and were expected to normalize further in the coming months. Auto sales in New Hampshire increased moderately in January owing in part to improved inventories of new vehicles, but supplies are not expected to fully normalize until 2023. Sales of RVs defied typical seasonal trends and remained robust throughout the winter. Massachusetts restaurant owners suffered a very challenging winter due to the surge of the Omicron variant in December and January. Sales were weakest in the Greater Boston area while suburban and outlying areas saw fewer disruptions. Nonetheless, a sense of optimism is emerging about the return of restaurant guests in the coming months as the rate of COVID infections declines and food supplies stabilize.\nManufacturing and Related Services\nAll eight contacts reached this round reported strong demand, but in some cases supply chain issues held back revenue growth, and sales increased slightly on average. Supply disruptions mostly affected production, but some firms' customers cancelled their orders because other suppliers could not deliver. One firm suffered from production delays in January when many workers were out sick with COVID. Most contacts were trying to hire, although one planned to focus on retention after expanding headcounts by a very large margin in 2021. Planned wage increases were low to moderate, but signing bonuses and recruiting fees also boosted labor costs. Contacts reported no major revisions to capital expenditure plans, but some indicated that spending was up due to \"catch-up\" following limited investment during the pandemic. The outlook was generally positive although some contacts expected supply chain problems to persist or even intensify moving forward.\nStaffing Services\nRevenues at staffing firms increased modestly on average, as two contacts reported no changes from the previous quarter, one recorded substantial growth, and one experienced a modest decline. Talent acquisition remained a challenge for all firms, especially in filling temporary positions and jobs requiring in-person work. One contact offered bonuses to new hires who stayed in their roles for at least 90 days, and another boosted salary for its own recruiters to improve retention. Scarcity of childcare continued to crimp labor supply, but contacts said they were surprised to have seen relatively little pushback to vaccine mandates. In response to labor scarcity one firm moved to accelerate the placement of available candidates, and another said that the ease of starting remote work had also sped up the hiring process. However, the faster placement pace put more pressure on clients to train and fully vet new hires. Looking ahead, all contacts were optimistic about the coming months in light of the resilience the economy had shown during the Omicron surge and the strong ongoing demand for workers in a variety of roles. Some contacts expressed concern over the inflation outlook, however, and one perceived an increased risk of recession.\nCommercial Real Estate\nThe First District's commercial real estate markets were mostly stable in recent weeks. The life sciences and industrial property sectors remained very strong, even \"frothy,\" as rents reached record levels and vacancies hovered near zero. Pension funds fueled strong investment demand for these sectors, but contacts perceived downside risks to returns. The office leasing market showed some signs of life, with relative strength in the suburbs, but stayed slow relative to historical norms. Multifamily construction increased amid rising rents, but supply and labor shortages caused some delays. Retail market performance varied widely by location and type of business, as outlets that relied on office workers continued to struggle, grocery-anchored centers stayed strong, and experiential retail started to bounce back after an Omicron-induced slowdown. Contacts expected further momentum in office leasing for spring, but large office users are still poised to give up significant amounts of space. The industrial outlook was mixed, as at least one contact expected a slowdown in demand.\nResidential Real Estate\nResidential real estate sales posted a modest seasonal slowdown in December and January as prices were stable on balance and inventories remained very low. (All New England states except Connecticut reported results.) Closed sales were down over the year (to either December 2021 or January 2022) for both single-family homes and condominiums. Although the decline in single-family sales extended recent trends, the slide in condo sales marked a reversal from the previous report. Several contacts interpreted the latest results as a return to normal seasonal patterns, together with the fact that in late 2020 the market had been unusually busy. Home inventories fell and median prices increased year-over-year in all reporting markets, by robust margins. Those over-the-year changes were mostly on par with the previous report, with the exception that Boston's condo prices posted somewhat slower growth recently. The Rhode Island, Massachusetts, and Boston contacts all anticipate high demand this spring, as many prospective buyers are expecting mortgage rates to increase and are eager to purchase a home before that happens.\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nMarch 2, 2022\nSummary of Economic Activity\nEconomic activity in the Twelfth District strengthened moderately during the reporting period of January through mid-February. Employment grew further while overall labor market conditions remained tight. Wages and price levels continued to climb notably, driven by materials and labor shortages. Sales of retail goods increased solidly, while conditions in consumer and business services picked up following a decrease in new COVID cases related to the Omicron variant. Conditions in the agriculture and resource-related industries remained unchanged on balance, whereas the manufacturing sector was mixed. Activity in the residential real estate market continued to increase robustly, while commercial real estate activity improved slightly. Lending activity was steady over the reporting period.\nLabor Markets\nEmployment levels grew further, with reports focusing on labor market tightness. Firms across the District continued to cite difficulties attracting qualified candidates for both high- and low-skilled positions, with many reporting elevated numbers for job openings and few applicants. Labor shortages for entry-level and low-wage positions were widespread, especially in the consumer services and farming industries. Firms in the finance, manufacturing, and energy sectors reported stable employment levels and comparatively lower turnover. Meanwhile, firms looking to fill openings for accounting, legal, technology, architecture, construction, and engineering positions continued to compete intensely for talent. Many contacts across the District mentioned higher rates of voluntary quits and early retirements, partially due to concerns about health risks during the recent Omicron wave. A few employers in Alaska and Utah highlighted especially difficult hiring conditions, citing candidates who missed scheduled interviews and newly hired workers who failed to show up on the first day at their new job.\nWages increased considerably over the reporting period. The mismatch in supply and demand for workers continued to put upward pressure on wages, especially in the consumer services sector. Contacts across the District reported increasing wages from 3 to 20 percent, depending on the skill level and sector. California contacts mentioned additional pressure from new minimum wage legislation that came into effect in early 2022. A few from the manufacturing sector observed a slight deceleration in the rate of wage inflation.\nPrices\nPrices climbed notably across the District. Contacts reported widespread price increases as higher material and labor costs were partially passed on to clients. Energy, transportation, and storage costs also contributed to further price increases across most sectors, including prices for construction materials and paper products. In agriculture, lower export sales increased domestic supply levels, which partially offset upward price pressures from higher input costs. A few contacts raised concerns that price hikes arising from wage increases may fuel further wage pressures going forward.\nRetail Trade and Services\nSales of retail goods increased solidly over the reporting period. Retailers across the District generally reported strong brick-and-mortar and online sales. Shipping delays and increased input costs continued to considerably affect the retail sector, causing inventory levels to be erratic in some areas. Contacts in the textile and garment sector reported tighter inventory, with some taking over their own wholesale supply in response. A few retailers noticed that sales of high-end or discretionary goods declined somewhat due to price increases. In the Mountain West, a contact mentioned that local and regional firms expanded into locations vacated by national brands. A contact in Arizona highlighted even tighter availability of retail goods in certain tribal communities, partially due to a higher incidence of COVID-19 cases.\nActivity in the consumer and business services sectors picked up in recent weeks, following a decrease in new COVID cases related to the Omicron variant. Consumer services, such as those related to tourism, hospitality, entertainment, and restaurants, observed increased demand in many areas, including Hawaii and Alaska. Nonetheless, providers continued to report supply chain disruptions and worker shortages, which impacted their ability to meet demand. Some professional services, including business consulting and legal services, observed increased demand and faster fulfilment of existing contracts despite difficulties in hiring. Health care, with still-elevated demand for medical services and hospital beds, struggled to reconcile with supply and staff shortages.\nManufacturing\nConditions in the manufacturing sector were mixed. Many manufacturers continue to report difficulties in filling orders due to supply chain disruptions, worker shortages, tight inventories, and increased material costs, such as those for lumber and steel. Manufacturers in the tourism-related sectors, such as for luxury products including leisure boats, noted a push to hire management consulting services from local markets as a way to respond to supply chain issues. Other contacts reported experiencing a better standing in dealing with supply hurdles and higher costs, resulting in fulfillment of more orders and elevated capacity utilization. A manufacturer of packaging machinery noted increased demand for process automation equipment in the face of widespread worker shortages. A manufacturer of renewable energy equipment highlighted uncertainty regarding fiscal policy and continued infrastructure investment.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related industries remained largely comparable to the previous reporting period. Sales of agricultural goods remained strong overall, with shipping delays and slightly fewer orders from abroad somewhat offset by domestic customers looking to fill back orders. Inventories of crops such as nuts and raisins remained at reasonable levels, while those for cut flowers, potted plants, fruits, and other tree crops dwindled a bit. Short supply of labor, materials, machinery, water, and fertilizer impacted the early pollination process for this year's crop. One exporter in the Pacific Northwest highlighted that the recent shift in sales toward the domestic market negatively affected profitability, while another grower in California expected this shift to be reverted once supply chain issues are alleviated.\nReal Estate and Construction\nActivity in the residential real estate market increased robustly. Residential construction and sales remained strong in both single-family and multifamily housing sectors. Nonetheless, ongoing shortages for material, workers, and land, as well as increased costs for lumber in particular, continued to delay construction projects' completion times. The pace of home price increases remained elevated but decelerated slightly relative to recent trends, while inventories remained tight. A contact in Alaska noted that supply chain delays from Canada further tightened the availability of materials in the area. A few contacts mentioned increased uncertainty concerning fiscal support for infrastructure investment. Reports also highlighted higher rents for multifamily units in major metropolitan areas.\nCommercial real estate activity increased slightly on balance, with recovery in the sector reportedly lagging that of the overall economy. Sales and rentals of commercial and office spaces have picked up somewhat over the reporting period, but new business investment in commercial real estate remained generally lackluster. A financier in the Pacific Northwest noted that expectations for increased borrowing rates have already affected demand for new commercial construction. Conversely, demand for construction of manufacturing, storage, and distribution facilities remained strong.\nFinancial Institutions\nLending activity was steady over the reporting period. Loan demand remained high despite long-term rate increases, but demand for commercial loans lagged that of consumer loans. Liquidity remained elevated, which further contributed to tight competition for loans. Most bankers reported high and improving credit quality, but a few others cautioned against a slight relaxation of underwriting requirements. A financier in Arizona highlighted that lending conditions within traditionally underserved communities remained quite tight.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nJanuary 12, 2022\nSummary of Economic Activity\nEconomic activity in the Twelfth District strengthened modestly during the reporting period of mid-November through December. Employment grew at a moderate pace, while overall labor market conditions remained tight. Price levels continued to climb significantly, driven by increases in shipping and labor costs. Sales of retail goods increased notably, while conditions in consumer services deteriorated somewhat due to the latest wave of COVID-19 infections being driven by the Omicron variant. Conditions in the agriculture and resource sectors remained mostly unchanged, whereas the manufacturing sector strengthened slightly. Activity in the residential real estate market continued to increase albeit at a slightly slower pace, while commercial real estate activity was little changed. Lending activity remained steady over the reporting period.\nEmployment and Wages\nEmployment grew moderately, with contacts reporting no signs of easing in the tight labor market. Firms across the District continued to cite difficulties attracting qualified candidates for both skilled and unskilled positions. Contacts in agriculture, retail, and food services reported being unable to fill open positions despite repeated wage increases over the past year, leading them to reduce their hours and capacities. A few contacts observed higher turnover rates have started to extend to management levels as well. Several contacts expressed concern over what they perceive as a longer-term mismatch between the skills needed and the availability of labor, which could be further exacerbated by the aging population and the increasing numbers of people retiring during the pandemic. A contact in the Pacific Northwest mentioned addressing the region's persistent shortage of health-care employees by plans to bring in foreign medical workers in the medium term. One employer in the technology sector noted increased competition from companies in other geographies that offer fully remote positions.\nWage pressures increased further over the reporting period due to the continued competition for talent. Many employers mentioned giving year-end bonuses to top performers and boosting base salaries by 3 to 10 percent. Several contacts also mentioned significantly expanding equity compensation at the executive level in order to retain talent. Two contacts noted that to help employees with the unexpectedly higher cost of health insurance renewals, one of them raised wages more than initially planned while the other absorbed the higher costs.\nPrices\nPrices continued to climb at a brisk pace across the District. Notable price hikes occurred for energy, agricultural products, construction materials, and menu items at restaurants. Additional shipping and labor costs contributed to further price increases that many companies reported passing on to consumers. Most contacts expected these pricing pressures to ease in 2022 as supply chain issues are resolved, although a few raised concerns that price increases arising from wage pressures might be longer lasting.\nRetail Trade and Services\nSales of retail goods continued to increase notably. E-commerce sales remained robust, while sales at brick-and-mortar stores were up compared to last year's holiday season, although not as high as holiday sales in 2019. Furthermore, several contacts noted that retail store staff shortages resulted in reduced hours, which further constrained sale volumes. Although a few contacts mentioned supply chain issues and inventory shortages for vehicles and some food products, most other retailers, especially clothing and electronics, reported having ample inventory levels. A few contacts observed that higher prices moderated holiday sales somewhat. A contact in the Pacific Northwest noted that many retailers are looking into acquiring their own warehouses and manufacturing facilities to mitigate supply chain issues in the future.\nConditions in the consumer and business services sectors deteriorated in recent weeks. The latest wave of infections driven by the Omicron variant has negatively impacted the travel and hospitality industry, with hotel bookings being cancelled and staff shortages at airlines. Demand for food services decreased somewhat, and many entertainment shows and events have been either cancelled or postponed. By contrast, demand for laboratory testing and medical services remained high, but supply was constrained by low inventories and medical worker shortages. A contact in management consulting noted that with many businesses navigating uncertainties and hybrid work stances, demand for consulting services has surged and some strategic services are sold out for most of 2022.\nManufacturing\nActivity levels in the manufacturing sector rose slightly. New orders were either steady or rising for fabricated metals, steel, and renewable energy equipment. However, continued supply chain disruptions and labor shortages continued to hold back production. As a result, one contact in the Pacific Northwest noted that lead times for some machinery equipment have increased to up to two years. Although manufacturers' capacity utilization rates were up and most were able to access raw materials, input costs have continued to increase and remained volatile.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors remained mostly unchanged. Exporters of agricultural products continued to be challenged by shipping bottlenecks and port delays, with no signs of easing. As a result, one exporter reported selling more agricultural products domestically instead. Demand from food services was noted to have softened in recent weeks due to concerns related to the Delta and Omicron variants, while retail demand for agricultural products remained steady. Crop yields for tree fruit, nuts, and raisins were lower than anticipated due to weather effects and carryforward of low inventories in 2020. A grower in the Pacific Northwest noted that due to a lack of available domestic labor, many companies in the area have hired a higher proportion of foreign seasonal agricultural workers for this year's harvest.\nReal Estate and Construction\nActivity in the residential real estate market continued to increase, although at a slightly slower pace compared to the previous reporting period. Residential construction and sales remained strong in both single-family and multifamily housing sectors. However, the pace of home price increases has slightly decelerated, and brokers in California mentioned that homes were taking a bit longer to sell. In addition, supply chain challenges and labor shortages continued to hamper new construction, with one contact in the Mountain West noting delays of more than six months in getting various appliances and building materials. A few contacts also mentioned higher rents partially due to continued migration into the Pacific Northwest. A contact in Alaska noted that applications for affordable housing have increased threefold relative to the pre-pandemic period.\nCommercial real estate activity was unchanged on balance. On one hand, demand for new office and retail space was noted to have decreased somewhat, with lease rates falling due to increased uncertainty stemming from the emergence of the Omicron variant. On the other hand, demand for industrial and manufacturing spaces increased further, with related lease rates increasing as well. A contact in Southern California noted that the decision by many companies to reduce their office space has pushed commercial real estate investors to look elsewhere for long-term investment.\nFinancial Institutions\nLending activity remained steady over the reporting period. Consumer loan demand continued to be strong especially for refinancing, while demand for commercial loans remained slow due to businesses holding excess cash. Liquidity remained high, as did the asset quality of loan and investment portfolios. Although interest margins continued to be squeezed, several banks mentioned that loan fees from processing PPP loans have helped boost margins this year. One contact in Southern California mentioned that competition for loans accelerated further, including that from fintech companies. Another contact in the clean energy investment space observed that green bond issuances and climate-focused SPAC (special purpose acquisition companies) activity have picked up in recent weeks.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nJanuary 12, 2022\nSummary of Economic Activity\nEconomic conditions have improved moderately since our previous report. Employers continue to report difficulty hiring enough workers to meet consumer demand, with some industries with a high degree of direct consumer contact forced to limit or cut back operating capacity due to staffing shortages. Significant wage pressures persist across most industries. Increases in raw material and transport costs contributed to moderate to strong cost pressures, most of which firms were able to pass along to consumers. The real estate sector remained strong; supply chain issues continued to limit construction but activity was higher than typical seasonal levels. The COVID-19 Omicron variant contributed to labor shortages and sparked some concern about the short-term outlook in the hospitality, transportation, and retail sectors.\nEmployment and Wages\nEmployment has increased modestly since our previous report. District contacts reported that widespread attempts to hire have been hampered by widespread worker shortages. Many firms, unable to find adequate staff, have been unable to grow or have had to actively cut back their operations. This was especially true for high-customer-contact industries, like dining and retail. St. Louis cut back its public transportation services despite holding job fairs, enticing retired operators back to work, and\u2014in the words of the supervising CEO\u2014\"literally begging for employees.\" Firms across industries reported increasing flexibility and benefits to entice scarce workers. Some also used automated processes as a substitute for workers. Several firms delayed their return-to-office timelines in the face of the Omicron variant.\nWages continue to grow strongly, particularly for traditionally low-wage positions. One Little Rock restaurant reported paying its dishwashers $13 per hour and skilled kitchen staff $16 per hour or more, and an Arkansas manufacturer reported plans to soon increase its starting wage by more than 10 percent.\nPrices\nPrices have increased moderately since our previous report. Contacts in the hospitality industry reported increasing costs since our previous report and are passing along most of it to customers. A contact from a jewelry retail store reported higher input costs and noted plans to increase prices charged to consumers. Furniture retail industry contacts reported slightly increased cost pressures and prices charged to consumers. Some contacts plan to reduce profit margins rather than pass the full extent of cost increases on to their customers. An auto retail contact reported no change in costs and prices since our previous report. A contact reported slightly lower freight costs since our previous report but also that freight costs remain higher than before the COVID-19 pandemic. Raw materials prices have increased modestly overall since our previous report.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported moderately higher business activity since our previous report. Consumer sentiment in West Tennessee regarding current conditions has worsened since September, but future expectations have improved. General retailers reported higher business activity and a mixed outlook for the next quarter, citing ongoing supply chain and pricing issues. Roughly 39 percent of consumers in Tennessee reported the majority of their holiday shopping was online this year, down from 53 percent of consumers last year. A St. Louis auto dealer reported that business activity is about the same as November; however, there is little clarity regarding future inventory. A restaurant in Arkansas noted that, since they no longer have restricted occupancy, they are anticipating increased sales; but they noted the increases in new COVID-19 cases remains a downside risk, especially given tight staffing. Hospitality contacts reported higher business activity month-over-month and year-over-year but a mixed short-term outlook due to the Omicron variant.\nManufacturing\nManufacturing activity has increased modestly since our previous report. Firms in both Arkansas and Missouri reported modest upticks in new orders and production, although the monthly rate of growth has slowed. Supply chain issues and labor shortages have increased input prices and continue to put pressure on firms' profit margins and service windows. With the passing of the Infrastructure Investment and Jobs Act, firms expect construction, and therefore demand for manufactured inputs, to increase in 2022. Firms also continue to explore automated substitutes for various aspects of the manufacturing process.\nNonfinancial Services\nActivity in the nonfinancial services sector was unchanged since our previous report. Airport passenger traffic decreased slightly as rising COVID-19 cases among workers have resulted in large numbers of flight cancellations. Airport cargo traffic has increased slightly since our previous report, although it is down roughly 5 percent relative to this time last year. Memphis and St. Louis area hospitals are dealing with increases in COVID-19 patients with the Omicron variant. In addition to the human toll, the tornado event in the District on December 10 and 11 disrupted transportation through road closures and damage to infrastructure.\nReal Estate and Construction\nThe residential real estate market has remained strong since our previous report. Home prices are still elevated. In Memphis, they are up 21 percent since this time last year. One contact noted that there has not been the typical drop in demand during the winter months. Inventory remains extremely low across the District, and one Memphis contact had 14 offers in the first 24 hours a house was on the market. However, the median number of days a house remains on the market has increased slightly since our previous report. While most expect the strong real estate market to continue into 2022, a contact expressed concern that any significant hikes in interest rates will impact demand from buyers.\nApartment rental rates were mixed but remain relatively stable since our previous report, with Little Rock and Memphis decreasing slightly and Louisville increasing slightly. All apartment rental rates in the largest District MSAs remain significantly higher than this time last year. Residential construction has remained strong since our previous report but continues to struggle with supply chain issues and increased costs. A Little Rock contact reported that, in spite of these problems, optimism remains high and new development continues.\nBanking and Finance\nBanking conditions have improved slightly since our previous report. District banks reported an increase in overall lending activity since the last period. Business loans, especially commercial, industrial, and commercial real estate loans, increased slightly while consumer and residential real estate loans increased moderately. Deposit levels remained high but growth moderated. A contact in Little Rock noted that the rate of forgiveness for PPP loans has risen through the previous quarter and predicted that the balance will be near zero by the middle of 2022. The outlook for 2022 among bankers is cautiously optimistic, as they expect loan growth across all divisions.\nAgriculture and Natural Resources\nDistrict agriculture conditions remain relatively unchanged since our previous report. The percentage of winter wheat in the District rated fair or better modestly increased from the end of October to the beginning of December, rising from 91 percent to 95 percent. This is a moderate increase over this period last year. While contacts in the District are optimistic after a profitable year due to elevated commodity prices, they are also concerned about increased costs for fuel, fertilizers, and other inputs potentially affecting their crop production next year.\nNatural resource extraction conditions improved slightly from October to November, with seasonally adjusted coal production increasing just over 1 percent. November production was up significantly compared with a year ago, increasing nearly 20 percent.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"January 12, 2022\nSummary of Economic Activity\nEconomic activity in the Seventh District increased modestly in late November and December, and contacts expected a similar pace of growth over the coming months. Labor and materials supply constraints as well as the spread of COVID-19 continued to weigh on the expansion. Employment, consumer spending, and business spending grew modestly; manufacturing was up slightly; and construction and real estate was flat. Wages and prices rose rapidly, while financial conditions were little changed. Agricultural incomes were strong for 2021.\nEmployment and Wages\nEmployment increased at a modest pace over the reporting period, and contacts expected growth to pick up over the next 12 months. Contacts across sectors reported persistent difficulty in finding workers at all skill levels. In addition, contacts noted some new hires did not show up on their expected first day or quit soon after. Many businesses continued to limit operating hours because of labor challenges, especially in the restaurant, retail, and manufacturing sectors. Rising COVID-19 cases led some companies to further delay plans to return to in-person work, and there were reports of business closures after COVID-19 exposures forced a large number of workers to quarantine. Some contacts expressed concern about the potential of vaccination requirements to limit labor supply. Overall, wage and benefit costs increased robustly. A scarcity of applicants for open positions led numerous contacts to raise wage offers, yet not all were successful in filling open positions. To retain workers, many employers increased the frequency of pay raises. Furthermore, contacts said they were giving larger-than-usual raises and year-end bonuses to account for inflation or share healthy profits with workers.\nPrices\nOverall, prices rose rapidly in late November and December, and contacts expected price increases to continue at a strong pace over the next 12 months. There were large increases in producer prices, driven by pass-through of higher costs for materials, labor, and transportation. However, contacts noted that some input prices, particularly for energy and certain steel products, had stabilized after very large increases earlier in the year. Consumer prices generally moved up robustly, with contacts pointing to solid demand, limited inventories, increased costs, and a greater ability to pass cost increases on to customers as sources of the higher prices.\nConsumer Spending\nConsumer spending increased modestly from a high level over the reporting period. Holiday spending met or slightly exceeded forecasts. Nonauto retail sales increased moderately, with contacts noting greater spending on groceries and pet supplies, as well lumber and building materials. Sales remained elevated in the apparel, furniture, and appliance categories. Thrift and discount stores also reported strong sales. Consumer electronics were a clear \"laggard\" according to one contact, decreasing modestly amid tight inventories. Light vehicle sales were little changed. Although vehicle inventories were modestly up, low levels continued to limit volumes. Dealer profit margins remained strong, reflecting both high vehicle prices and increased service department activity. Leisure and hospitality activity was flat overall, though restaurant spending increased modestly.\nBusiness Spending\nBusiness spending increased modestly in late November and December. Retail inventories remained at low levels in numerous sectors due to domestic and international supply chain challenges, and contacts expected the issues to persist into the second half of 2022. Manufacturing inventories changed little and were still tight, with shortages of a wide range of inputs, most notably certain metals, chemicals, and electrical components. Demand for transportation services remained high, even as many contacts reported continued domestic and international shipping delays and elevated cargo and freight rates. Capital expenditures increased moderately, with contacts highlighting technological upgrades (such as new automation equipment) and facility expansions. Contacts expected a similar increase in capital expenditures over the next twelve months. Residential and commercial energy consumption increased slightly, notably in leisure and hospitality, while industrial consumption decreased slightly.\nConstruction and Real Estate\nConstruction and real estate activity was little changed relative to the previous reporting period, though contacts said there were more projects in the pipeline. Residential construction was flat, while residential real estate activity decreased slightly. One real estate contact indicated that uncertainty surrounding the economy and the pandemic contributed to the slowdown. Home prices and rents increased modestly. Nonresidential construction was steady over the reporting period. Contacts indicated that long lead times and labor shortages persisted. Commercial real estate increased slightly, with activity in the industrial and multi-family sectors continuing to outpace that of the retail and office sectors. Sales and prices were up slightly for commercial properties. Commercial rents and vacancy rates were unchanged, though the availability of sublease space edged up.\nManufacturing\nManufacturing production increased slightly in late November and December, with many contacts reporting growth in order backlogs. Despite strong demand for the majority of manufacturers, ongoing capacity constraints due to challenges securing inputs, particularly labor, limited production gains. Auto output rose only slightly, as assemblers and suppliers continued to face shortages of microchips and other materials. Demand for heavy trucks picked up on top of an already strong level, but production of new trucks held steady, leading to higher prices for used trucks. Contacts reported little change in overall steel demand, which stayed strong. There was a small increase in steel availability as capacity utilization ticked up. Demand for building materials was flat at a high level, supported by solid orders for commercial and residential construction.\nBanking and Finance\nFinancial conditions were unchanged on balance over the reporting period. Business loan demand increased slightly, notably for commercial real estate, equipment, and commercial lending. One contact also reported increases in business loan refinancing. Business loan quality decreased slightly, while standards loosened slightly. In consumer markets, loan demand was unchanged on balance, as were loan quality and standards.\nAgriculture\nHigh prices and bumper corn and soybean harvests led to strong agricultural income in 2021. Agricultural lenders reported few issues with credit quality. Expectations are for income to be lower in 2022 than in 2021, as recent growth in input prices outpaced growth in agricultural goods prices and farmers expected the trend to continue. More crop farmers than typical applied fertilizer on fields during the fall because of expected cost increases and questions about future availability. Contacts also voiced concerns about pricing and availability of other inputs, with a jump in forward contracting to ensure supplies for 2022. Prices for corn and soybeans rose during the reporting period, supported by weather problems in South America and a pickup in ethanol production. Prices for cattle, hogs, eggs, and dairy products moved higher. Farmland prices stayed on a rapid upward trend.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"January 12, 2022\nSummary of Economic Activity\nEconomic activity in the Sixth District expanded moderately from mid-November through December, even amidst widespread outbreaks of the Omicron variant late in the reporting period. Demand for workers remained strong and labor market tightness persisted. Upward pressure on wages was widespread. Nonlabor costs grew, albeit at a slower pace. Retail sales were solid; auto sales, however, remained challenged due to supply chain constraints. Domestic leisure travel was strong. Business travel and convention bookings picked up somewhat, though increases in Omicron cases precipitated some postponements and cancellations in the near term. Robust housing demand continued. Conditions in commercial real estate improved. Manufacturing activity was healthy. Conditions at financial institutions were steady, though deposit levels declined, and loan demand slowed somewhat.\nEmployment and Wages\nDemand for labor was strong over the reporting period amidst pervasively tight labor supply. Most employers reported that qualified candidates for open positions remained in short supply across all jobs but particularly for entry-level positions. Shortages of workers were reported to be exacerbated by childcare availability issues and remaining Federal subsidies, such as the advance on child tax credits. Additionally, geographic competition for workers has expanded with increased remote-work options. Tight labor conditions have firms intensely focused on retention. Some reported being proactive with wage increases while others added \"stay\" bonuses that reward a longer-term commitment of two years. Firms continued to evaluate greater flexibility for workers and even more time off, including additional \"self-care days,\" remote work, and four-day workweeks. Many continued to advocate for COVID vaccines, but not mandate them, with the ultimate aim to retain employees. Several employers said they are making plans to reduce their labor dependence through technology and automation. It was noted that some smaller firms were making a concerted effort to stay under the 100-employee threshold that would exempt them from costly COVID vaccine and testing regulatory requirements. In late December, some employers noted an uptick in absenteeism related to Omicron which resulted in curtailed operations.\nUpward pressure on wages remained relatively widespread. Increases were most notable at the lower end of the pay scale and among new hires. Most contacts indicated they feel like they are chasing market wages to attract and retain staff. Wage growth remains above plan for most firms, and many anticipate higher wage growth in 2022.\nPrices\nSeveral contacts noted that many nonlabor costs leveled off or increased only slightly since the previous report, though the rising cost of steel and freight was frequently mentioned. Most contacts expect price levels to remain elevated for the foreseeable future, and while pricing pressures from supply chain issues and labor shortages are expected to ease over the next year, they are not expected to disappear. Pricing power softened somewhat as contacts expressed worry that continued price increases would drive demand downward. The\u202fAtlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs\u202fwere unchanged in December at 3.6 percent.\u202fYear-ahead expectations increased slightly to 3.4 percent in December, up from 3.3 percent in November.\nConsumer Spending and Tourism\nConsumer spending remained healthy throughout the holiday season, particularly for off-price retailers. District contacts noted an increase in foot traffic compared with year-earlier levels. Auto sales remained low , and dealers expect continued supply constraints, heightened demand, and improved earnings into 2022.\nTravel and hospitality contacts reported robust domestic leisure travel driven by festivals and holiday events. District cruise activity was strong, though passenger counts were lower than pre-COVID levels as cruise lines maintained self-imposed capacity limits. While there was an uptick in business travel and conventions early in the reporting period, bookings remained well below 2019 levels and contacts noted increased postponements and cancellations due to the rise in Omicron cases.\nConstruction and Real Estate\nHousing demand in the District remained strong over the reporting period. Though slightly higher interest rates have slowed refinance mortgage activity, demand for home equity lines of credit and other mortgage products was steady. Many markets throughout the District continued to attract buyers from higher-cost markets such as the Northeast and West Coast. Demand from investors and second-home buyers continued to emerge as a significant component of the housing market. Home price appreciation continued to rise sharply, leading to escalated concerns about housing affordability over the long term. Despite significant increases in new home starts over the past year, builders continued to struggle to keep pace with demand given the widespread challenges created by supply chain disruptions. After abating earlier this year, rising material costs, particularly for lumber, have become more burdensome for builders.\nCommercial real estate (CRE) activity improved, on balance, since the previous report. Contacts noted improving conditions in the office sector as more businesses reopened. After a very robust year, activity in the multifamily sector slowed due to seasonality; occupancies, however, remained at healthy levels. Contacts continued to report that competition is accelerating among CRE lenders. Smaller banks and non-bank lenders have been identified by market contacts as some of the more aggressive CRE lenders, at this juncture.\nManufacturing\nReports on manufacturing activity were largely consistent with the previous report. Contacts noted robust demand and increased revenues, though some firms indicated that production was hindered somewhat by supply chain disruptions and high employee turnover. District manufacturers expect further strengthening in demand in 2022, but concerns over supply chain interruptions, labor shortages, and rising input costs remain.\nTransportation\nTransportation activity remained robust over the reporting period. District ports experienced further growth in container traffic, and some reported utilizing \"pop-up\" container storage yards to clear congestion on port properties. Railroads noted significant increases in intermodal freight and overall traffic year-to-date. However, terminal dwell times lengthened, and rail contacts cited a deterioration in service delivery amid crew shortages and a dearth of conductors. Air cargo contacts noted increased demand as ecommerce shipments surged.\nBanking and Finance\nConditions at Sixth District financial institutions remained steady over the reporting period. Loan growth trended downward amid renewed uncertainties about the course of the pandemic and growing underwriting competition from nonbank lenders. Deposit levels declined slightly but remained elevated. Financial institutions continued to hold higher balances in both cash accounts and securities portfolios. Asset quality remained healthy without any notable increases in nonperforming loans or charge-offs. Increased earnings have been driven by lower loan loss provision expenses and reductions in noninterest expenses, though margin pressures persisted due to the low interest rate environment.\nEnergy\nActivity across energy sectors held steady or grew slightly over the reporting period. Chemical manufacturing and petroleum refining picked up across the region; however, contacts continued to report supply chain bottlenecks for various inputs, constraining some chemical production. Utilities industry contacts noted sustained growth in commercial, residential, and industrial business lines. Contacts also continued to report significant investments in renewable energy development and production, primarily in solar, wind, and carbon capture technologies.\nAgriculture\nAgricultural conditions remained mixed. Parts of the District experienced unusually dry conditions. The December production forecast for Florida's orange crop was down from last year's production while the grape-fruit forecast was unchanged from last year's production. The USDA reported year-over-year prices paid to farmers in November were up for corn, cotton, rice, soybeans, cattle, broilers, and eggs but down for milk. On a month-over-month basis, prices were up for corn, cotton, rice, soybeans, cattle, broilers, and milk, but down for eggs.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy\u2010matters/regional\u2010economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2022/2022-01-ri

"January 12, 2022\nSummary of Economic Activity\nThe Fifth District economy grew modestly since our previous report, but growth was somewhat constrained by supply issues and labor shortages. Manufacturers reported a moderate increase in shipments, new orders, and backlogs while inventory levels remained low as supply shortages persisted. Ports continued to see record-breaking volumes, particularly for imports. Trucking companies experienced strong demand and did not see the typical seasonal slowdown for this time of year. Retailers reported strong demand, increased foot traffic, and sales levels on par with 2019. Travel and tourism remained strong, driven by leisure travel as hotel occupancy rose, although hotels had to limit the number of rooms or services due to staffing shortages. Demand for residential real estate remained strong but declined slightly in recent weeks. Home prices were little changed and inventories remained low. Commercial real estate activity increased moderately. The industrial market remained strong while office and retail leasing activity improved. Banks reported a slight decline in loan demand as a result of the softening in mortgage activity and concerns from businesses over the rise in Covid cases from the Omicron variant. However, commercial and business lending held steady. Nonfinancial services generally experienced flat to modestly increasing revenues in recent weeks. Employment rose moderately and demand for workers remained strong, but companies continued to report challenges filling open positions. Some employers were concerned that rise in Omicron cases would add to their labor challenges. Wages rose strongly as many employers gave larger than usual year-end increases. Prices grew robustly as firms increases prices in response to higher costs of goods and labor.\nEmployment and Wages\nEmployment in the Fifth District increased moderately since our previous report. Demand for workers remained robust with many firms reporting unfilled job openings and difficulties finding qualified candidates. Several contacts noted that their employees were getting unsolicited job offers from other companies. The tight supply of labor led some companies to look to investment in technology and automation so they could operate with a smaller headcount. A few employers expressed concerns that the Omicron variant of Covid-19 would add to labor challenges as more employees may be required to quarantine. Wages increased strongly with many contacts reporting higher than usual year-end wage increases. Several noted that those increases were in addition to off-cycle wage increases already made this year to attract and retain workers.\nPrices\nPrice growth increased further in recent weeks from an already elevated rate. According to our surveys, average prices received by services firms was up by more than six percent compared to last year. Firms reported even stronger growth in non-labor input prices. Additionally, many firms reported raising wages and passing the higher labor costs through to final prices. Manufacturers also reported strong growth in prices paid and received, with some of the largest cost increases coming from freight and energy.\nManufacturing\nFifth District manufacturers experienced a moderate increase in shipments and new orders since our previous report. Capacity utilization increased, but the higher volume of new orders led to increased backlogs. Low levels of inventories of raw materials and finished goods persisted. Lead times continued to lengthen for many components, including microchips, but a few producers saw lead times ease slightly for some materials. Several manufacturers anticipated supply chain disruptions to extend at least into the second half of 2022. Spending on equipment and software picked up modestly in recent weeks.\nPorts and Transportation\nFifth District ports reported strong growth and record-breaking volumes since our last report. Import volumes drove growth, with export volumes down slightly with the exception of farm equipment. Several respondents reported receiving diversion from other east coast ports due to congestion or carriers skipping ports due to time and cost concerns. Shipping prices remained high but have come down from their peak earlier in the year. Most ports stated they are running at or over capacity, with no additions to U.S. container capacity expected until at least 2023. Shortage of transportation equipment and warehouse space caused imports to sit at rail yards and ports for longer periods. All the ports indicated that cost for both labor and equipment were rising rapidly. One airport noted that both passenger and air freight traffic were up this holiday season.\nTrucking firms in the Fifth District cited unusually strong demand for shipping for this time of year. Volumes were high across most goods in both the industrial and retail sectors. Contacts reported turning away business because of shortages of drivers and equipment. Trucking firms indicated that employment and equipment costs have continued to increase and they have been able to pass them along customers.\nRetail, Travel, and Tourism\nRetail demand in the Fifth District was strong since our last report. Customer traffic increased and retailers were on track to meet 2019 sales levels. Retailers passed on the higher costs of goods, mainly owing to elevated freight costs, as well as higher labor costs. Auto dealers saw strong revenue because of high prices of used vehicles and increased demand for servicing of existing cars, but new car sales were down because of low inventory levels.\nFifth District travel and tourism held strong primarily due to leisure travel. Contacts noted that there has been a limited amount of group or business travel, as well as fewer conferences or conventions. Passenger counts at airports are at their highest since the beginning of the pandemic. Hotel occupancy and room rates strengthened, but hotels are holding back rooms or limiting service because of staff shortages. Restaurants saw strong demand but had to limit hours or days of service because of lack of staffing, and reducing menu choices because of supply chain disruptions.\nReal Estate and Construction\nDemand for Fifth District homes has experienced some seasonal slowing since our last report but remained strong. Average days on the market increased slightly, but remains short amid low inventory levels. Home prices remained elevated, discouraging some purchasers, but buyers did not have any difficulty qualifying or obtaining mortgages. Rising construction costs, long lead times for materials and equipment and shortages of skilled trade labor continued to slow residential construction and limited the availability of new homes.\nOverall, activity in the commercial real estate market continued to increase at a moderate rate in the Fifth District. The industrial segment remained very strong with low vacancy rates and rising sale prices and rental rates. Office leasing improved slightly, but tenants were still doing short term lease renewals amid some indecision by companies as to future space requirements. The owner-occupied real estate market was strong as more businesses have decided to own their space. Retail leasing was good with lots of renewals and new tenants. Multifamily leasing remained robust with rising rents. Contacts also reported increased multifamily construction in their markets.\nBanking and Finance\nOverall loan demand slowed slightly, mainly due to usual seasonality as well as new Covid concerns from the Omicron variant. However, commercial real estate and business lending remained steady. Mortgage lending was down slightly and one respondent noted that the supply of homes was keeping the loan volume depressed. Direct auto lending was still being impacted from a lack of car dealer inventory. Financial institutions noted that deposit levels were still increasing modestly, even in a low-rate environment. Credit quality continued to be excellent with one bank noting their delinquency rates were at 15-year lows.\nNonfinancial Services\nNonfinancial services firms reported a modest increase in revenues and demand. Professional services firms experienced strong demand and steady to increasing revenues. Health services firms, however, reported flat to slightly declining revenues. One health care provider said that staffing shortages inhibited their ability to meet demand and led to falling revenues. Educational institutions reported no changes to demand or revenues in recent weeks.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2022/2022-01-bo

"January 12, 2022\nSummary of Economic Activity\nBusiness activity in the First District was steady or up slightly on balance. Employment increased modestly and wages advanced at a strong pace. Input pricing pressures stayed high or intensified, and firms' output prices increased moderately. Retailers had mixed recent results but performed well above pre-pandemic levels, while tourism contacts reported modest improvements in activity. Manufacturing results varied from robust revenue growth to large declines in sales. Software and IT services firms enjoyed strong, roughly stable demand. Single-family home sales picked up slightly but remained off of their year-earlier levels, and condominium sales gained further momentum as a lower-priced option. Commercial real estate activity was steady. The outlook was mostly positive, but uncertainty remained high, and the Omicron variant of Covid-19 presented a risk to near-term activity in some sectors.\nEmployment and Wages\nEmployment was up modestly on average and wages increased at a strong pace. Headcounts were unchanged among retail and tourism industry contacts, and mixed but flat on balance at software and IT services firms. Among manufacturers, employment was either flat or up by moderate or even robust margins. Three contacts from diverse sectors said that it had recently become easier to hire workers, while others reported that hiring remained difficult but had not deteriorated. Elevated turnover remained a problem for several firms, but one noted that vaccine mandates had not resulted in increased quits. Wages posted strong gains on average, with year-over-year raises ranging from only slight to a robust 10 percent. The outlook for hiring in 2022 was quite varied, as a few firms described moderate-to-aggressive hiring plans while at least one intended to shed workers.\nPrices\nPrices increased moderately on average among the contacts reached this round. Prices were stable on balance at software and IT services firms. Average hotel room rates in the Boston area edged up moderately in recent months and increased sharply on a year-over-year basis. Retailers raised their prices somewhat in recent months in response to rising input costs and robust demand, although one experienced some consumer pushback after its latest price move. Retail contacts said that freight and shipping costs had stabilized at very high levels. Manufacturing contacts reported intense input pricing pressures, with increases as high as 30 percent over the year. Large input price gains pertained to a wide range of commodities, including foam, steel, aluminum, wood, cornstarch, adhesives, and cardboard. Some manufacturers raised their final goods prices by large margins (over-the-year) to compensate for the higher costs but at least one said it was trying not to raise prices.\nRetail and Tourism\nRetail and tourism contacts offered mostly positive reports. A clothing retailer enjoyed a robust seasonal surge in sales above its already-strong performance in the first 3 quarters of the year, as recent sales exceeded comparable 2020 levels by low double-digit percentages. A furniture seller saw revenue above pre-pandemic levels, but its sales volume dropped in recent months relative to the record-setting levels posted in the summer of 2021. Airline passenger traffic through Boston picked up steadily in recent months, and passenger levels in a recent six-week period were 200 percent higher than in the same period in 2020. (All statements about air travel and tourism were relayed prior to the recent, Covid-related surge in flight cancellations in the US and elsewhere). Passenger levels nonetheless were off by about 25 percent compared with 2019. Retail passengers in January 2022 are expected to show further improvement, but the recovery of international and business travel continues to trail that of domestic leisure travel. Hotel occupancy rates in the greater Boston area also saw further modest gains in recent months, and November's average occupancy rate of 58 percent represented a marked improvement from one year earlier. Retail and tourism contacts expressed a largely optimistic outlook for demand in 2022.\nManufacturing and Related Services\nReports from First District manufacturers were mixed. Two contacts, a semiconductor manufacturer and a supplier of cardboard boxes, continued to record stellar growth in sales on a year-over-year basis, similar to or even better than Q3 results. The cardboard box producer said that its double-digit sales growth would have been even higher if not for supply constraints. Other firms were not as positive. A frozen fish producer suffered large sales declines due to an ongoing supply snafu, a precision parts maker had flat revenues, and a biotech firm suffered a sharp drop in demand. Capital expenditures were revised down in Q4 at two firms but stable otherwise, while spending plans for 2022 were mixed. The outlook was variable, in line with each firm's recent performance, and clouded somewhat by uncertainty regarding inflation, supply-chain concerns, and idiosyncratic issues. The semiconductor contact expected strong growth for the next few years but expressed concern that the desire of many countries to make chips locally could lead to a glut of chips down the line.\nSoftware and Information Technology Services\nSoftware and IT contacts reported stable activity in the fourth quarter and moderate to strong gains in demand on a year-over-year basis. For one firm, however, realized revenues were just flat over-the-year despite increased demand, based on normal lags between bookings and payments. Recent results exceeded expectations at two out of the three firms reached this round. Prices were described as stable, although customer contracts at one firm included automatic cost-of-living increases, and two firms said that shifts towards cloud-based services had led to changes in the mix of prices paid by customers. Changes in profits and margins were mixed and tended to align with revenue growth. Capital and technology spending were consistent with prior plans, but firms had diverse spending trends. Contacts were generally optimistic for 2022 as a whole, but rising COVID-19 infection rates and shutdowns in Europe presented downside risks for the near term.\nCommercial Real Estate\nThe First District's commercial real estate markets were stable in recent weeks. Life sciences space in Boston continued to face very high demand and very low availability, spurring moderate increases in new construction and office-to-lab conversions. The industrial property market also continued to thrive, and despite low inventories construction was limited to the activity of a few large users. Retail leasing was still weak, especially for smaller stores relying on urban foot traffic, although sales at restaurants and experiential retail got a modest seasonal boost and high-end malls showed relative strength. Several contacts noted an uptick in conversions of retail space for warehousing uses. In the office sector, leasing activity remained scant in most areas but picked up somewhat in Rhode Island, and vacancy rates and rents were unchanged. Some contacts noted that \"contrarian\" investors increasingly sought to purchase top-quality office product. Regarding the outlook, contacts were optimistic on balance but expressed concerns about high inflation and rising interest rates. Contacts also speculated that premier office properties could see robust leasing demand in 2022 but that generic offices faced grim prospects, and some perceived that the Omicron variant of COVID-19 posed at least a transitory risk to activity moving into 2022.\nResidential Real Estate\nResidential real estate activity was stable or up slightly in November from earlier in the fall. Five New England states and Boston reported results; Connecticut data were unavailable. As earlier in the fall, closed sales of single-family homes were down sharply on a year-over-year basis in most markets (except Boston), reflecting softer demand compared with historic pandemic highs. Nonetheless, year-over-year sales improved slightly from the previous reports and sales were high for the typically slow month of November. In Boston, single-family sales rebounded to post slight over-the-year gains. Median sales prices of single-family homes were roughly flat but remained higher than year-earlier levels by robust margins. Inventories fell further and are down by large margins from November 2020. The Rhode Island and Massachusetts contacts said that high prices and low inventories in the single-family market pushed many first-time buyers into the condo market, and in fact condo sales increased notably in most reporting markets. One contact remarked that \"with the threat of climbing interest rates and rising rents, buyers are focused on securing a home with a steady mortgage payment to help stabilize expenses.\"\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/2022/2022-01-ph

"January 12, 2022\nSummary of Economic Activity\nOn balance, business activity in the Third District grew modestly \u2013 a slower pace than during the prior Beige Book period. Moreover, activity in most sectors had not yet returned to pre-pandemic levels. Since the prior Beige Book, the Omicron variant of COVID-19 has driven up the rate of cases, hospitalizations, and deaths. Contacts noted increased business disruptions as outbreaks occurred at worksites, in employee households, and among their own families. The rate of all persons being fully vaccinated edged up to 66 percent. Net employment growth and price increases slowed to a modest and moderate pace, respectively, while wages continued to rise sharply. However, many firms, especially larger ones, noted strong profits \u2013 \"the best year ever\" for some. Optimism remained high but waned somewhat, as the share of firms expressing positive expectations for continued economic growth over the next six months narrowed \u2013 to near two-thirds of the nonmanufacturers and near two-fifths of the manufacturers.\nEmployment and Wages\nEmployment grew modestly, with growth in the service sectors more subdued than last period. The share of firms reporting employment increases fell to one-fifth of the nonmanufacturing firms and edged up to two-fifths among the manufacturers. Overall, one-fifth of the nonmanufacturers reported a rise in average hours worked \u2013 a bit less than manufacturers' one-third share.\nStaffing firms and most employers continued to report significant difficulty attracting and retaining labor. The surge in Omicron cases created staffing challenges in some sectors more than in others.\nEmployment in leisure and hospitality remains about 10 percent below pre-pandemic levels \u2013 more so in the city of Philadelphia \u2013 accounting for 175,000 jobs in our three states. While contacts noted great difficulty finding workers, they expect that fewer staff will be required as new technology and lower levels of service (e.g., less frequent fresh towels) are deployed. Likewise, auto dealers are employing about 5 percent (8,000) fewer workers than they did pre-pandemic in New Jersey and Pennsylvania. While dealers noted a need for mechanics, their demand for salespeople is limited while inventories remain scarce and may not fully recover if customers accept and adapt to new sales technologies.\nWages continued to rise substantially. The share of nonmanufacturing firms reporting higher wage and benefit costs per employee held steady at 60 percent. No firms reported lower compensation.\nPrices\nOn balance, prices rose moderately over the period \u2013 less than the prior period's sharp increase. The share of manufacturers reporting higher prices for factor inputs decreased to 68 percent, while those receiving higher prices for their own products fell to 51 percent. The share of nonmanufacturers reporting higher prices for their inputs fell to 55 percent, while the share receiving higher prices from consumers for their own goods and services dropped to 34 percent.\nContacts noted that rising wages and higher commodity costs were driving the price increases. Many contacts noted that supply chain disruptions had worsened. Builders also noted the impact from the higher tariff on Canadian lumber.\nAbout 62 percent of the manufacturing contacts reported they expect to pay higher prices over the next six months, and slightly less than that expected to receive higher prices for their own goods.\nManufacturing\nOn average, manufacturing activity grew modestly \u2013 a drop-off from the prior robust pace. The share of firms reporting increases in shipments and new orders fell to levels matching their long-run nonrecession averages. Moreover, increases in net backlogs and delivery times were less widespread, and net inventories held steady.\nConsumer Spending\nRetailers (nonauto) and restaurateurs continued to report modest growth. Contacts noted that the rise in COVID-19 cases had begun to disrupt worker attendance and may have dampened late holiday season activity.\nSupply constraints further reduced inventories for auto dealers \u2013 causing new auto sales to fall modestly from already low levels. Contacts expect the limited inventory to preclude the typical year-end sales surge that accompanies year-end bonuses. However, continued demand maintained upward pressure on new and used car prices, and some contacts noted that the high prices were causing some potential buyers to exit the market.\nOverall, tourism continued to improve at a modest pace of growth; however, as COVID-19 cases surged in late December because of the Omicron variant, staffing challenges increased and some bookings were canceled, especially within the business travel segment. Resort areas continued to report strong demand but noted that customers had become more demanding \u2013 were rougher on resort properties and were refusing to wear masks.\nNonfinancial Services\nOn balance, nonmanufacturing activity continued to grow moderately, although the share of firms reporting increases in sales retreated to half from nearly two-thirds. The share reporting increases in new orders remained at about one-third.\nFinancial Services\nThe volume of bank lending (excluding credit cards) edged higher during the period (not seasonally adjusted); loan volume growth was similar during the same period in 2019. Loan volumes rose modestly in commercial real estate, moderately for home mortgages, and robustly for commercial and industrial lending. However, home equity lines and other consumer loans fell modestly, while auto lending fell sharply. Growth in credit card volume was very strong \u2013 a bit stronger than during the same period in 2019.\nBankers, accountants, and bankruptcy attorneys have noted relatively few changes in delinquencies or defaults. However, financial and real estate contacts noted that lenders were becoming increasingly creative at qualifying buyers for new loans. One contact was concerned that a bubble was forming in home mortgages; however, most contacts still felt that home values were sufficient to allow the majority of homeowners to sell their properties and pay off mortgages that had become unaffordable.\nBankers and accountants noted an increasing level of uncertainty on the part of their business clients. Some are choosing to sell their businesses, while buyers find it cheaper to acquire a new business than to grow one \u2013 fueling the ongoing high level of mergers and acquisitions. Prior to the surge in Omicron cases, one accounting firm noted a growing fear among its clients of another wave of COVID \u2013 that many think the resulting decreased demand would cause them to close their businesses.\nReal Estate and Construction\nHomebuilders reported no change to relatively high levels of contract signings and construction activity. Contacts did note higher construction costs for materials and labor, increased delays because of supply chain problems, and other negative impacts on sales and production as Omicron variant cases surged.\nExisting home sales appeared to hold steady at high levels. Excess demand continued to reward cash buyers with offers above the asking price. Contacts noted that rental units were becoming unavailable, and in some markets, inquiries have increased about mobile home regulations, while some hotels are offering long-term rentals for people stuck between homes.\nConstruction activity and leasing activity for most segments of nonresidential real estate held steady. Contacts noted that demand for new industrial/warehouse space, institutional projects, and multifamily housing remained strong, while rents continued to rise for existing properties. Uncertainty continued in the office market as analysts debate the extent to which demand will fall. Once again, the recent surge in cases from the latest COVID-19 variant has delayed return-to-office plans and clouded forecasts.\nFor more information about District economic conditions visit: www.philadelphiafed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"January 12, 2022\nSummary of Economic Activity\nRobust expansion continued in the Eleventh District economy, with gains broad based across sectors. Growth in the manufacturing, nonfinancial services, and retail sectors stayed strong, and growth in financial services picked up. Home sales remained elevated, though construction capacity continued to be highly constrained. Solid apartment leasing continued. The energy sector saw further expansion, while drought dampened agricultural conditions. Employment rose robustly, and wage growth remained highly elevated due to widespread labor shortages. Supply-chain bottlenecks continued to drive up costs, and prices rose at a rapid clip. Outlooks improved overall, though uncertainty increased amid a new surge in COVID-19 cases and concern that labor market tightness and supply-chain disruptions will persist well into 2022.\nEmployment and Wages\nEmployment continued to expand robustly. Job gains were widespread across services, manufacturing, energy and construction, even amid reports of a dearth of applicants and acute hiring difficulty. A manufacturer noted extreme new-worker turnover, saying three to five hires were needed for even one to stay on. Labor shortages were the top challenge in the healthcare industry, according to contacts. However, a large transportation services firm said they recently received a surge of applicants and were able to reach appropriate staffing levels. There were a few mentions of concern that vaccine mandates would further exacerbate labor issues, largely among oilfield contacts.\nWage growth remained at or near record highs. While some contacts noted wage increases were concentrated more among low-skill workers, others said they were more evenly distributed across skill levels. Also, some contacts reported that raising starting wages successfully attracted workers, while others noted that their increased wages were still being met with demands for even higher pay. A large transportation services company said they increased wages for package handlers to $20 an hour earlier in the year and recently offered referral bonuses to employees, more paid time off, and tuition reimbursement. According to a December Dallas Fed survey of more than 300 Texas business executives, wages rose 7 percent in 2021, on average, up from a reported 2 percent in 2020 and 4 percent in 2019.\nPrices\nInput and selling price increases remained the highest in recent history. In the energy sector, cost pressures accelerated to new heights. Construction contacts reported that the cost of materials remained steady but elevated, except for lumber prices which climbed over the past six weeks. Many manufacturers noted acute price pressures due to ongoing supply chain shortages, particularly metals and food inputs. Auto dealers reported persistently high prices on used cars due to a lack of inventory.\nVery strong annual price growth was seen among Texas businesses in 2021, according to a year-end survey conducted by the Dallas Fed. Respondents said input prices rose about 10 percent, on average, and selling prices rose 7 percent. These figures are markedly higher than what was reported in recent years, and businesses expect elevated price pressures in 2022 as well.\nManufacturing\nExpansion in the Texas manufacturing sector continued at an impressive clip in December, despite continued supply-chain and labor challenges. Growth was led by nondurables, particularly food and chemical manufacturing. Sharply rising input costs have led to decreased operating margins among many manufacturers, though some have been able to pass on the higher costs to customers. Outlooks improved over the reporting period, though uncertainty continued to rise due to materials delays and/or shortages, inflationary pressures, and the Omicron variant of COVID-19.\nRetail Sales\nRetail sales continued to rise at an above-average pace in December. Auto dealers reported an increase in sales after several months of weakness, though they noted that demand continued to exceed supply in both new and used vehicles. A majority of retailers said supply-chain disruptions were restraining sales. Outlooks improved, though some contacts expressed concern over an expected persistence in supply-chain issues. An equipment wholesaler said they project supply issues through fourth quarter 2022.\nNonfinancial Services\nTexas service sector activity continued to expand at a robust pace overall. Revenue growth was broad based, with particular strength seen in health care. Growth slowed in transportation services and leisure and hospitality in December after surging in November, but it remained robust. A major airline said they were just beginning a solid recovery from the slowdown caused by the Delta variant but now they are again seeing a pullback in demand from the Omicron variant. A hospitality contact reported order cancellations for larger events and private functions due to the resurgence of COVID. Staffing services firms reported strong demand over the past six weeks, particularly from the healthcare, manufacturing and construction sectors. Overall, services firms said their biggest revenue restraint is limited operating capacity due to staffing shortages, particularly absenteeism and difficulty hiring.\nOutlooks remained optimistic, and expectations are for increased activity going into 2022. Risks include the path of the pandemic, supply-chain stresses, and inflation.\nConstruction and Real Estate\nHome sales remained strong and in line with expectations. While sales rose, construction capacity continued to be highly constrained, delaying home closings. Prices crept higher and discounting was limited, though a few builders noted offering incentives in select communities. Inventories remained constrained and lot supply tight. Builders' margins were solid, and outlooks were generally optimistic, though contacts voiced concern about production challenges, lot pricing, and a potential increase in mortgage rates.\nApartment leasing continued to be robust. Occupancy was at or above the full mark cutoff in most markets, and rents advanced further. Investor interest was highly elevated, boosting sales activity and new development. Demand for industrial space stayed exceptionally strong, while office leasing was still sluggish, though activity has ticked up.\nFinancial Services\nLoan demand picked up pace over the past six weeks, driving up overall loan-volume growth. Loan volumes increased across lending types, led by commercial real estate. Volume growth accelerated for commercial and industrial loans, and consumer loans increased after weakening slightly last period. Nonperforming loans continued to decrease, and credit standards and terms remained largely unchanged. General business activity improved further, though contacts expressed concern over inflation, supply-chain disruptions and labor shortages. Outlooks for loan demand and general business activity six months from now remained optimistic.\nEnergy\nOilfield activity rose over the past six weeks, with a notable increase in the Eleventh District rig count. Oil prices moved down but were in line with 2022 expectations of about $70 per barrel, a profitable level for most producers. Lead times for equipment in oilfield supply chains were stabilizing at high levels. Delays are not expected to worsen much more but are not expected to return to normal before 2023. Industry sentiment was dented by the Omicron variant and steady global production increases, though outlooks remained positive. Contacts expect rigs to rise steadily through the end of 2022, perhaps leading to an increase in drilling of about 25 to 35 percent next year.\nAgriculture\nDrought conditions worsened, with severe drought expanding in the northwest part of the District. Still, 2021 crop production was strong, particularly for cotton, outstripping last year's output thanks to more harvested acres and higher yields. Crop prices pushed higher during the reporting period, boosting sentiment among producers. However, contacts noted concerns over surging input costs and limited availability of herbicides and other items. On the livestock side, cattle prices pushed higher and demand for all meats remained strong. Outlooks are a bit uncertain, as dry conditions could restrain production prospects for next year.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

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"Beige Book Report: Kansas City\nJanuary 12, 2022\nSummary of Economic Activity\nThe Tenth District economy expanded at a moderate pace as 2021 came to a close. Food manufacturing and other non-durable goods production grew solidly, and manufacturing businesses generally sustained elevated levels of activity. Although business confidence about the outlook remained high, planned capital expenditures over the next six months declined slightly outside of the energy sector. Drilling activity in the oil and gas sector remained subdued, but activity among support service businesses rose at a moderate rate. Investments in renewable energy capacity are expected to rise at a robust rate this year. Consumer spending expanded at a moderate pace, particularly in leisure activities and travel, even as Omicron cases began to rise. Businesses continued to recruit workers utilizing both wage increases and enhanced non-wage benefits to overcome labor shortages, actions that contacts expect to continue into the coming year. Looking ahead, businesses cited supply chain disruptions and labor shortages as top risks. COVID was cited as material but less significant risk. Prices increased broadly as businesses incurred additional costs to overcome myriad supply challenges.\nEmployment and Wages\nEmployment levels grew at a modest rate in the Tenth District during November and December. Hiring in the services sector slowed compared to previous months but employment at manufacturing firms continued to rise at a strong pace. Contacts reported that labor demand remains high, and that worker shortages held down hiring activity. In particular, demand for childcare, healthcare and hospitality workers remained elevated, but businesses noted the number of applicants was subdued.\nWage growth continued to be robust and broad-based in recent weeks. Looking ahead, contacts reported further expectations of robust wage growth. Planned wage increases for workers in service and transportation sectors were particularly elevated, though generally above historical averages across industries. In addition, contacts reported other non-wage costs are expected to rise at a solid rate in 2022. For example, businesses are making larger contributions to health savings accounts, insurance premiums, retirement plans, and adding vacation time. Multiple contacts reported novel ancillary benefits, such as \"no-meeting Wednesdays\" and subsidized pet care services, to attract workers.\nPrices\nMost businesses reported raising prices to customers at a solid pace. However, input price growth generally outpaced price increases to customers, with manufacturers reporting greater ability to pass through costs than services companies. Some contacts reported resorting to creative, but costly, sourcing strategies, such as buying operationally critical parts via on-line auction platforms. Business contacts remain concerned about continued price pressures in coming months, citing ongoing supply chain challenges, rising wages, and healthcare costs.\nConsumer Spending\nSpending in the Tenth District grew at a moderate pace. Leisure travel continued to grow robustly, supporting restaurants and hotels outside of city centers. Spending at auto dealerships and entertainment venues remained stable at subdued levels. Resort areas reported record bookings for the months ahead, and contacts generally expect consumer spending to grow over the next six months. Some contacts noted a risk that advances in child tax credit payments may result in unexpectedly small tax refunds, causing a minor headwind to spending this spring, particularly among lower income households.\nManufacturing and Other Business Activity\nManufacturing activity expanded at a moderate pace, driven by ongoing growth in durable goods manufacturing and a pick up in the pace of growth among non-durable goods producers. Notably, food and beverage manufacturing contacts expressed strong growth in order volumes and shipments in recent weeks. However, expectations for growth in the coming months wavered somewhat. While most contacts expect activity will expand over the next six months, they expected slower growth than noted previously. Cooling expectations were reported broadly across businesses, with many noting a slower pace of new orders, while others expressed concerns about capacity constraints as a contributing to slower growth prospects.\nCommenting on top risks to the outlook in 2022, business contacts highlighted ongoing supply chain disruptions, higher labor and materials costs, and labor availability. These concerns were expressed broadly across contacts and segments of the manufacturing sector. Although COVID remains a persistent risk, it was not a top concern for most businesses as of mid-December. Still, most contacts said they would see some disruption in their business operations from a resurgence in the virus.\nCapital expenditures continued to rise at a robust rate across businesses. Recent growth in capital expenditure was driven primarily by investment from non-durable manufacturers. Business contacts report continued investments in labor saving technology in order to temper the effects of labor shortages. However, expectations for capital expenditures in the coming months are for a slower pace of growth than expressed in previous months. Planned capital investments slowed primarily among durables manufacturers, which continue to struggle with supply chain issues and labor shortages.\nReal Estate and Construction\nResidential construction activity remained steady throughout the District, with western states experiencing elevated levels of new construction on single family housing. Demand for new construction of multifamily housing remained high. Several contacts noted that labor constraints are likely to moderate the pace of growth in residential construction over the medium term. Access to financing for new construction did not materially change in recent weeks. However, banking contacts were attentive to valuations of homes and projected values for new projects amid elevated materials costs and the potential that financial conditions may be less accommodative over the medium term.\nBanking\nLoan demand from commercial real estate borrowers showed robust growth in recent weeks. The primary driver was a pickup in residential real estate construction and lending for other land development projects. However, loan demand in all other categories was stable at relatively low levels. Some contacts noted that, amid subdued loan demand, lenders are adjusting terms on borrowing, in particular extending the duration on new lines of credit. Overall credit quality remained strong.\nEnergy\nTenth District energy activity grew modestly in December. The number of active rigs remained steady across most District states with a small uptick in oil rigs in Oklahoma. While drilling activity remained mostly subdued, activity among support service businesses rose at a moderate rate. Compared to the previous survey period, oil and gas revenues and profit levels continued to increase. Firms also reported higher wages and benefits. Capital spending has increased, and most contacts expected higher capital spending this year compared to 2021. Moving forward, regional firms expected prices to remain profitable on average for oil and natural gas. However, the average price firms reported needing to substantially increase natural gas drilling remains above price expectations for the near-term, constraining expectations for production growth. Renewable energy production continued to increase at a robust pace across several District states. Looking forward, planned additions to wind electricity production capacity in Oklahoma and Wyoming remain elevated, supporting the outlook for renewable energy investment throughout 2022.\nAgriculture\nConditions in the Tenth District agricultural economy remained stable with ongoing strength in the sector. Farm revenues at year end were expected to reach multi-year highs due to elevated commodity prices, but contacts in the region reported further concerns about profit opportunities moving forward. Substantially higher input costs remained a primary concern. In addition, while demand for most major commodities in the region remained strong and continued to support prices, export activity was lower than a year ago for some products as challenges associated with supply chains and port operations persisted. Contacts in the meat packing industry reported that tight labor markets continued to limit production capacity, particularly for beef and hog processing facilities that are located in less populated areas where labor challenges have been more acute.\nFor more information about District economic conditions visit: www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

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"January 12, 2022\nSummary of Economic Activity\nOn balance, the Fourth District economy expanded at a moderate pace in recent weeks, although growth varied by segment. Demand generally remained solid, but the emergence and spread of the Omicron variant of COVID-19 reportedly constrained sales in some high-contact service-providing industries, especially food services and leisure and hospitality. Moreover, persistent supply chain challenges continued to limit growth for manufacturing firms, construction companies, and some retailers. Despite these supply constraints, general merchandisers and apparel retailers suggested that holiday sales were solid. Looking forward, contacts generally expected demand to continue to grow in coming months, but at a somewhat slower pace than currently as renewed uncertainty about the path of the pandemic tempered their optimism. Supply challenges were expected to persist in coming months, keeping upward pressure on costs and prices. However, most contacts expected meaningful relief from disruptions in 2022, especially in the second half of the year.\nEmployment and Wages\nLabor demand remained solid in the District in recent months and hiring picked up. Staffing services contacts indicated that firms across a wide array of industries were hiring to keep up with strong demand. Several contacts noted a continued trend toward higher turnover amid a persistently competitive job market. Moreover, several contacts suggested that increased retirements led to more openings. Looking forward, businesses expected to continue boosting staffing levels in coming months, although they anticipated that labor availability would remain constrained.\nWith labor demand outpacing labor supply, wages continued to rise. Nearly 70 percent of business contacts indicated that they had increased pay rates during the prior two months, a share that was virtually unchanged since our last report. While wages are rising most notably among hourly workers, salaried workers are seeing meaningful increases, as well, according to our contacts. Anticipating little relief from labor shortages in the near term, firms expected competition for workers to remain intense, keeping upward pressure on labor costs.\nPrices\nNonlabor input costs continued to rise, albeit at a slightly slower pace than in our last report. The share of contacts reporting higher costs declined from around 85 percent to roughly 75 percent. While cost pressures reportedly intensified for firms in the transportation sector, contacts noted some relief in manufacturing and construction. Firms in the latter two industries suggested that costs remained high, but prices for inputs such as steel, aluminum, and resins had stabilized and in some cases had come down. Looking forward, firms expected input cost pressures to continue easing in coming months as supply chain disruptions dissipated, although they anticipated that costs will remain elevated.\nPressure on selling prices remained elevated. Roughly two-thirds of contacts suggested they had increased selling prices over the prior two months, similar to in the prior report. Firms continue to indicate that they raised prices to offset higher nonlabor input costs and protect margins. Also, contacts more frequently reported that they were factoring in the cost of higher wages in pricing strategies as well.\nConsumer Spending\nConsumer spending increased modestly. General merchandisers and apparel retailers said that demand for goods remained strong, and many noted favorable holiday sales. Restaurateurs and hoteliers reported a pickup in sales in recent weeks, although some restaurateurs said that news of the omicron variant dampened activity. Auto dealers reported limited sales despite generally elevated demand as tight inventories and higher prices deterred buyers. Contacts expected nonauto consumer spending to remain relatively strong in the coming months, and multiple auto dealers were optimistic that sales would increase along with inventory levels in the first quarter of 2022.\nManufacturing\nGrowth in demand for manufactured goods slowed somewhat in recent weeks, although it remained solid. Some contacts attributed softer growth to persistent supply chain disruptions and long lead times, both of which limited availability of essential inputs. For example, one steel manufacturer said that a customer reduced its purchases until diesel engines and truck chassis were more readily available. Many manufacturers also noted that the shortage of production workers inhibited their ability to keep up with demand or build inventories to desired levels. Looking forward, many manufacturers expected that supply constraints will continue to limit production through the next several months.\nReal Estate and Construction\nHousing demand has remained elevated. But one homebuilder noted that he no longer had time to build spec homes to take advantage of strong demand because of the number of projects already under contract. Supply chain disruptions also slowed current construction activity. A homebuilder indicated that he had been unable to complete homes that were already sold because of labor and materials shortages. Going forward, contacts expected demand to remain strong as consumers look to lock in low interest rates, although supply chain disruptions were expected to continue impeding new home construction.\nDemand for nonresidential construction and real estate remained stable on net but continued to vary by sector. Leasing activity for industrial space remained robust, while office occupancy rates continued to decrease. Contacts reported that nonresidential construction activity has remained solid overall, with the strongest demand centered on industrial spaces. Going forward, contacts were less optimistic about future construction demand because concerns about supply chain disruptions, labor availability, and inflation have led some firms to delay construction projects.\nFinancial Services\nLoan demand increased moderately. Contacts reported growth in business lending despite elevated cash balances, and many bankers reported a stronger loan pipeline. Lenders said that demand for auto loans and mortgages was slightly down because limited inventories and higher selling prices in both markets dampened activity. Lenders said that delinquency rates for consumer and commercial loans were still low and that core deposits had increased in recent months. Looking ahead, bankers expected that business loan volumes will continue to increase because of a large number of applications in the pipeline.\nProfessional and Business Services\nProfessional and business services firms continued to experience robust activity. Demand for HR and IT software and solutions remained strong, while the recently passed infrastructure bill increased demand for engineering firms. Accounting and wealth management firms also reported increases in activity, in part because of potential changes in federal tax laws. IT firms anticipated that demand will remain strong as businesses continue to shift to more online work. Other professional and business services firms were also optimistic about the future and anticipated that an increasing number of public agencies will be seeking project proposals related to the infrastructure bill.\nFreight\nDemand for freight services increased moderately in recent weeks from an already high level. As in other industries, capacity constraints and supply disruptions were limiting growth. When asked if his firm had seen increased activity in recent months, one contact said his firm was \"running at capacity, (so) no change is the only possible response at this point.\" Moreover, a logistics firm noted that problems getting containers in from overseas contributed to lower-than-expected volumes just prior to the Black Friday\u2013Cyber Monday period. While the scarcity of drivers and trucks is likely to persist well into 2022, multiple contacts expected supply chain disruptions to ease late in the year and improve at least truck availability.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

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"January 12, 2022\nSummary of Economic Activity\nThe Ninth District economy grew moderately since mid-November, though a surge in COVID cases due to the Omicron variant was delaying return-to-work plans and dampening outlooks in some sectors toward the end of the reporting period. Employment saw moderate growth, though strong labor demand continued to outstrip supply. Wage pressures were strong, while price pressures increased moderately from elevated levels. Growth was noted in commercial and residential construction, commercial real estate, consumer spending, and manufacturing, while residential real estate activity fell. Agricultural conditions were steady, as higher prices and strong harvests in some crops offset the negative impacts of drought. Minority- and women-owned businesses saw improvements but noted price and supply chain challenges.\nEmployment and Wages\nEmployment grew moderately since the last report, as tighter labor supply forestalled much stronger growth. Job postings continued to rise from very high levels across the District. In Michigan's Peninsula, current job openings were almost double those from a year earlier. Three surveys among construction, hospitality-tourism and manufacturing firms found high demand for labor; many firms were hiring to replace persistent turnover, but an even larger percentage were looking to add to their total headcount. Actual hiring was nonetheless more challenging, with the large majority of respondents in all three sectors reporting moderate to significant difficulty in finding available workers.\nWage pressures remained strong. Surveys since the last report found strong wage growth in construction, manufacturing, and hospitality-tourism; more firms increased wages, and by larger amounts. More than 40 percent of hospitality and tourism firms reported wage increases of 5 percent or more over the last year. A South Dakota state budget proposal included a 6 percent raise for state workers, including teachers and corrections employees. Nonprofits were reportedly dealing with growing turnover as workers left for higher compensation offers in the private sector. Among firms, said one contact, \"The wage-increase conversation is just as hot as the difficulty-hiring topic.\"\nWorker Experience\nLabor supply was tight across the District and quit rates continued to trend up. A labor contact said that more hospitality workers at a Minnesota airport have left their positions, citing \"hassles\" such as the time spent going through security. The presence of the Omicron variant and subsequent cancellation of in-person conferences and events brought more uncertainty for some hospitality workers. A nonprofit contact said that many low-wage workers who held two or more jobs before the pandemic have decided to work less to meet childcare and other needs. A healthcare labor contact said that nurse retirements continued to put downward pressure on a depleted workforce, and the availability of traveling nurses has thinned. A South Dakota contact said that workers in the energy sector expressed concerns over vaccine mandates.\nPrices\nPrice pressures remained elevated. More than three-quarters of preliminary respondents to the manufacturing survey reported that they had increased prices charged for their products in the previous year, while 70 percent expected to increase their prices further in 2022. Contacts in construction reported that materials costs remained elevated across the board, but that plastic pipe and plumbing fixtures in particular had spiked recently. Responses to a hospitality and tourism survey indicated greater recent pressure on input prices than final prices; nearly 45 percent of hospitality firms said wholesale prices had increased by more than 5 percent over the previous 12 months, while about a quarter reported that prices charged to customers had increased by that magnitude. Retail fuel prices in District states as of late December decreased modestly relative to a month earlier. Prices received by farmers in November increased from a year earlier for corn, soybeans, wheat, canola, dry beans, potatoes, hay, hogs, cattle, turkeys, chickens, and eggs, while milk prices decreased.\nConsumer Spending\nConsumer spending grew moderately since the last report. An industry contact said that retailers reported better than expected holiday sales and in-store traffic, while online shopping was also very active. A regional mall contact noted similarly strong sales, particularly for those with healthy staffing levels. Hospitality and tourism firms widely reported improved revenues, but future sentiment was mixed due to concerns over the Omicron variant, particularly among firms catering to large events. One Minnesota hotel said banquet and catering revenues \"are expected to be lower for some time.\" New-vehicle sales\u2014cars, trucks, marine, recreational, and powersport\u2014remained slow compared with a year ago, due mostly to lack of inventory; used-vehicle sales remained healthy as \"some consumers are settling for a used vehicle rather than waiting for a new vehicle,\" according to one dealer.\nConstruction and Real Estate\nCommercial and residential construction grew moderately since the last report. Recent industry data showed that the value of construction starts in District states continued to trend higher, though some revenue increases were attributed to inflated input costs. New projects out for bid were higher in District states compared with the same period last year. Supply chain problems and higher input costs were dampening future demand, according to a variety of sources.\nCommercial real estate grew modestly overall. Retail was buoyed by stronger-than-expected holiday traffic. A regional mall contact noted that recent and expected future leasing efforts were \"quite strong.\" But retail vacancy rates continued to inch higher in some markets, and another virus surge would dampen recent momentum. Office vacancy rates remained high, as the Omicron threat postponed return-to-office plans. Multi-family vacancy rates remained low in many markets and recent investor sales suggested a strong market. Slower residential real estate sales persisted in most markets across the District, largely due to exceptionally low inventory of homes for sale.\nManufacturing\nDistrict manufacturing activity increased briskly. A manufacturing survey indicated growth in orders, production, and capital spending through 2021 compared with the previous year for most firms. Profits and productivity were flat, and employment fell slightly, largely due to challenges in hiring. Firms' expectations for 2022 pointed to similar growth, with a positive outlook for employment. A regional manufacturing index indicated increased activity in Minnesota, North Dakota, and South Dakota, relative to the previous month. A third of supply managers surveyed expected supply chain issues to get worse over the first six months of 2022.\nAgriculture, Energy and Natural Resources\nDistrict agricultural conditions were steady since the last report. Crop production in Ninth District states exceeded earlier, drought-related predictions; however, production of some commodities (dry beans, for example) was much lower than 2020 levels. Most contacts expected higher commodity prices to offset lower production and increased input costs, except in the hardest-hit areas. District oil and gas exploration activity increased modestly since the previous report. District iron ore mines were operating at capacity, with 2021 production expected to pass pre-pandemic levels.\nMinority- and Women-Owned Business Enterprises\nReports from minority-and-women-owned business enterprises (MWBEs) in the District were generally optimistic, but concerns lingered regarding labor shortages, supply chain issues, and COVID. Almost three quarters of respondents in a recent survey said that they experienced price increases of more than 3 percent for nonlabor inputs. Businesses in the hospitality and tourism industry reported improved business activity but faced challenges finding workers. Supply chain challenges were singled out by a restaurant owner as their greatest challenge, adding that food cost fluctuations were passed on to customers. The CEO of a collaborative working space said that many are entering entrepreneurship to diversify income streams after experiencing employment instability during the pandemic; she added that more women have chosen to leave their jobs to launch a business.\nFor more information about District economic conditions visit: minneapolisfed.org/region\u2010and\u2010community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nJanuary 12, 2022\nThis report was prepared at the Federal Reserve Bank of Kansas City based on information collected on or before January 3, 2022. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic activity across the United States expanded at a modest pace in the final weeks of 2021. Contacts from many Districts indicated growth continued to be constrained by ongoing supply chain disruptions and labor shortages. Despite the modest pace of growth, demand for materials and inputs, and demand for workers, remained elevated among businesses. Lending activity picked up slightly toward the end of the year, led by commercial real estate borrowers. Consumer spending continued to grow at a steady pace ahead of the rapid spread of the Omicron COVID-19 variant. Most Districts noted a sudden pull back in leisure travel, hotel occupancy and patronage at restaurants as the number of new cases rose in recent weeks. Although optimism remained high generally, several Districts cited reports from businesses that expectations for growth over the next several months cooled somewhat during the last few weeks. The manufacturing sector continued to expand nationally, with some regional differences in the pace of growth. Overall activity in the transportation sector expanded at a moderate pace. While farm incomes were elevated throughout 2021, agricultural conditions were marred by drought conditions across several Districts.\nEmployment and Wages\nEmployment grew modestly in recent weeks, but contacts from most Districts reported that demand for additional workers remains strong. Job openings were up but overall payroll growth was constrained by persistent labor shortages. Tightness in labor markets drove robust wage growth nationwide, with some Districts highlighting additional growth in labor costs associated with non-wage benefits. While many contacts noted that wage gains among low-skill workers were particularly strong, compensation growth remained well above historical averages across industries, across worker demographics, and across geographies. Besides wage gains, many contacts indicated adjustments to job demands \u2013 such as accommodating part-time work or adjusting qualification requirements \u2013 to attract more applicants and retain existing workforces.\nPrices\nContacts from most Federal Reserve Districts reported solid growth in prices charged to customers, but some also noted that price increases had decelerated a bit from the robust pace experienced in recent months. Wholesale and materials prices contributed to pricing pressures across a wide range of industries, spanning service providers and goods producers. Many contacts attributed the high cost of inputs to ongoing supply chain disruptions. Some Districts reported that transportation bottlenecks had stabilized in recent weeks, though procurement costs remained elevated. Ongoing labor shortages and associated wage growth also added cost pressures to businesses.\nHighlights by Federal Reserve District\nBoston\nBusiness activity was steady or up slightly, although performance was somewhat mixed. Employment increased modestly and wages advanced at a strong pace. Input prices climbed at a rapid pace and output prices increased moderately. The outlook was mostly positive but uncertainty remained elevated.\nNew York\nThe regional economy grew at a subdued pace in recent weeks, restrained by intensifying supply disruptions, labor shortages, and the Omicron outbreak. However, holiday season sales were reported to be fairly solid. Employment and wages increased, and businesses noted ongoing widespread escalation in both input costs and selling prices. Still, contacts continued to express optimism about the near-term business outlook.\nPhiladelphia\nBusiness activity grew modestly during the current Beige Book period \u2013 slower than the prior period \u2013 and remained below pre-pandemic levels. Vaccination rates rose slightly, but the Omicron variant caused COVID-19 cases to surge \u2013 disrupting business once more. Overall, employment growth slowed to a modest pace, and price increases ebbed to a moderate rate, while wage increases continued to rise sharply.\nCleveland\nThe District's economy expanded at a relatively steady pace, although the emergence and spread of the Omicron variant of COVID-19 dampened sales for some restaurants and hotels. Contacts did not expect Omicron to derail the recovery, but they did anticipate slower growth in the near term. While labor shortages and supply challenges persisted, most firms expected meaningful relief from the latter by yearend 2022.\nRichmond\nThe regional economy grew modestly in recent weeks. Manufacturers, ports, and trucking companies reported moderate to robust growth while retail, travel, and tourism remained strong. Home sales and mortgage lending slowed while commercial activity held strong. Employment rose moderately and the tight labor market led to strong wage and price growth.\nAtlanta\nEconomic activity expanded at a moderate pace. Labor markets remained tight and wage pressures grew. Nonlabor costs rose slightly. Retail sales were healthy. Domestic leisure travel remained solid. Business travel improved slightly. Housing demand was strong. Commercial real estate conditions improved. Manufacturing activity was robust. Banking conditions were steady.\nChicago\nEconomic activity increased modestly. Employment, consumer spending, and business spending grew modestly; manufacturing was up slightly; and construction and real estate was flat. Wages and prices rose rapidly, while financial conditions were little changed. Agricultural incomes were strong in 2021.\nSt. Louis\nEconomic conditions have improved at a moderate rate since our previous report. Employers reported continued difficulties hiring to meet increased demand. Input cost pressures have led to price increases, most of which firms were able to pass on to consumers. Contacts expressed concern about the Omicron variant's impact on consumer demand and the supply of labor.\nMinneapolis\nThe region's economy saw moderate growth, despite challenges related to labor, higher prices, supply chains, and the Omicron variant. Employment continued to grow, but more slowly than hiring demand. Holiday shopping was strong, and manufacturers reported robust activity. Strong commodity prices and good crop harvests in some areas helped offset widespread drought. Minority- and women-owned business enterprises saw a boost in entrepreneurship.\nKansas City\nThe Tenth District economy finished 2021 at a moderate pace of growth. Businesses reported several non-traditional actions aimed at mitigating supply constraints, resorting to consumer online auction platforms to procure parts and offering enhanced, sometimes novel, benefits to attract workers. Growth in consumer spending on leisure activities was strong. Prices increased broadly. Plans for capital outlays cooled somewhat in December.\nDallas\nThe District economy expanded at a robust pace, with gains broad-based across sectors. Employment growth was strong, and wage and price growth continued to be highly elevated. Home sales remained high, and loan growth increased further. Outlooks improved overall, though uncertainty increased amid a new surge in COVID-19 cases and concern that labor and supply-chain shortages will persist well into 2022.\nSan Francisco\nEconomic activity strengthened modestly over the reporting period. Employment grew at a moderate pace, while overall conditions in the labor market remained tight. Wages and price levels climbed significantly. Retail sales increased notably, while conditions in the consumer and business services sectors deteriorated somewhat. Lending activity remained steady, and residential construction continued to expand at a slightly slower pace.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nJanuary 12, 2022\nSummary of Economic Activity\nGrowth in the Second District economy slowed to a subdued pace, reflecting widespread supply disruptions, labor shortages, and the outbreak of Omicron across the District. However, contacts continued to express fairly widespread optimism about the near-term outlook. Businesses continued to report increases in selling prices, input costs, and wages. The job market has remained exceptionally tight, with businesses planning to hire more workers, on net, in the months ahead. Consumer spending was mixed, with vehicle sales weakening further but retail holiday-season sales characterized as solid. The home sales market has been unusually robust for this time of year, and apartment rental markets strengthened slightly; commercial real estate markets were somewhat stronger. Both residential and commercial construction activity weakened, with contacts noting scattered shortages of materials. Finance-sector contacts reported ongoing improvement, while regional banks reported stronger loan demand from commercial borrowers but weaker demand from the household sector.\nEmployment and Wages\nEmployment has continued to increase modestly, restrained by ongoing labor shortages. Staffing agencies in both New York City and upstate New York reported that hiring orders have remained fairly strong during this typically slow season, particularly for technology, sales and human resource workers. However, businesses have continued to experience difficulty in hiring and retaining workers. Labor shortages persist across a wide range of industries and occupations. Businesses in most sectors plan to add staff in the months ahead.\nContacts in all sectors continued to report widespread wage increases. An upstate New York employment agency noted continued escalation in wages while a New York City agency reported that there are large gaps between candidates' salary requirements and prospective employers' offers. Minimum wages across New Jersey and much of New York State were notched up on January 1st. More broadly, looking ahead to 2022, businesses across all major sectors foresee annual wage increases averaging around 6 percent.\nPrices\nA large majority of contacts continued to report escalation in input prices. Contacts noted shortages and exceptionally high costs of a wide range of supplies, including metals, chemicals, construction materials, glass bottles, and paper. A sizable majority of contacts in most sectors expect input prices to rise further in the months ahead.\nHikes in businesses' selling prices have also remained widespread, particularly in the manufacturing, distribution, and retail sectors. A major retailer noted that its selling prices\u2014based on merchandise acquisition costs negotiated months ago\u2014have not yet risen significantly but are likely to in the first half of 2022. A majority of businesses plan to hike selling prices in the months ahead.\nConsumer Spending\nConsumer spending has been steady overall in the latest reporting period. Non-auto retailers characterized the holiday season as fairly successful: sales were robust in November but tapered off a bit in December, which was attributed largely to the Omicron outbreak. Supply disruptions caused scattered inventory shortages but were not too disruptive overall. One chain noted that in-store sales were moderately below 2019 levels but on-line sales boosted total business above pre-pandemic levels. New York City continued to lag the rest of the region, hampered by fewer commuters and visitors. Consumer confidence among New York State residents climbed to a 5-month high in early December.\nNew vehicle sales continued to weaken and were running well below late-2020 levels, restrained by the ongoing dearth of supply. Many dealers have had little or no inventory and generally reported a 6-month lag in filling orders from customers. However, sales of used vehicles have picked up noticeably, with inventories lean but shortages far less severe than for new autos.\nManufacturing and Distribution\nManufacturing activity grew at a slower pace in the final weeks of 2021, while activity in the wholesale, transportation, and warehousing sectors continued to expand briskly. Many contacts in these sectors reported further deterioration in the availability of supplies and escalating prices, which have impeded business activity. Still, looking ahead to the first half of 2022, these businesses continued to express fairly widespread optimism.\nServices\nService industry activity tapered off somewhat in the final weeks of 2021. In particular, businesses in the leisure & hospitality and, to a lesser extent, education & health sectors noted a drop-off in activity\u2014likely reflecting the Omicron outbreak. Information industry contacts also noted a slowdown. However, contacts in professional & business services noted steady, moderate growth. Businesses in all these industries generally remained optimistic about the near-term outlook.\nThere are indications that the Omicron outbreak has dampened both tourism and other service-sector activity in New York City. Subway ridership, which had been trending up through November, turned down noticeably in December and was more than 50 percent below comparable 2019 levels in the second half of the month. New York City's New Year's Eve celebration in Times Square was scaled back sharply, with crowd capacity limited to 15,000\u2014a small fraction of typical pre-pandemic turnout.\nReal Estate and Construction\nSales activity remained relatively strong in the final weeks of 2021. The volume of co-op and condo sales in Manhattan remained high, particularly at the upper end of the market, and inventories have fallen to more normal levels. One industry expert noted that some sellers are eager to make sales before the end of December due to uncertainty about tax changes in 2022. Elsewhere across the District, increasingly lean inventories of unsold homes have restrained sales, pushed up prices, and led to frequent bidding wars.\nNew York City's residential rental market was slightly stronger in recent weeks, as vacancy rates have continued to edge down, rents have edged up, and concessions have diminished. Rents on larger apartments, and those in doorman buildings are now generally above pre-pandemic levels.\nCommercial real estate markets strengthened slightly, on balance, across the District. In Manhattan, availability rates were little changed in recent weeks, rents showed signs of leveling off, and leasing activity has been steady at a fairly brisk level. Across the rest of the metropolitan region, office vacancy rates declined modestly, and rents were steady to slightly higher. In upstate New York, markets were steady to slightly weaker. The industrial market continued to strengthen, with vacancy rates steady to down slightly near record lows and rents continuing to escalate. The retail leasing market, though still soft, has shown signs of picking up.\nConstruction sector contacts reported a slight uptick in activity, on balance, though some noted that ongoing supply shortages and soaring prices have continued to restrain activity. Both multi-family residential and non-residential construction starts weakened, though there continues to be a good deal of ongoing construction in the pipeline.\nBanking and Finance\nContacts in the broad finance sector reported ongoing improvement in business conditions. Small to medium-sized banks in the District reported little change in overall loan demand, noting a pickup for commercial mortgages but weaker demand for consumer loans and residential mortgages. Refinancing activity declined. Both credit standards and delinquency rates were reported as unchanged across all loan segments.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"December 1, 2021\nSummary of Economic Activity\nRobust expansion continued in the Eleventh District economy, with gains generally broad based across sectors. Growth in the manufacturing and nonfinancial services sectors stayed strong, though retail sales were mixed. Home sales and single-family construction remained elevated; however, activity was being constrained by labor, lot, and materials shortages. Apartment demand rose, and office leasing ticked up as well. Loan volumes rose broadly. The energy and agricultural sectors saw continued expansion. Employment rose robustly, and wage growth remained elevated due to widespread labor shortages. Supply-chain bottlenecks continued to drive up costs and prices rose. Outlooks improved though uncertainty surrounding labor and supply-chain challenges increased.\nEmployment and Wages\nEmployment expanded robustly. Hiring picked up in construction, manufacturing, and services despite persistent reports of labor shortages and a growing number of job openings. Several firms noted worsening issues with retention and hiring, with some noting having to terminate contracts or turn away business due to lack of capacity. While finding low-skill workers remained the most challenging, filling mid and high-skill positions was becoming increasingly difficult as well. One contact said that competition for tech workers was being further exacerbated by non-local companies looking for remote workers in cities like Austin. Some firms voiced concern that the vaccine mandate would make hiring more challenging in an already tight labor market.\nWage growth remained highly elevated, and numerous contacts noted continued difficulty retaining workers and filling vacancies even at much higher wages. An airline reported offering flight attendants triple pay to work during peak periods over the coming holiday season. A parcel shipping firm cited staffing issues despite having increased hourly pay by 16-25 percent for package handlers.\nPrices\nUpward pressure on input and selling prices remained at historically high levels, with several contacts noting that persistent changes in pricing was posing a challenge in planning for the future. Input costs rose broadly, led by increases in the manufacturing sector. Supply-chain constraints continued to be widely cited as a key factor driving up costs, with some firms reporting continued double-digit increases in the price of raw materials. There were several reports of rising freight costs. While most respondents in the retail, manufacturing, and construction sectors were able to pass on some portion of the higher costs to customers, numerous service firms reported holding prices steady and a few noted losing customers due to price hikes. Airlines said that leisure travel fares eclipsed pre-pandemic levels during summer, but weak business travel is a drag on overall fares. A few staffing firms anticipate reducing their markups for certain clients as a result of the sharp increase in wages.\nManufacturing\nRobust expansion continued in the Texas manufacturing sector. Output growth was elevated and broad based across sectors, led by durable goods manufacturing. Supply-chain disruptions or delays remained widespread, with many firms noting that the inability to secure raw materials was affecting their ability to meet demand. Several respondents said orders that would typically take weeks to fill were now taking months. Refiners cited higher utilization rates, and chemical manufacturers said that production had fully recovered from the impact of Hurricane Ida. Chemical margins slipped slightly but remained at healthy levels. Manufacturing outlooks were positive though uncertainty edged higher due to supply-chain constraints.\nRetail Sales\nRetail sales dipped in October but rebounded modestly in November. Growth was mixed across industries, with auto dealers continuing to report declining sales amid ongoing supply-chain issues and extremely tight used and new vehicle inventories. Retailers noted margin pressure due to rising costs. Outlooks were flat as supply-chain challenges weighed on sentiment.\nNonfinancial Services\nTexas service sector activity continued to expand at a solid pace. Revenue growth was broad-based, with strong increases seen in the transportation and warehousing, administrative support services, and accommodation and food services sectors. Staffing firms saw broad-based strength in demand and noted that job orders had surpassed pre-pandemic levels. In transportation services, a parcel shipping company cited rising shipments and record delivery volumes in September. Container activity at Texas ports experienced double-digit growth year-over-year in September, driven largely by increased consumer spending. There were reports of port congestion, with wait times for ships averaging around 60 hours. The slowdown at the ports was being made worse by a truck driver shortage and a lack of trucks to haul containers. Airlines said air travel picked up during the reporting period following a deceleration in August and September that was driven by the surge in Delta-variant infections. Holiday bookings were coming in quite strong, though overall demand for air travel is expected to be choppy through spring 2022. Service sector contacts cited rising prices, lengthening wait times, and greater regulatory risk as potential headwinds for future growth.\nConstruction and Real Estate\nHome sales held steady at above-average levels, though demand has softened relative to the highly elevated levels seen in spring and early summer. Construction capacity remained extremely constrained, resulting in lengthy delays in both lot development and home closings. Home inventories remained low and lot supply tightened further, nearing record lows in some areas. Builders' margins have widened, and outlooks were optimistic though there is widespread concern about lot supply and labor and material shortages.\nApartment demand rose further. Occupancy surpassed pre-pandemic levels, and rents continued their upward trend, with annual growth at or near record highs in most District metros. Demand for retail space was steady since the last report. Office leasing activity picked up, but vacancies remained high, with little improvement expected through yearend. For industrial properties, e-commerce activity continued to drive robust growth in demand and construction, with Dallas\u2013Fort Worth ranking among the top U.S. markets in both metrics.\nFinancial Services\nLoan demand picked up over the past six weeks, bolstering loan volumes. Commercial real estate lending led volume growth, eclipsing residential real estate lending, which continued to expand but at a decelerated pace. Volumes were largely unchanged for commercial and industrial loans and edged down for consumer loans. Nonperforming loans continued to decrease, and credit standards and terms remained unchanged. General business activity increased further, though contacts expressed concern over supply-chain disruptions, labor shortages, and inflation. Outlooks for loan demand and broader business activity six months from now remained optimistic, though contacts were less bullish on profitability.\nEnergy\nOilfield activity rose steadily over the past six weeks. Optimism remained high among upstream contacts, boosted by high oil and natural gas prices. However, supply-chain delays worsened, with significantly larger backlogs, escalating costs, and material and equipment lead times as long as 10 months for some types of machinery. Access to capital was slowly improving, but firms did not expect this to alter drilling plans. Looking ahead, contacts anticipate a moderate increase in production and improved margins.\nAgriculture\nOverall, the agricultural sector was doing quite well. Soil moisture remained mostly favorable, though some areas have begun getting dry over the past six weeks. Harvesting continued and production was strong, particularly for cotton and soybeans, far outstripping last year's numbers. Solid agricultural prices combined with high yields have boosted many farmers' financial positions this year. Contacts voiced concern going forward over higher input costs\u2014fuel, fertilizer, machinery, etc.\u2014and there were scattered reports of difficulty sourcing herbicides. On the livestock side, cattle prices rose, bolstered by solid beef demand.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

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"Beige Book Report: Kansas City\nDecember 1, 2021\nSummary of Economic Activity\nThe Tenth District economy continued to expand at a moderate pace through November. Activity at non-durable manufacturing facilities rose and durable goods production remained at high levels. Several contacts noted a shift in their approach to managing supply chain disruptions toward a strategy of holding larger inventories, adding demand for key inputs. Retail spending continued to grow generally, but event and entertainment businesses experienced a moderate decline in attendance and bookings. Conditions in the agricultural sector remained strong, supporting ongoing growth in farmland values. Job gains were broad-based. Demand for workers was driven by strong customer demand as well as a need to alleviate strains on current employees. Prices rose as labor costs, material costs and transportation costs remained elevated. Several contacts noted that wage pressures were particularly strong among low-skill and front-line workers, where competition among businesses has led to a significant number of workers switching jobs.\nEmployment and Wages\nEmployment grew at a moderate rate in the Tenth District during October and November. Manufacturers of non-durables added jobs and significantly increased the number of hours worked after facing several months of anemic growth. Job gains at restaurants slowed initially at the emergence of the COVID-19 Delta variant, but picked back up in recent weeks. Contacts continue to report that demand for additional workers remains high.\nBusinesses reported numerous motives for adding jobs, including the need to meet elevated demand from customers as well as to alleviate strains on their current workforces and to address skill shortages. Hiring activity continues to be restrained by a lack of qualified candidates and a declining number of applicants. Most businesses reported that employment levels are at, or near, pre-pandemic levels. Of those that still have jobs outstanding, most expected employment levels to fully recover by the end of next year.\nWages grew at a robust rate over the last two months. While wage growth was broad-based, many contacts noted that wages and benefits paid to low-skill workers increased relatively more quickly.\nPrices\nNearly all businesses reported raising prices to customers. However, the extent to which those prices offset increasing cost pressures varied across industries and differed between small and large businesses. Price pressures came from a combination of rising labor costs, elevated material costs and high transportation costs. Several businesses also noted higher costs associated with holding or managing inventories amid supply chain disruptions.\nConsumer Spending\nRetail spending expanded at a moderate rate and grew broadly across a number of categories. Two exceptions were spending on motor vehicles, which was mostly unchanged, and spending at entertainment venues, which declined slightly as cases of the Delta variant rose in number. Although growth in spending at restaurants slowed slightly in early October, most businesses reported a strong resurgence in patronage in recent weeks. Contacts indicated high confidence that consumer spending will further expand over the next six months and that demand remains elevated.\nManufacturing and Other Business Activity\nManufacturing activity expanded at a robust pace in October and November. Growth in manufacturing over the past year has largely been attributable to durable goods producers. However, contacts at non-durable manufacturers reported an uptick in products shipped and new orders for goods. Expectations for growth over the next six months were near all-time highs across the manufacturing sector. Those expectations were supported by a significant booking of future orders, with several contacts across sectors noting that their business is booked out further than ever experienced previously.\nMost contacts attributed the backlogs in their businesses to both demand and supply factors. For example, growth in demand for electronic equipment, motor vehicles and construction projects drove strong demand for microchips and steel products above pre-pandemic levels. Supply disruptions in those markets added to the backlogs in deliveries, but contacts indicated that they are not the sole driver. Regarding steel, contacts were attentive to the new tariff rate quota system negotiated with the European Union and noted that it could lead to additional logistical disruptions and uncertainty when implemented early next year.\nCapital expenditures continued to rise at a robust rate across businesses. Some contacts noted that limited availability of vehicles and other heavy machinery are delaying some planned capital outlays. Several contacts indicated strong increases in demand for inventories of inputs to mitigate the consequences of ongoing disruptions, noting this runup is a strategic shift in how their specific supply chains are managed.\nReal Estate and Construction\nCommercial real estate owners reported declines in vacancy rates in the Tenth District as new leasing activity picked up in recent months. However, most respondents continue to expect vacancy rates to rise over the next six months. Although most contacts commented that access to credit for new development projects and acquisitions was unchanged, some noted shifts in sources of funding and changes to covenants required by lenders.\nConstruction on commercial real estate projects picked up slightly during the October and November, but expectations for future activity have declined steadily over the past year. Falling again in October and November, contacts now report expectations for only slight growth in construction over the next six months.\nBanking\nOverall loan demand increased modestly in recent weeks, but was mixed across categories. Commercial real estate loan demand increased modestly, with consumer lending and other commercial and industrial loan categories remaining stable. Bankers reported a slight decline in agriculture loan demand and in demand for residential real estate loans, consistent with seasonal patterns. Credit standards generally held steady. Bankers experienced modest improvement in loan quality compared to a year ago, although they anticipate a slight decline in loan quality over the next six months.\nEnergy\nTenth District energy activity continued to grow at a moderate rate through November. The number of active oil rigs increased in Oklahoma, though declined slightly in Wyoming compared to the previous survey period. Revenues and profit levels increased considerably from a year ago. Regional contacts continued to report tight credit and lending conditions, limiting near-term production growth, despite high commodity prices.\nPrices for oil and natural gas were within the average profitable price range for most firms operating across the District. Still, over half of firms did not expect U.S. oil production to return to pre-pandemic levels. Of those who expected U.S. oil production to recover fully, most expected it to rebound sometime in 2022. Wyoming recently shuttered its last underground coal mine, causing local losses of mining-related jobs. While the state still has several active surface mines, the closure is a further example of the secular decline in coal mining and production across Tenth District states.\nAgriculture\nEconomic conditions in the Tenth District's agricultural sector remained strong amid continued strength in commodity prices. The price of all major crops remained elevated and harvest estimates in November indicated that both corn and soybean production are expected to be at high levels across the District. Cattle prices increased modestly to above pre-pandemic levels in early November. With healthy conditions across the sector, farm real estate values increased sharply from a year ago. District contacts continued to express concerns about high input prices, yet farm income and credit conditions continued to improve and were expected to remain strong in the coming months.\nFor more information about District economic conditions visit: www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

/beige-book-reports/2021/2021-12-mi

"December 1, 2021\nSummary of Economic Activity\nThe Ninth District economy grew moderately since early October. Employment saw moderate growth, with labor availability holding back robust hiring demand. Wage pressures were strong, while price pressures increased moderately from elevated levels. Growth was noted in commercial and residential construction, commercial real estate, consumer spending, professional services, and manufacturing, while residential real estate fell. Ag conditions improved overall, though drought has negatively impacted certain areas and commodities. Business activity reports were mixed among minority- and women-owned businesses.\nEmployment and Wages\nEmployment grew moderately since the last report, with tight labor constraints impeding what would otherwise be a robust employment market. Job postings remained at exceptionally high levels across the District. Surveys showed that a large share of firms expected to increase future employment, with only a very small share expecting workforce cuts; many firms cited overworked staff as a motivating reason to hire more employees. However, surveys also showed that firms were having increased difficulty filling open positions, particularly for lower-skill jobs. Some large firms reported a decline in staff over the past three months, possibly tied to the federal vaccine mandate. Firms also reported very little net increase in job applications since the ending of pandemic-era unemployment programs.\nWage pressures remained strong. The frequency and size of wage increases have steadily increased. A survey of District firms showed that nearly one-quarter of firms raised wages by 5 percent or more over the past year, a notable increase from the previous quarter. A large majority of firms also said they were increasing wages for most positions and were increasing wages more than usual. A tourism firm in Michigan's Upper Peninsula reported raising wages more than 5 percent, noting that it was \"not possible to hire or retain employees at previous wages.\"\nWorker Experience\nLabor supply remained tight across the District. A workforce development professional working mainly with immigrant populations shared that workers in customer-facing jobs were \"no longer willing to deal with rude customers and difficult schedules\" and were leaving for better-paying jobs. Reportedly, some took jobs as warehouse workers, but others invested in microbusinesses such as food trucks and cleaning services. \"The pandemic has made people more comfortable with failure, workers want to feel productive, and they are taking risks,\" said another workforce contact. A nonprofit contact reported that immigrants in professional occupations have faced challenges remaining in a job, more so than getting hired, partly because of insufficient onboarding and difficulties penetrating the culture in a remote environment. Enrollment in nursing programs continued to drop, according to a health care professional in Minnesota, putting further pressure on supply of entry-level workers.\nPrices\nPrice pressures increased moderately from an elevated level since the previous report, as firms continued to pass on input cost increases to customers. More than a third of respondents to a survey of District businesses reported that nonlabor input costs were 10 percent higher than pre-pandemic levels; slightly fewer reported final prices increasing by more than 10 percent. Contacts reported steep, ongoing increases in freight and transportation costs, particularly for imported goods. Manufacturers reported increases for inputs, but particularly for electronic components and raw materials such as plastic resin. Home heating costs were forecasted to increase sharply this winter, as natural gas prices were expected to rise by more in the region than the national average.\nConsumer Spending\nConsumer spending grew modestly since the last report. Firms in accommodation and entertainment reported growth overall, but acknowledged that the Delta variant was negatively affecting sales. However, demand remains robust in some areas. Restaurants have reported robust sales for take-out and delivery meals. Same-store sales at a regional convenience chain have been higher and were expected to continue. Retailers reported missed sales due to supply chain problems and related inventory shortages. Vehicle sales dropped in October compared with a year earlier, thanks mostly to low inventory of new trucks and cars, which has also been a drag on trade-ins that drive used-car sales.\nProfessional Services\nProfessional services activity across the District grew moderately. Respondents to a recent business conditions survey expressed difficulties hiring, and the majority reported having increased salaries to attract talent. Businesses reported challenges hiring experienced communications, IT, and medical professionals. \"Staff is exhausted, patients are frustrated, and we're unable to attract doctors to the area,\" said a health care professional. Job openings in that sector have skyrocketed with vacancies across occupations.\nConstruction and Real Estate\nCommercial and residential construction grew moderately since the last report. Industry data showed that the value of construction starts this fall continued to trend higher. Firms reported good to very good project activity overall; some attributed lower activity to normal seasonal slowing. Contacts continued to report substantial challenges related to labor constraints, high materials prices, and supply chain disruptions. Firms also reported a slight increase in project cancellations compared with summer levels, and project delays continued to be a major problem.\nCommercial real estate rose moderately overall. Office vacancy rates remained elevated, and the Delta variant has slowed leasing momentum. Industrial space remained strong, and low multifamily vacancy rates held across the District despite significant new construction. Residential real estate was lower. Closed sales in October were consistently down by double digits in markets across the District.\nManufacturing\nDistrict manufacturing activity increased briskly since the previous report, though contacts were concerned about the ongoing effects of supply chain disruptions. A regional manufacturing index indicated increased activity in Minnesota, North Dakota, and South Dakota in October relative to the previous month. Participants at recent meetings with manufacturers generally reported strong recent revenue and new order trends, with several noting that their firms were having record years even amid input cost and availability challenges. An electrical equipment producer reported that it was planning significant capital investments in capacity to meet demand, which it reported was up by 30 percent over last year.\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions improved overall, though drought took a heavy toll on certain areas and commodities. Responses to a survey of agricultural lenders indicated increased farm income, as producers continued to benefit from strong commodity prices and government payments. Drought damage was not as bad as expected in general, though ranchers saw heavy losses, and damage to crops was much more severe in the western Dakotas and Montana's wheat-producing region. In other areas, though crop yields will decrease, timely rains for many were helpful, and higher crop prices appear to have more than offset the financial loss. Oil and gas exploration activity in North Dakota and Montana was stable since the previous report.\nMinority- and Women-Owned Business Enterprises\nBusiness activity reports were mixed among minority-and women-owned business enterprises (MWBEs) in the region, but there was a general sense of optimism. A nonprofit that serves minority and women entrepreneurs reported that 95 percent of microloan recipients survived the pandemic and remained in business. Forty percent of MWBE entrepreneurs who responded to a recent survey reported an increase in sales and revenue in the past three months; an equal share reported a decrease. Slightly more than half of respondents said they raised wages to attract workers. One reported raising wages to \"match rising prices at the pump and rent.\"\nFor more information on the Ninth District economy, visit: minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

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"December 1, 2021\nSummary of Economic Activity\nEconomic activity in the Fourth District accelerated somewhat in recent weeks after having decelerated over the summer and early fall. While most businesses indicated that demand for their goods and services remained solid, some suggested that persistent supply-side disruptions (and associated higher costs) led some customers to put off spending until availability of products improved or costs came down. For example, one auto dealer said that only customers who need to buy a car are doing so, while others who want one may be sitting on the sidelines. A key factor limiting capacity was the ongoing labor shortage. A few contacts reported that labor availability improved a little in recent weeks, but they were clearly in the minority. Moreover, even those who had seen an increase in applicants noted that the increase was not sufficient to meet their staffing needs. Wages and other input costs continued to rise in recent weeks, and a larger share of firms reported output price increases. Looking forward, contacts were generally more optimistic about demand in coming months than they were in the prior report, even as they expected shortages and higher costs to persist.\nEmployment and Wages\nStaffing levels continued to trend modestly higher in the District. Demand for labor was strong across industries, but a dearth of available workers constrained hiring. Many firms continued to say that they needed to hire additional workers to keep up with current demand but were unable to do so, a situation leading to flat and often falling staffing levels. Some firms, including retailers, restaurants, and hotels, curbed hours of service because of a lack of workers. On balance, contacts said that labor availability has changed little since our last report, and they did not expect it to change meaningfully in coming months. Several firms indicated that they were reluctant to mandate vaccines because doing so would likely disadvantage them in an already competitive labor market.\nReports of wage increases were more frequent in recent weeks amid those persistent hiring challenges. Nearly 70 percent of our contacts reported that wages had risen over the prior two months, and the increases were broad based across industries. While wage increases were most notable for entry-level positions, contacts suggested that pay was increasing across the wage scale. Moreover, firms were reportedly enhancing other benefits such as hiring and retention bonuses and flexible work arrangements to attract and retain workers.\nPrices\nNonlabor input costs continued to increase. Eighty percent of contacts reported higher nonlabor input costs over the prior two months, with the increases broad based across industries and inputs. As one logistics contact stated, \"Gas, electric, food, raw materials, products, everything is going [up].\" With broad-based supply disruption expected to persist into 2022, most contacts expected costs to continue rising in coming months. That said, a few contacts suggested that the availability of semiconductors, a key constraint in the production of many goods (including autos), had increased somewhat over the prior two months.\nMore firms reported higher selling prices since the last report. Approximately 65 percent of contacts said they increased prices over the prior two months, a share that has changed little over the past four reports. In most instances, firms suggested that they raised selling prices out of necessity to keep up with increased input costs. One restaurant owner said that she was trying to \"control every other aspect [she] can before raising prices.\" Several contacts who did not increase prices could not do so because they were bound by contracts. Some of these firms plan to include escalation clauses in the future.\nConsumer Spending\nReports suggested that consumer spending increased modestly during the reporting period. General merchandisers and apparel retailers said that demand for goods remained strong, and they noted solid early holiday season sales. Hoteliers and restaurateurs reported continued improvement in activity, and one hospitality contact said that weddings and conferences that had been rescheduled from last year were taking place. Auto dealers reported a dip in sales despite generally strong demand as tight inventories and higher prices deterred buyers. Contacts expected a favorable holiday shopping season and were optimistic that nonauto consumer spending would continue to increase in the coming months. However, auto dealers suggested that sales will remain weak until inventory levels recover, with some expecting supply bottlenecks to begin to ease as early as next quarter.\nManufacturing\nDemand for manufactured goods remained solid, but the ability to meet that demand was hampered by continued supply chain disruptions. That said, some contacts reported that they saw increased demand for their products because their competitors were out of stock or had changed their product offerings. Several manufacturers noted sustained weakness in demand from auto-related customers as key inputs to that industry (including semiconductors) remained in short supply. Looking ahead, contacts were optimistic that activity would remain strong, and some noted that the passing of the infrastructure bill and an increase in auto production could boost demand.\nReal Estate and Construction\nHomebuilders and residential realtors reported that housing demand remained strong despite persistent supply chain disruptions that have further increased lead times for new homes. One homebuilder attributed the heightened demand to the desire of individuals to lock in low interest rates. Going forward, contacts anticipated demand will remain elevated, though homebuilders expected supply constrains will continue to hinder construction activity.\nDemand for nonresidential construction and real estate continued to rebound. Industrial and retail leasing activity remained strong, and an increasing number of individuals returning to in-person work further improved demand for office space. Nonresidential construction contacts also indicated that demand remained strong, though persistent supply chain disruptions led to further increases in lead times. Overall, contacts were optimistic that demand would remain strong. However, a few construction contacts raised concern that the recently signed infrastructure bill could put further pressure on supply chains.\nFinancial Services\nLoan demand increased moderately. Contacts reported some growth in business lending, especially for commercial real estate loans, and many bankers reported a stronger loan pipeline. Contacts noted that demand for auto loans and mortgages was stable to slightly down as higher selling prices and limited inventories in both markets dampened activity. Lenders said that delinquency rates for consumer and commercial loans were still low and that core deposits increased. Looking ahead, bankers were optimistic that business lending would continue to improve as pipelines strengthen.\nProfessional and Business Services\nContacts in professional and business services reported that demand remained robust. Firms attributed the strong demand to the overall health of the economy that has increased companies' desire to move forward with projects and acquisitions. One law firm noted that their clients' economic outlook remained optimistic and that challenges brought on by supply chain disruptions and labor shortages have been outweighed by favorable business opportunities. Going forward, demand is expected to remain strong as firms continue to ramp up business activity and actions from the federal government related to vaccine mandates and the infrastructure bill further increase the need for compliance and engineering solutions.\nFreight\nDemand for freight and logistics services remained strong. A regional airport relayed that cargo volumes were up more than 20 percent year over year. Contacts reported that the availability of drivers remained limited. More often, equipment shortages also made it difficult to expand capacity. Because it was difficult to add capacity, contacts expected that demand in the coming months would continue to be stronger than the sector's ability to meet it.\nFor more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nDecember 1, 2021\nThis report was prepared at the Federal Reserve Bank of Chicago based on information collected on or before November 19, 2021. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic activity grew at a modest to moderate pace in most Federal Reserve Districts during October and early November. Several Districts noted that despite strong demand, growth was constrained by supply chain disruptions and labor shortages. Consumer spending increased modestly; low inventories held back sales of some items, notably light vehicles. Leisure and hospitality activity picked up in most Districts as the spread of the Delta variant ebbed in many areas. Construction activity generally increased but was held back by scarce materials and labor. Nonresidential real estate activity increased widely, while residential real estate activity grew in some Districts but declined in others. Manufacturing growth was solid across Districts, though materials and labor shortages limited expansion. High freight volumes continued to strain distribution systems. Energy activity was generally higher, growth in professional and business services varied widely, and demand for education and health services was largely unchanged. Loan demand increased in almost all Districts, though some reported declines in residential mortgages. Agriculture saw improved financial conditions overall and rising land values. The outlook for overall activity remained positive in most Districts, but some noted uncertainty about when supply chain and labor supply challenges would ease.\nEmployment and Wages\nEmployment growth ranged from modest to strong across Federal Reserve Districts. Contacts reported robust demand for labor but persistent difficulty in hiring and retaining employees. Leisure and hospitality and manufacturing contacts reported an uptick in employment, but many were still limiting operating hours due to a lack of workers. Contacts in several other sectors also noted labor-related constraints on meeting demand. Childcare, retirements, and COVID safety concerns were widely cited as sources that limited labor supply. Many Districts noted concerns that the federal vaccination mandate could exacerbate existing hiring difficulties. Nearly all Districts reported robust wage growth. Hiring struggles and elevated turnover rates led businesses to raise wages and offer other incentives, such as bonuses and more flexible working arrangements.\nPrices\nPrices rose at a moderate to robust pace, with price hikes widespread across sectors of the economy. There were wide-ranging input cost increases stemming from strong demand for raw materials, logistical challenges, and labor market tightness. But wider availability of some inputs, notably semiconductors and certain steel products, led to easing of some price pressures. Strong demand generally allowed firms to raise prices with little pushback, though contractual obligations held back some firms from increasing prices.\nHighlights by Federal Reserve District\nBoston\nBusiness activity in the First District expanded at a modest pace on balance, but results were mixed. Sales of single-family homes softened further relative to their frenzied recent pace. Labor demand was robust but hiring activity was modest in light of labor scarcity. Price increases were moderate. The outlook was mostly positive but marked by uncertainty.\nNew York\nThe regional economy continued to grow at a modest pace in recent weeks, restrained by intensifying supply disruptions and labor shortages. Employment and wages increased, and businesses noted ongoing widespread escalation in both input costs and selling prices. Nevertheless, contacts continued to express optimism about future business prospects.\nPhiladelphia\nBusiness activity grew moderately during the current Beige Book period\u2014faster than the prior period\u2014but remained below pre-pandemic levels. Vaccination rates rose slightly, but COVID-19 cases also resumed rising, while the vaccine mandate hit a wall with some workers. Overall, employment growth picked up to a moderate pace, but wage and price growth picked up, and sharply.\nCleveland\nThe District's expansion picked up a bit after slowing during the summer and early fall. Contacts reported that supply challenges continued to limit sales and output growth. Labor availability changed little recently, leaving many firms with open positions and unsatisfied demand. Ongoing shortages of inputs and labor put further up-ward pressure on costs, and more firms reported raising output prices over the past two months.\nRichmond\nThe regional economy continued to expand at a modest rate. Growth continues to be constrained by labor shortages and supply chain issues. Firms faced challenges filling open positions as well as increased turnover, leading to wage increases for new and existing workers. Price growth further intensified recently from an already elevated rate.\nAtlanta\nEconomic activity expanded at a moderate pace. Labor markets remained tight and wage pressures grew. Nonlabor costs rose. Retail sales strengthened. Domestic leisure travel remained solid. Residential real estate demand was strong. Commercial real estate conditions improved. Manufacturing activity was robust. Banking conditions were stable.\nChicago\nEconomic activity increased moderately. Employment and business spending grew moderately; consumer spending and manufacturing were up modestly; and construction and real estate was flat. Wages and prices increased strongly, while financial conditions improved slightly. A larger than expected corn and soybean harvest pushed up anticipated 2021 farm income.\nSt. Louis\nEconomic conditions have shown modest improvement since our previous report. Contacts reported continued difficulties hiring to meet increased consumer demand. Wage increases and supply chain shortages have led to price increases across several sectors. The overall outlook is optimistic due to anticipated strong demand.\nMinneapolis\nThe District economy saw moderate growth despite continued challenges related to labor, higher prices, and supply chains. Prices rose as firms passed higher input costs to consumers. Employment grew moderately, but tight labor precluded even stronger gains. Consumer demand grew, but the spread of the Delta variant slowed some activity. Ag conditions improved, but drought remained problematic. Minority- and women-owned business enterprises saw mixed activity.\nKansas City\nEconomic activity continued to grow at a moderate pace. High expectations for future growth were supported by significant increases in orders for goods and services in the future. Several contacts noted that their business is booked out further than ever previously experienced. Most contacts attributed the backlogs in their businesses to both elevated demand and ongoing supply factors. Amid supply disruptions, desired inventory levels rose.\nDallas\nThe District economy expanded at a solid pace, though supply-chain bottlenecks and staffing challenges remained headwinds. Employment gains were robust, and wage and price growth continued to be highly elevated. Housing and industrial demand remained solid, and office leasing ticked up. Outlooks were optimistic but uncertainty crept higher due to worsening supply-side constraints.\nSan Francisco\nEconomic activity strengthened moderately over the reporting period. Employment rose at a moderate pace, while overall conditions in the labor market remained tight. Wages and price levels climbed significantly. Retail sales expanded markedly, while conditions in the agriculture and manufacturing sectors strengthened further. Lending activity increased modestly, and residential construction expanded at a brisk pace.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nDecember 1, 2021\nSummary of Economic Activity\nThe Second District economy continued to expand at a modest pace, with contacts in most sectors continuing to express optimism about the near-term outlook. Both wages and prices have continued to accelerate, as supply disruptions and labor shortages have intensified. The job market has remained exceptionally tight, with businesses continuing to add staff and many looking to hire more workers. Consumer spending was steady, with sales of durable goods continuing to be restrained by severe supply shortages. The home sales market strengthened further, while apartment rental markets have continued to rebound; office markets have been stable. Both residential and commercial construction activity increased modestly, despite shortages of materials. Finally, contacts in the broad finance sector noted some pickup in activity, while regional banks reported some improvement in delinquency rates and higher loan demand from commercial customers.\nEmployment and Wages\nEmployment has continued to increase modestly, restrained by ongoing labor shortages. Businesses reported widespread ongoing difficulty in both hiring new workers and retaining existing staff, as many employees are quitting to work for a different company or look for a new job. A New York City employment agency reported a marked pickup in job openings, particularly at small to medium sized firms, but a severe shortage of candidates. Labor shortages persist across a wide range of occupations but particularly in technology, sales, and human resources. Among the reasons cited for this shortage are ongoing COVID concerns, child care, and a reduced urgency to work due to fiscal support and accumulated savings.\nOf note, leisure & hospitality businesses reported widespread increases in staffing levels, and firms in the manufacturing and distribution sectors also report fairly strong hiring. Businesses in most sectors also expect to ramp up staffing levels in the months ahead.\nWage escalation has been prevalent across all major industry sectors but particularly widespread among leisure & hospitality firms. An employment agency in upstate New York reported rapid escalation in wages and benefits, as well as increasing use of perks to attract workers. Looking ahead, businesses across all major sectors foresee continued widespread wage hikes.\nPrices\nA large and growing proportion of firms reported escalation in input prices\u2014particularly in the manufacturing, distribution, and construction sectors. A large majority of contacts in all sectors continue to anticipate rising input prices in the months ahead.\nHikes in businesses' selling prices have also grown increasingly widespread\u2014most notably among manufacturers, wholesalers, retailers, and construction firms. Retailers reported more widespread price hikes than at any time in almost a decade. A majority of businesses in most sectors plan to raise their selling prices in the months ahead.\nConsumer Spending\nConsumer spending has been mixed but fairly steady overall in the latest reporting period. Non-auto retailers reported steady to modestly higher sales in October and early November, and they were cautiously optimistic about the upcoming holiday season. Supply disruptions have caused scattered stockouts, particularly for furniture. One retail chain noted that New York City stores have seen some improvement due to the gradual return of office workers and tourists. While in-store business has remained well below normal levels, strong on-line sales in the metro area have boosted total business above pre-pandemic levels. Consumer confidence among New York State residents rebounded strongly in October, after dropping in September.\nNew vehicle sales continued to weaken, mostly due to a lack of supply but also some drop off in buyer traffic. Many dealers have little or no inventory and expect this to continue through at least mid-2022 due to the microchip shortage, as well as general supply chain disruptions. Dealers noted that almost all cars coming off the production line have already been sold. Sales of used vehicles have picked up a bit due to a modest increase in inventory and continued robust demand.\nManufacturing and Distribution\nManufacturing and transportation & warehousing firms saw continued solid growth in recent weeks, while wholesalers noted a pickup in growth to a brisk pace. However, many businesses in these sectors complained that ongoing labor shortages and supply disruptions are increasingly impeding business. Still, manufacturers and wholesalers continued to express fairly widespread optimism about the near-term outlook, while those in transportation & warehousing were moderately optimistic.\nServices\nService industry activity continued to expand at a modest pace in recent weeks. New York City subway ridership has increased steadily, though it is still about 40 percent below comparable 2019 levels. Leisure & hospitality businesses noted a pickup in growth. Contacts in the professional & business services and information industries reported more modest growth, while education & health businesses indicated little change in business. Service firms generally remained optimistic.\nTourism has continued to increase, helped by a series of events, most notably the New York City marathon. Weekend hotel occupancy rates have climbed above 80 percent, even as more hotels have re-opened, approaching pre-pandemic levels; mid-week rates have risen but remain well below normal at 50-60 percent. Increased occupancy, along with a gradual rebound in room rates, have boosted revenue. The re-opening of borders is expected to further buoy New York City's hospitality and related sectors, as well as bring some influx of Canadian visitors, which would benefit parts of upstate New York.\nReal Estate and Construction\nHousing markets have continued to strengthen across most of the District since the last report. Home sales activity picked up noticeably across New York City, reaching its highest level in decades, while the inventory of unsold homes receded further. Inventory levels remain somewhat above normal in Manhattan but are at exceptionally low levels across the rest of the District, where they have continued to restrain sales activity and push up prices. In Manhattan, home prices continued to climb, particularly at the high end of the market, where they now exceed pre-pandemic levels.\nNew York City's residential rental market has strengthened considerably in recent weeks, particularly in Manhattan where rents and occupancy rates have rebounded to around pre-pandemic levels\u2014exceeding them at the higher end of the market but still lagging at the lower end.\nCommercial real estate markets have been steady, on balance, across the District. In New York City, office rents and availability rates were little changed in recent weeks, and leasing activity has picked up. Across the rest of the District, office vacancy rates edged up in most areas, while rents were generally steady. The industrial market continued to strengthen, with vacancy rates steady to down slightly near record lows and rents continuing to escalate. The retail leasing market has shown scattered signs of a pickup.\nBoth multi-family residential and non-residential construction starts were steady, though there continues to be a good deal of ongoing construction. However, some industry contacts reported that activity slowed further in October, partly due to normal seasonal effects but also reflecting worker shortages and problems acquiring construction materials. Moreover, construction sector contacts have grown more pessimistic about prospects for the months ahead. A good deal of new apartment development (rentals and condos) is currently in the pipeline.\nBanking and Finance\nBusinesses in the broad finance sector indicated that activity has picked up modestly and were generally optimistic about the near-term outlook. Small to medium-sized banks across the District reported stronger demand for commercial mortgages and commercial & industrial loans but steady demand from households. Refinancing activity remained unchanged, on net. Credit standards were reported as unchanged across all categories. Loan spreads narrowed for consumer and commercial loans, but they widened for residential mortgages. Delinquency rates improved across all categories. Finally, bankers reported some reduction in leniency for consumer and commercial loan borrowers.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"December 1, 2021\nSummary of Economic Activity\nEconomic activity in the Seventh District increased moderately in October and early November, and contacts expected a similar pace of growth over the coming months. Labor and materials supply constraints as well as the spread of COVID-19 continued to weigh on the expansion. Employment and business spending grew moderately; consumer spending and manufacturing were up modestly; and construction and real estate was flat. Wages and prices increased strongly, while financial conditions improved slightly. A larger than expected corn and soybean harvest pushed up anticipated 2021 farm income.\nEmployment and Wages\nEmployment increased at a moderate pace over the reporting period, and contacts expected a similar pace of growth over the next 12 months. Contacts across sectors again reported difficulty in finding workers at all skill levels. Many businesses continued to limit operating hours because of labor challenges, especially in the restaurant, retail, and manufacturing sectors. In addition, a few contacts in the professional services sector said labor constraints were slowing the completion of existing projects and delaying the start of new ones. Contacts pointed to childcare issues, school quarantines, retirements, and health safety concerns as factors limiting labor supply. There were also a few reports of workers quitting jobs to avoid vaccination requirements. The pandemic caused some companies to further delay plans to return to in-person work, and there were some reports of business closures after COVID-19 exposures forced workers to quarantine. Overall, wage and benefit costs increased robustly. A scarcity of applicants for open positions led numerous contacts to raise wage offers, yet not all were successful in filling open positions. With starting wages rising, many firms were boosting pay for existing workers in order to retain them. In addition, turnover rates were higher than usual.\nPrices\nOverall, prices rose rapidly in October and early November, and contacts expected price increases to stay at a strong pace over the next 12 months. There were large increases in producer prices, driven by pass-through of higher materials, energy, labor, and transportation costs. However, contacts noted that some materials prices, particularly for lumber and certain steel products, had stabilized after very large increases earlier in the year. Consumer prices moved up robustly overall. Contacts pointed to solid demand, limited inventories, increased costs, and a greater ability to pass on cost increases to customers as sources of higher consumer prices.\nConsumer Spending\nConsumer spending was up modestly over the reporting period from an already high level. Spending on leisure and hospitality declined some, notably at hotels, and especially in areas affected by convention cancelations. Restaurant sales were little changed. Nonauto retail sales increased moderately. Halloween-related sales were noticeably stronger than typical years. Contacts indicated that demand for furniture and electronics remained solid, though appliance and home supply sales were constrained by availability and prices. Sales at discount stores increased significantly, and spending at department stores was stronger than expected, especially for jewelry, apparel, and accessories. Grocery sales volumes were flat, but at a high level. After adjusting for inflation, most forecasts expect holiday spending to increase modestly versus last year. Light vehicle sales were little changed in recent weeks, as inventories remained extremely low. Dealer profit margins remained above their long run averages.\nBusiness Spending\nBusiness spending increased moderately in October and early November. Retail inventories remained lean in many sectors due to ongoing supply chain and logistics challenges, and contacts expected the issues to continue into the second half of 2022. In manufacturing, for-sale inventories rose slightly but were still tight, and there were shortages of a wide range of inputs including certain metals, chemicals, resins, foam, adhesives, pallets, paper, and electrical components. Demand for transportation services remained elevated, with many contacts reporting continued domestic and international shipping delays and high cargo and freight rates. Capital expenditures increased moderately, and contacts expected a similar pace of expansion over the next twelve months. Lead times remained long for some types of equipment. Commercial energy consumption decreased slightly, particularly for smaller establishments, while residential energy consumption increased slightly.\nConstruction and Real Estate\nConstruction and real estate activity was similar to the previous reporting period. Residential construction was unchanged. Builders indicated that demand was solid, but material and labor shortages continued to limit activity. Multifamily construction and redevelopment continued at high levels. Residential real estate activity was steady, and prices and rents moved up slightly. Nonresidential construction was mixed, and prices increased modestly. As with residential construction, materials and labor supply challenges held back growth in nonresidential construction. Commercial real estate activity was little changed on net. Industrial space remained in high demand. A contact based in southeast Michigan reported that many multifamily transactions were being completed despite rising costs. Overall, commercial real estate sales prices increased slightly, but rents were little changed. Vacancy rates were little changed as well.\nManufacturing\nManufacturing production grew modestly in October and early November, and contacts reported high backlogs of unfilled orders. Manufacturers with strong demand were generally able to increase output, though ongoing labor and logistical challenges held back production gains for many. Auto production increased slightly, remaining at low levels as assemblers and suppliers were constrained by the ongoing shortage of microchips and other materials. Heavy truck demand was strong, driving down inventories and driving up prices for used trucks. Contacts reported little change in steel demand, which stayed at a high level. Demand for steel from the automotive sector was low but picked up some. Building materials demand fell slightly yet continued to be strong, supported by solid orders from commercial construction.\nBanking and Finance\nFinancial conditions improved slightly over the reporting period. Business loan demand increased somewhat, with contacts reporting an increase in commercial loan demand for acquisition financing and lines of credit to cover higher inventory costs. Construction and multifamily financing also rose. Business loan quality increased slightly, while loan standards loosened. In consumer markets, loan demand was slightly higher overall. Contacts highlighted continued high levels of demand for auto financing, but mortgage activity weakened some from a solid level. Loan quality increased slightly, while standards remained unchanged on balance over the reporting period.\nAgriculture\nExpectations for farm incomes in 2021 moved up, driven by stronger than anticipated corn and soybean yields. Contacts said the soybean harvest would likely set a District record, and the corn harvest would likely be the third largest ever. Despite a sizeable harvest, corn prices moved higher during the reporting period. Soybean prices languished but were still above year-ago levels. Farmers were reportedly purchasing inputs for 2022 ahead of their normal schedules because of concerns about future prices and availability of fuels, chemicals, fertilizers, and seeds. Prices for hogs and eggs edged lower. Cattle and dairy price movements were mixed. Agricultural land values moved sharply higher.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"December 1, 2021\nSummary of Economic Activity\nOn balance, business activity in the Third District grew moderately\u2014a faster pace than during the prior Beige Book period. Still, activity in most sectors had not yet returned to pre-pandemic levels. The rate of all persons being fully vaccinated against COVID-19 rose to about 64 percent. However, after falling through October, COVID-19 cases are rising again in November, with the highest incidence rates in rural areas. The earlier ability of large professional firms imposing vaccine mandates is now being offset by challenges faced at firms in other sectors in which the workforce is less amenable. There are ongoing reports of supply chain disruptions and labor shortages, both of which have taken a toll. While net employment growth picked up to a moderate pace, prices and wages have risen sharply. Still, optimism was more widespread, with nearly three-fourths of the nonmanufacturers and close to one-half of the manufacturers expressing positive expectations for continued economic growth over the next six months.\nEmployment and Wages\nEmployment grew moderately, with service sectors providing the lift from the more modest pace of growth last period. The share of firms reporting employment increases rose to one-fourth of the nonmanufacturing firms and held steady at one-third among the manufacturers. Overall, one-third of the nonmanufacturers reported a rise in average hours worked\u2014an increase since last period that converged with that of manufacturers.\nContacts noted an uptick in workers returning to the hospitality sector. However, most staffing firms and other employers continued to report significant difficulty attracting and retaining labor. Moreover, several contacts noted that baby boomers were leaving jobs and selling businesses to retire early \u2013 a trend that was due (1957 marked the peak year for births among baby boomers; those babies turn 65 next year) but has accelerated because of pandemic burnout.\nThe vaccine mandate has been met with varying levels of acceptance across the labor force. Many large employers in professional services, health care, and other similar sectors have described relatively high cooperation with those mandates, especially in urban areas. However, other large employers in manufacturing and retail, including staffing firms that service those sectors, described vaccination rates of just 40 percent among their workforces and dire expectations for imposing the mandate or conducting weekly testing.\nWages rose substantially. The share of nonmanufacturing firms reporting higher wage and benefit costs per employee climbed to 60 percent. No firms reported lower compensation. Contacts reported significant salary increases for many professional jobs and also noted that job candidates would arrive for interviews with several offers in hand. Some speculate that remote work may be creating competition for workers living in outlying areas between jobs based in their areas and those in New York City and other high-cost areas. Since the prior quarter, firms reported a significantly higher expectation of the one-year-ahead change in compensation cost per worker, with a median of 5.8 percent.\nPrices\nOn balance, prices rose sharply over the period. The share of manufacturers reporting higher prices for factor inputs climbed above 80 percent, while those receiving higher prices for their own products rose to 65 percent. The share of nonmanufacturers reporting higher prices for their inputs rose to 66 percent, while the share receiving higher prices from consumers for their own goods and services exceeded 40 percent.\nFrom our quarterly survey of firm price expectations, contacts reported further increases in the actual prices received for their own goods and services over the past year\u2014the trimmed mean for actual price changes was 8.6 percent among manufacturers and 4.8 percent for nonmanufacturers. Actual price changes have risen steadily since the fourth quarter of 2020, when contacts reported increases of 1.3 percent and 1.4 percent for manufacturers and nonmanufacturers, respectively.\nLooking ahead one year, the prices that firms anticipate receiving also rose further\u2014the expected rate of growth was 6.8 percent among manufacturers and 5.9 percent for nonmanufacturers. However, for manufacturers this quarter marked the first\u2014since prices began rising significantly\u2014in which the expected future price increase was lower than the prior year's change.\nManufacturing\nOn average, manufacturing activity grew robustly\u2014an increase over the prior moderate pace. However, the strongest net increases were for new orders, while shipments merely edged higher. Not surprisingly, net backlogs and delivery times also rose and were more widespread. Net inventories dipped.\nConsumer Spending\nRetailers (nonauto) and restaurateurs reported modest growth. Contacts noted that ongoing supply chain disruptions and labor shortages continued to constrain growth.\nAuto sales held somewhat steady at low levels, as supply chain issues continued to plague auto dealers. According to contacts, manufacturers are shipping so few new cars that most are presold and spend little time on dealer lots. Used cars are also becoming scarce.\nTourism resumed a modest pace of growth as the Delta variant wave ebbed. Contacts reported that leisure travel remained relatively robust, while business trips picked up again, especially among small and medium-sized firms.\nNonfinancial Services\nOn balance, nonmanufacturing activity grew moderately\u2014a faster pace than during the prior period. The share of firms reporting increases in sales rose significantly to nearly two-thirds.\nFinancial Services\nThe volume of bank lending (excluding credit cards) edged lower during the period (not seasonally adjusted); during the same period in 2019, by contrast, loan volume growth was flat. Home mortgages grew modestly; however, commercial and industrial loans continued to contract significantly, while home equity lines and other consumer loans fell modestly. Auto lending and commercial real estate were relatively flat. Credit card volumes grew modestly\u2014an improvement over the slight decline during the same period in 2019.\nBankers, accountants, and bankruptcy attorneys have begun to note a small uptick in some delinquencies, but at very low levels. However, several contacts noted that homeowners who had faced untenable levels of forbearance debt exited their mortgages by selling without a foreclosure and renting elsewhere. The significant increase in home prices has enabled a more graceful exit from debt than during the Great Recession, when many homeowners were underwater on their mortgages. One accountant reported that three major clients sold their multimillion-dollar businesses and retired\u2014citing fatigue stemming from uncertainty.\nReal Estate and Construction\nHomebuilders noted little change. Demand remains strong, but sales are constrained by higher prices and longer delivery times; construction activity remains busy, but efficiency is challenged by supply constraints and contractor availability. One contact noted that the once critical task of scheduling has now become the critical task of rescheduling.\nExisting home sales increased modestly as new listings improved. Sales continued to feature multiple offers and cash deals, but inspections were not waived as often. On average, closing prices remained above asking prices in many markets.\nConstruction activity for nonresidential projects held steady. According to contacts, industrial/warehouse and institutional projects remained strong, while multifamily projects continue to sell despite some concerns. However, the office market is uncertain and quiet. Leasing activity was also strong for industrial and lab space, while demand for office space continued to weaken. The office sublease market stayed active, and many lease renewals requested less space.\nFor more information about District economic conditions visit: www.philadelphiafed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

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"December 1, 2021\nSummary of Economic Activity\nThe Fifth District economy continued to grow at a modest pace since our previous report. Manufacturing activity picked up modestly and lead times lengthened but producers struggled to keep up with demand due to supply and labor shortages. Ports and trucking companies saw modest to moderate increases in volumes from already high levels, and they had difficulty meeting demand due to capacity and labor constraints. Retail demand remained strong and stores continued to report inventory challenges and staffing shortages. Travel and tourism rose moderately, lifted by an increase in business and group travel. Residential real estate activity softened modestly but remained strong as prices held steady and homes sold quickly. Inventory remained low but increased slightly. Commercial real estate leasing rose modestly amid flat to slightly rising rental rates. Financial institutions reported modest loan growth, overall, as commercial real estate and business lending increased modestly while mortgage lending slowed slightly. On balance, nonfinancial services firms indicated modest growth. Employment rose moderately and demand remained strong. There were widespread reports of difficulty finding and retaining workers at all skill levels, leading to a moderate increase in wages. Prices increased further in recent weeks and remained elevated on a year-over-year basis.\nEmployment and Wages\nTotal employment in the Fifth District increased moderately in recent weeks and demand for workers remained robust. Contacts from across sectors of the economy reported difficulties finding workers at all skill levels. Many also reported difficulties retaining workers and faced increased turnover. Several employers expressed concerns that their current workforce was being overworked. Some contacts had success recruiting young people into their training and apprenticeship programs while others were able to find workers more easily for fully remote positions. Wages continued to rise at a moderate rate as employers increased pay for both new and existing workers.\nPrices\nPrice growth intensified slightly in recent weeks from an already high rate. According to our surveys, average prices were up nearly five percent compared to last year in the service sector. Manufacturers reported even stronger growth in selling prices, above nine percent. In both sectors, selling prices rose as firms were able to pass along at least some of their rising costs for raw materials, intermediate and finished goods, and labor. Several contacts noted that strong demand, shortages of inputs, and elevated shipping and transportation costs contributed to input price growth.\nManufacturing\nFifth District manufacturers reported a modest increase in shipments and new orders in recent weeks. However, lead times continued to lengthen as inventories remained low. Manufacturers struggled to find shipping for goods, and production was constrained by shortages of staff and inputs. A furniture manufacturer reported record shipments in recent weeks but struggled with machinery breaking down from overuse. Multiple contacts reported that long lead times for machinery parts limited production. Manufacturers saw high revenue but reported shrinking profit margins resulting from increased costs of materials, high shipping rates, and rising wages.\nPorts and Transportation\nFifth District ports saw moderate growth since our last report, as some handled record-breaking volumes. Import volumes drove growth, but export volumes rose as well. Imports of furniture, apparel, and other consumer goods were especially strong, as were agricultural exports. However, both imports and exports of autos were weak. Shortages of transportation equipment and warehouse space led imports to dwell at the ports for longer times, causing congestion. Contacts noted that many empty containers were being shipped back to Asia, before they could be loaded with exports as ocean carriers could get higher rates for import cargos.\nDemand for trucking in the Fifth District increased modestly from already high levels in recent weeks. Contacts reported turning away business because of shortages of drivers and equipment. Volumes were high across most goods in both the industrial and retail sectors. Delays in getting new trucks led to companies to run old ones longer, leading to increased need for repairs, which, in turn, were delayed by long lead times for parts. One contact expected this issue to get worse, reporting that suppliers are not taking orders for next year because they are unsure what they will be able to produce.\nRetail, Travel, and Tourism\nDemand for retail in the Fifth District held fairly steady at high levels. Customer traffic was strong, but low inventories limited sales. Inventories of automobiles continued to shrink, but dealers saw strong profits because of high prices of vehicles. Retailers ordered goods early to allow time for inventories to arrive. Some contacts reported swiching from ocean to air transport for goods from overseas, which was more costly but helped to replenish inventories. Many retailers limited operating hours because of staffing shortages, and businesses invested in automation where possible.\nTravel and tourism in the Fifth District increased moderately since our last report. Contacts reported seeing more business and group travel than they had since the beginning of the pandemic, and air travel increased in many areas. Hotel occupancy and rates strengthened, but hotels limited the number of rooms offered and restricted services because of staffing shortages. A resort reported staggering services and activities offered throughout the week in order to operate with fewer staff. Restaurants saw strong demand but limited hours because of lack of staffing and implemented limited menu choices because of supply chain disruptions.\nReal Estate and Construction\nDemand for Fifth District homes softened modestly in recent weeks, but remained strong. Inventories remained low but increased slightly. Prices were little changed, and realtors noted homes were still getting multiple offers, but fewer than in the past year. Average days on the market increased but remained low. Realtors noted that buyers are increasingly requesting inspections and offering smaller deposits, but many continue to buy homes sight-unseen. One contact added that buyers were increasingly willing to purchase homes in urban areas. Builders noted that long lead times for materials and appliances were slowing construction and delaying the availability of new homes.\nCommercial real estate leasing in the Fifth District increased modestly in recent weeks. Office leasing improved slightly, but some businesses looked to downsize. Incentives and concessions increased, but rental rates for office space held steady. Companies saw an increase in retail leasing, particularly for restaurants and services, driving rental rates up and vacancies down. Contacts noted that vacated retail spaces were quickly occupied by new businesses. Demand for industrial space remained strong and continued to rise. Multifamily leasing remained strong, and contacts noted increasing multifamily construction.\nBanking and Finance\nLoan growth was modest, overall, for this period due mainly to higher than normal credit payoffs. On balance, banks indicated a slight increase in demand for commercial real estate and business loans, and a slower pace of mortgage loan growth. Direct auto lending was almost nonexistent due to a lack of inventory on car dealer lots. Most financial institutions stated that deposits continued to grow moderately despite a further reduction in rates on interest-bearing accounts. Credit quality remained good, with a few respondents noting that delinquency rates continue to decline to well below pre-COVID levels.\nNonfinancial Services\nDemand and sales for nonfinancial services rose modestly in recent weeks. Firms engaged in mechanical repair services, such as automobile, elevator, and manufacturing equipment repair saw strong demand. Professional and legal services firms reported steady demand, overall. Health services providers saw continued demand for both COVID and non-COVID related services. For example, a behavioral health practice reported increasing demand and continued to provide services virtually. A North Carolina community college president noted that while enrollment remained below pre-pandemic levels, female and Latinx enrollment was up.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

/beige-book-reports/2021/2021-12-at

"December 1, 2021\nSummary of Economic Activity\nEconomic activity in the Sixth District grew at a moderate pace from October through mid-November. Demand for labor remained strong amid a tight market. Reports of wage increases were pervasive. Nonlabor costs continued to rise, and pricing power strengthened. The pace of retail sales was robust; auto sales, however, remained challenged due to supply chain constraints. Strength in domestic leisure travel activity persisted, while business travel remained soft. Residential real estate sales increased even as mortgage interest rates rose. Commercial real estate conditions improved. Manufacturing activity was solid, though supply chain disruptions hindered production somewhat. Conditions at financial institutions were stable, and loan demand improved.\nEmployment and Wages\nDemand for labor remained strong over the reporting period, as the extremely tight labor supply persisted. Turnover rates rose as employees were lured away by competing firms offering significant wage increases and greater flexibility. Several firms lessened educational or work experience requirements, and one noted they are considering hiring \"vocational graduates from the prison system.\" A trucking company reported an easing of requirements for CDL drivers by covering more routes with smaller box trucks or pick-up trucks pulling trailers. Some large manufacturers lent workers to component suppliers to relieve labor-related bottlenecks. A technical college reported that there remains a disconnect for many students between the coursework they are taking and the skills needed by employers; too few are pursuing careers in high-demand occupations such as advanced manufacturing, skilled trades, construction, aviation, and automotive.\nUpward pressure on wages to attract and retain talent remained relatively widespread. Several contacts mentioned that labor costs were already being passed along to consumers with little resistance, while others said plans were underway to do so. Many contacts noted that containing labor costs is a priority.\nPrices\nNonlabor costs continued to increase, and inputs such as raw materials, the availability of which remained exacerbated by supply chain disruptions, rose significantly. Several contacts reported that costs of freight and construction materials increased multiple times over the last year. Pricing power was strong, though contract negotiations were resulting in shorter terms. Most contacts expect cost pressures to ease steadily over 2022 but remain above pre-pandemic levels. The\u202fAtlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs were relatively unchanged in November at 3.6 percent.\u202fYear-ahead expectations increased to 3.3 percent in November, up from 3.1 percent in October. Both measures have increased sharply over the last nine months.\nConsumer Spending and Tourism\nDistrict retailers reported strong consumer demand and expectations for\u202frobust holiday sales.\u202fSome contacts with large bases of lower-income consumers cautioned\u202fthat the\u202fdrawing down of excess savings as fiscal supports expire could result in\u202fan eventual\u202fsoftening of demand\u202famong these consumers. Automotive dealer inventories remained challenged by supply chain issues; however, some manufacturers have excluded certain add-on features to expedite the delivery of vehicles to market.\nWhile activity at limited-service hotels remained strong, contacts noted that a lack of available labor limited capacity and the ability to operate at pre-pandemic levels. Many contacts described the robust level of domestic leisure activity as pent-up demand that will\u202fnormalize\u202fover the next 24 months. Business travel and convention bookings remained well below pre-COVID levels, but contacts expect activity to pick up in\u202fthe first half of 2022.\nConstruction and Real Estate\nAlthough still strong, housing demand moderated further from the record highs experienced over the past year. Nonetheless, the recent uptick in mortgage interest rates led to an improvement in residential sales, spurred by homebuyers' expectations that interest rates will rise further. On a year-over-year basis, home prices increased sharply in markets like Atlanta, Nashville, and central and south Florida. Affordability contracted further throughout the District. Housing starts were up from year-earlier levels in most markets. Homebuilders noted elevated interest from institutional investors seeking to buy or build new homes for single-family rental units.\nCommercial real estate (CRE) activity strengthened over the reporting period. Contacts reported improving conditions in the office sector as more businesses reopened. Activity in the multifamily sector accelerated, though uncertainty remained regarding future impacts from the lifting of the eviction moratorium. Contacts continued to report that competition is accelerating among CRE lenders. Smaller banks and non-bank lenders have been identified by contacts as some of the more aggressive CRE lenders.\nManufacturing\nDistrict manufacturers continued to report healthy demand over the reporting period, with several noting record sales. Lead times for components were extended as supply chain interruptions persisted, hampering production for some firms. Most manufacturers anticipate stronger sales over the next 6-12 months; however, lingering labor shortages, rising input costs, and disrupted supply chains could challenge firms' ability to meet this demand.\nTransportation\nTransportation activity remained robust over the reporting period. District ports reported continued growth in container volumes, noting that customers were buying safety stocks of inventories, citing a \"just in case, rather than just in time\" approach. However, containers were slow to move off port due to a lack of chassis and trucks. Inland waterways experienced improvement in the movement of energy-related cargoes as Gulf refineries recovered from damages caused by Hurricane Ida. Air cargo carriers reported higher demand as the cost of container shipping exceeded air freight rates, in some cases. Some transportation contacts do not anticipate a normalization of the overall supply chain until late 2022 or 2023.\nBanking and Finance\nDistrict banking activity remained steady. Financial institutions experienced stronger consumer and residential mortgage loan growth, and improved CRE loan demand. Although margin pressures remained due to the low interest rate environment, interest income rose as loan demand strengthened. Deposit levels were stable and remained elevated. Asset quality was unchanged with loan losses and net charge-offs still near historical lows.\nEnergy\nActivity across energy sectors picked up over the reporting period as global demand for energy products strengthened. While contacts reported sustained improvement in oil and gas production, some acknowledged that capital formation for exploration and production has become increasingly challenging. Chemical manufacturing surged in the region, however, high crude oil and natural gas costs and supply chain bottlenecks for numerous inputs continued to constrain growth. Utilities industry contacts noted a sizeable uptick in commercial activity, along with sustained strength in residential and industrial sales. Contacts also continued to report significant investment in renewable energy development and production, primarily in solar, wind, and carbon capture technologies.\nAgriculture\nAgricultural conditions remained mixed. Most of the District remained drought free. Agriculture producers indicated supply chain issues and labor scarcity are putting pressure on margins. On a year-over-year basis, production forecasts for the District's corn and soybean crops were up while rice, peanuts, cotton, and sugarcane forecasts were down. The USDA reported year-over-year prices paid to farmers in September were up for corn, cotton, rice, soybeans, cattle, broilers, eggs, and milk. On a month-over-month basis, prices were up for cotton, cattle, broilers, and eggs but down for corn, rice, and soybeans while milk prices were unchanged.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy-matters/regional-economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2021/2021-12-bo

"December 1, 2021\nSummary of Economic Activity\nBusiness activity in the First District expanded at a modest pace on balance, but results were somewhat mixed. Retail sales softened slightly, while restaurant sales rebounded in September following weakness in August attributed to the Delta variant surge. Manufacturers saw moderate sales gains in the third quarter, and most staffing firms saw robust increases in revenues. Sales of single-family homes softened further relative to their frenzied recent pace. Commercial real estate contacts expected office leasing to pick up in early 2022 as more firms require in-person work, but footprints are set to fall. Labor demand was robust but hiring activity was modest in light of labor scarcity. Average price increases were moderate. The outlook was mostly positive, but contacts expressed uncertainty concerning inflation, supply chain disruptions, and the impact of vaccine mandates on the labor market.\nEmployment and Wages\nLabor markets remained very tight and wage increases ranged from moderate to very strong. Hiring advanced at a modest pace on average but increased churn\u2014attributed in some cases to vaccine mandates\u2014put a drag on headcounts. Manufacturing contacts managed to hire some workers despite the tight labor market, albeit with difficulty, and the inability to hire the desired number of workers was said to hold back growth at one firm. One manufacturer used large starting bonuses to attract workers rather than raising starting salaries, and others enacted modest pay increases. Labor scarcity led some restaurants and retail outlets to cut back hours of operation. Staffing firms' pay rates increased by moderate to large margins from the second quarter, in part to keep up with hefty starting wage increases by some large employers. Also, staffing firms faced increased competition for recruiters from client firms, putting moderate upward pressure on recruiter salaries.\nPrices\nInformation on pricing was relatively scarce but suggested that retail and manufacturing prices increased at a moderate pace on average. At Massachusetts restaurants, menu prices increased at an above-average pace that was nonetheless not enough to cover large increases in food, labor, and other costs, leaving profit margins somewhat lower. Manufacturers enacted slight-to-modest price increases, and complaints about input prices were surprisingly muted. One manufacturing contact said that input price pressures had increased recently but that his firm had mostly offset them with efficiency improvements and had raised their own prices only slightly.\nRetail and Tourism\nRetail contacts said that sales remained strong in the third quarter, but that performance had softened somewhat in comparison with either pre-pandemic or year-ago levels. Massachusetts tourism and hospitality contacts reported a rebound in sales in September and October following COVID-related weakness in August.\nA discount and salvaged goods retail chain reported strong September and October sales that exceeded those of the same period in 2019 by about 3 percent, marking a slight decline in performance from its summer sales numbers. However, sales at the firm's outlets along the Canadian border increased modestly as restrictions on cross-border commerce eased. An online home-furnishings retailer said that recent sales remained well above pre-pandemic levels but declined relative to the very strong numbers of fall 2020.\nRestaurants across Massachusetts experienced higher recent sales after a late-summer dip in response to renewed COVID outbreaks and restrictions. Despite improving for most of 2021, restaurant activity in Boston remained well below pre-pandemic levels. A contact on Cape Cod reported a strong fall season for hotels, restaurants, and main-street retail, up from weaker activity in August that was seen as fallout from a COVID cluster in July. Large wedding venues on the Cape continued to bounce back from the pandemic, with advanced bookings currently extending into 2024. Nonetheless, a lack of conferences and other large group travel has continued to weigh on the recovery.\nManufacturing and Related Services\nFirst District manufacturing contacts reported very strong sales in the 3rd quarter of 2021, although only three firms were reached this round. Two firms saw moderate-to-strong increases in revenue from the second quarter, including one with revenues at an all-time high, and one had roughly steady sales. Revenue gains reflected increased volume rather than higher prices. One manufacturer posted a year-over-year decline in sales but mainly because it had seen extraordinary sales in 2020Q3, and all enjoyed revenues that exceeded their respective pre-pandemic levels. Nonetheless, labor shortages and supply chain issues were said to hold back sales in relation to demand. One owner said that if he could hire as many workers as he needs to fulfill demand, he could finally return to his peak sales levels from before the 2007-2009 recession. Capital expenditure plans were unchanged. The outlook remained very positive on balance, but one contact expressed increased uncertainty related to ongoing supply chain disruptions.\nStaffing Services\nMost staffing firms reached this round saw moderate to very large increases in revenues in 2021Q3 from the previous quarter, but one firm reported lower revenues, citing difficulties in filling manufacturing and light industrial positions. All firms described labor markets as very tight, especially for entry-level roles, and the share of direct hires increased relative to temporary positions. Factors seen as holding back labor supply included childcare and family care obligations, rising wage demands, and some workers' reluctance to comply with vaccine mandates. Contacts also reported increased attrition in response to vaccine mandates. Most contacts were optimistic, believing that robust labor demand will continue to drive strong performance at their businesses, but one firm was less sanguine in light of its weak recent results. Contacts held mixed views about the potential impact of vaccine mandates moving forward, with some seeing them as a major threat to labor supply and others expecting only temporary disruptions.\nCommercial Real Estate\nCommercial real estate markets remained mixed and fundamentals were mostly unchanged. The life sciences and industrial sectors continued to enjoy very strong demand for both leasing and investment, as rents and property values edged higher. Retail leasing activity was mixed, and investment in grocery-anchored retail increased moderately. In the office market, leasing volume was sluggish but improved slightly, and is expected to pick up further in early 2022 based on recent signals from tenants. However, the extent to which footprints will be reduced in any renewed leases remains highly uncertain. Office vacancy rates were flat in most submarkets but increased slightly in Connecticut. Office rents faced moderate downward pressure in Rhode Island but fell mainly through increased concessions rather than cuts in asking rents; elsewhere rents were roughly flat. Construction activity was stable and mostly limited to the life sciences sector and warehouse space. Commercial real estate lending activity slowed slightly, a move attributed to interest rate uncertainty. Most contacts were optimistic, but the outlook was clouded by uncertainty about office space demand, inflation, and interest rate movements. With many firms set to return to the office in January 2022, contacts expected greater clarity to emerge then about firms' space requirements.\nResidential Real Estate\nHome sales slowed in September and October amid continued low inventory and high prices in New England's residential real estate markets. New Hampshire reported changes from October 2020 to October 2021. All other areas provided changes from September 2020 to September 2021. Connecticut data were unavailable.\nWhile median sales prices are higher and inventories lower year-over-year in all reporting areas, both indicators are little changed from the previous report. For single family homes, closed sales fell by moderate to large margins, both on a year-over-year basis and compared with late summer results. Condo sales increased year-over-year in Massachusetts and Boston, representing a substantial acceleration in sales activity from the previous report. Contacts remarked that many buyers turned to the condo market after being priced out of the single-family home market. However, in the remaining condo markets, sales activity slowed in recent months and over-the-year. Several contacts remarked on the overall \"cooling\" of sales activity relative to the frenzied demand seen throughout the pandemic but noted that sales and prices were still historically high.\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

/beige-book-reports/2021/2021-12-sf

"Beige Book Report: San Francisco\nDecember 1, 2021\nSummary of Economic Activity\nEconomic activity in the Twelfth District strengthened moderately during the reporting period of October through mid-November. Employment rose at a moderate pace, while overall conditions in the labor market remained tight. The overall price level moved up significantly, driven by increases in employee compensation and other input prices. Sales of retail goods rose markedly while activity in consumer services increased at a tamer pace. Conditions in the agriculture and resource sectors as well as the manufacturing sector strengthened further. Activity in the residential real estate market expanded at a strong pace despite capacity constraints on construction, while commercial real estate activity was more mixed. Lending activity picked up modestly over the reporting period.\nEmployment and Wages\nEmployment rose at a moderate pace, while overall conditions in the labor market remained tight. Demand for workers continued to significantly outpace supply across the District. Contacts across sectors reported substantial difficulties attracting and retaining qualified candidates, particularly for positions in the lower end of the wage distribution. Labor shortages reportedly affected production and service capacity in several industries, including hospitality, retail, food services, transportation, construction, and manufacturing. Some consumer service providers noted increased rates of voluntary quits and job offer rejections. In health care, contacts highlighted particular difficulties in hiring workers for nonstandard shifts. A contact in education mentioned that inability to hire teachers forced some schools to close in the Pacific Northwest. In contrast, some bankers and energy providers observed ameliorated hiring conditions. One manufacturer mentioned increased efforts in hiring from nontraditional worker programs, such as previously incarcerated individuals. A few contacts expressed concern over workers' mental health and increased difficulties balancing work with family responsibilities.\nWages grew further over the reporting period due to intensified competition for talent, widespread labor shortages, and rising living costs. Annual percent increases in pay rates reportedly reached double digits in such sectors as hospitality, construction, and professional services. Many contacts mentioned the continued use of hiring bonuses, flexible work hours, part-time job offers, and remote work arrangements as additional measures to attract qualified talent. Conversely, some employers in the technology sector mentioned more stable wage levels due to their ability to hire outside major metropolitan areas.\nPrices\nPrices moved up significantly across the District. Widespread price hikes affected construction materials, retail food items, and energy, to name a few. Additional price pressures arose from business services, such as transportation and warehousing. Many contacts reported passing on increased wage and other input costs to consumers. One contact in business consulting mentioned rate increases beyond 30 percent for services that required consultants to travel to and work from clients' premises.\nRetail Trade and Services\nSales of retail goods rose markedly over recent weeks. Consumer demand for most retail products was reportedly strong even in the face of increasing prices. Several contacts mentioned continued robust e-commerce activity. Retailers observed labor shortages and rising costs, which were partly mitigated by an ongoing shift toward new technologies to substitute for labor, such as self-checkouts. Supply chain hurdles continue to hinder inventory building across the District, which retailers highlighted as an important risk for the high level of sales expected during the upcoming holiday season. A wood products provider mentioned that sales at retail home centers were well above pre-pandemic levels. Sales of vehicles continued to be hindered by semiconductor shortages and other ongoing disruptions to inventory building.\nActivity in the consumer and business services sectors rose slightly. Demand in travel, leisure and hospitality, event management, entertainment, and food services saw an uptick as the wave of infections driven by the Delta variant subsided in recent weeks. Business travel, relative to leisure travel, has been slower to recover from recent lows. Some contacts in the hospitality sector noted higher revenues despite lower occupancy rates, which was attributed to price effects. Demand for transportation services remained elevated but supply was constrained somewhat by labor shortages and other capacity-reducing factors. Demand for non-COVID-related health-care services rose quickly of late, while inventories for medical supplies were tighter. Demand for legal services was uneven, with more client interest for estate planning than for business formations services, for example.\nManufacturing\nActivity levels in the manufacturing sector rose further. Contacts noted a strong flow of new orders across industries, including metals fabrication, wood products, and processed foods. However, widespread supply chain disruptions and labor shortages continued to hold back production to a certain extent. As a response, manufacturers considered diversifying supply chains and stockpiling raw materials, despite reduced availability and rising costs for inputs. Some contacts additionally mentioned increased investment in new technologies and renewable energy as a way to improve resilience in the production process. Capacity utilization remained elevated overall.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource-related sectors strengthened over the reporting period. Demand remained strong domestically and, partly due to a more favorable foreign exchange environment, internationally, for the region's meats, produce, seafood, and lumber. Inventories were at satisfactory levels for most crops, although crop yields for tree fruit and wheat were relatively lower due to warmer temperatures and water shortages. Contacts highlighted underground water availability as being of particular concern. However, recent rains in Northern California eased drought conditions a bit in some regions. Contacts also noted that a general lack of readily available labor, continued logistical delays, interruptions related to the Delta variant, and difficulties concerning equipment maintenance further restrained production. A contact in the logging sector mentioned rapidly rising costs and competition for timberland, as well as reduced supplemental availability of logs from fire salvages.\nReal Estate and Construction\nActivity in the residential real estate market continued to increase at a brisk pace. Demand for both single-family and multifamily housing was strong across the District, although declining affordability in parts of the region reportedly pushed some potential single-family buyers into the multifamily market. Construction activity remained robust. However, labor and material shortages hampered the pace of construction somewhat. Building permit issuance remained solid, while the inventory of existing homes remained low. Additionally, a few contacts noted tighter availability of new lots for construction projects. A contact in Alaska highlighted that a large multifamily housing development project was postponed due to inflation uncertainty. A statement from Utah suggested that the real estate market stabilized somewhat in that region.\nCommercial real estate activity was mixed. Demand for new office and retail space picked up in some areas, while it remained subdued in others. One contact in California expressed concern about permanently lower demand for office space related to a switch to hybrid workspaces. Demand for new hotel facilities was weak, partially due to the impact of the recent Delta wave. Manufacturing and warehousing spaces were in shorter supply and had high occupancy rates, especially near the busy West Coast ports where logistical delays were observed.\nFinancial Institutions\nLending activity picked up modestly over the reported period. Consumer demand for credit card loans, home mortgage, and insurance products remained strong, while auto loan origination continued to be hindered by low vehicle supply. Demand for commercial real estate loans lagged those for their residential counterparts. Bankers across the District highlighted elevated deposit levels, but somewhat lower than in the previous reporting periods. Underwriting standards reportedly eased of late, as competition for loans tightened further and interest margins remained squeezed. Some contacts observed increased merger and acquisition activity among regional banks, as well as accelerated business investments in fintech companies. One contact in California mentioned that credit to small minority-owned businesses remained under tight availability.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

/beige-book-reports/2021/2021-12-sl

"Beige Book Report: St Louis\nDecember 1, 2021\nSummary of Economic Activity\nEconomic conditions have shown modest improvement since our previous report. Employers reported difficulties adding workers to meet rising consumer demand, with significant wage increases increasingly common across industries. Supply chain constraints have contributed to moderate price increases, especially on raw materials. Retailers and nonfinancial services contacts reported increased activity, and banks reported an increase in loan demand. Manufacturing contacts reported production upticks and increased optimism about the coming quarter. While contacts are optimistic about continued strong demand in the short term, the rate of growth is expected to slow over the next 12 months.\nEmployment and Wages\nEmployment has increased modestly since the previous report. Firms continued to recruit workers aggressively as the recovery continued and the holiday season approaches; two-thirds of contacts planned to increase the size of their workforce within the year. Worker shortages, however, remained endemic; half of contacts reported a decline in job applications since Labor Day, and a third did not expect to recover to pre-pandemic employment levels within a year. One large transportation firm held a job fair where recruiters frequently outnumbered job seekers; a Kentucky bank lamented that its only option was to hire individuals with the potential to perform key roles after a year or more of training.\nWages have grown strongly; on net, two-thirds of contacts reported wages had grown since a year ago\u2014a new high. Three-quarters of hiring firms reported raising wages for most jobs to entice new hires; very few reported no such raises. One Arkansas pizzeria advertised $15-20 an hour for delivery drivers; a large transportation firm, unable to fill its night shift, raised wages from $13 to $21 an hour.\nPrices\nPrices have increased moderately since our previous report. Contacts in the construction industry reported increased costs for input materials; one construction contact reported that prices have increased six times over the course of 2021. A contact in the residential real estate industry stated the cost of materials for new construction has raised new home prices out of the typical range for entry- and mid-level buyers. Contacts in the agricultural industry noted a \"dramatic\" increase in the cost of fertilizer due to international supply chain constraints. There have been moderate to robust increases in prices for raw materials such as coal and cotton string since the last report. Meat prices have increased in recent months because of high demand and higher input costs for materials, labor, and logistics.\nConsumer Spending\nDistrict general retailers, auto dealers, and hospitality contacts reported higher business activity since our previous report. October saw that real sales tax collections decreased in Arkansas, Missouri, and West Tennessee relative to September and increased in Kentucky. General retailers reported higher sales and a somewhat better outlook despite supply chain issues and labor shortages. Sales exceeded expectations for auto dealers, but they had a mixed outlook for the coming quarter. A Little Rock dealer expects the chip shortage to persist into 2022 based on their manufacturer and trade publications. A restaurant in St. Louis reported that people have been more willing to dine indoors at restaurants and that they have been relying less on outdoor seating during colder months. Hospitality contacts reported increased activity in October and that business travel is starting to rebound.\nManufacturing\nManufacturing activity has modestly increased since our last report. Survey-based indices suggest that production and capacity utilization have moderately increased, while new orders have slightly decreased. Firms in Arkansas and Missouri reported moderate upticks in production and slight declines in new orders. Automobile manufacturers, including two major manufacturing facilities in Louisville, continued to produce below capacity because of microchip supply shortages. Manufacturers in South Central Kentucky not reliant on these scarce inputs have seen their production exceed pre-pandemic levels. Firms have also been developing their own manufacturing of components for electric vehicles rather than relying on global supply chains. On average, firms expect strong increases in production, capacity utilization, and new orders in the coming quarter.\nNonfinancial Services\nActivity in the nonfinancial services sector has increased moderately since the previous report. More than 80% of nonfinancial services contacts reported that quarterly sales have met or exceeded expectations thus far. Airport passenger traffic has been steady since the previous report, remaining near 80% of pre-pandemic levels. A childcare contact in the St. Louis area mentioned that business has been negatively affected by several large employers not returning to in-person work. Several fitness center contacts noted that concerns about the Delta variant and corresponding government restrictions have hurt business. A logistics contact mentioned that the chip shortage and its impact on the automotive supply chain have hurt business. Several large parcel services have increased hiring in anticipation of the holiday season.\nReal Estate and Construction\nThe residential real estate market has weakened slightly since our previous report. Total home sales have decreased across the largest District MSAs, but home prices remain elevated and inventory remains low. Residential construction activity remains high, though contacts reported that the continued high cost of construction, long lead times on key building materials, and supply chain issues are still affecting the speed of new construction. Meanwhile, apartment rental rates across the District continued to rise slightly this month.\nThe commercial real estate market has remained mixed since our previous report. Industrial real estate remains strong across the largest District MSAs. In St. Louis, asking rents for industrial space have increased 25% since this time last year, while industrial vacancy rates are at an all-time low. Contacts stated that grocery stores and mixed-use properties involving hotels, restaurants, and entertainment venues remain popular. A contact reported that interest in retail is increasing as returns on industrial and multifamily development shrink.\nBanking and Finance\nBanking conditions have improved slightly since our previous report. District banks reported an increase in overall loan demand since the last survey period. Credit card lending increased moderately, while demand for commercial loans decreased slightly. A contact noted a slowdown in mortgage lending activity but cited the lack of inventory as a primary reason. Liquidity remained elevated and banks continued to report difficulties in finding investments to deploy excess funds. However, financial performance has remained strong as many banks are still recognizing income earned through the PPP loan program. Delinquency rates increased slightly, especially for auto and real estate loans, but remained relatively low. Creditworthiness modestly declined, and banks reported slightly tightening their credit standards.\nAgriculture and Natural Resources\nDistrict agriculture conditions have remained stable compared to the previous reporting period. Production forecasts for corn and soybeans have declined slightly, while forecasts for cotton remained unchanged and rice increased. On a year-over-year basis, however, production levels for corn and soybeans are expected to be moderately higher, while cotton and rice production is expected to moderately decline. While production has remained relatively steady, contacts in the District have expressed concern over rising input prices, specifically nitrogen and other fertilizers, and labor shortages, which they fear may cause production shortfalls next year.\nDistrict coal production improved modestly in October, with seasonally adjusted production increasing about 3 percent over the previous reporting period. Production has improved strongly over the previous year, increasing 20 percent over this time last year.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

/beige-book-reports/2021/2021-10-bo

"October 20, 2021\nSummary of Economic Activity\nBusiness activity in the First District expanded at a modest to moderate pace. Software and IT firms posted moderate revenue gains on balance. Retail sales were stable or up modestly and easily exceeded pre-pandemic levels; demand for new and used autos continued to outstrip limited supplies. Air travel and hotel occupancy improved but stayed well below pre-pandemic levels. Manufacturers saw mixed recent results but most reported revenue gains on a year-over-year basis. Sales of single-family homes softened, but that may reflect the resumption of normal seasonal patterns following an unusual 2020, as home prices continued to climb. Commercial real estate markets were stable but the outlook for office leasing remained uncertain. Wages increased moderately amid widespread labor scarcity. Retailers and manufacturers posted moderate to steep price increases amid ongoing supply disruptions. The outlook was cautiously optimistic.\nEmployment and Wages\nThe labor market remained tight across sectors. At several businesses, competition for new hires was intense, leading to robust increases in starting wages, new signing bonuses, and increased willingness to train, but one firm was not planning to increase wages despite facing hiring challenges. Wages were on the rise for existing workers as well, as a few firms planned for larger merit increases in 2022 and at least one offered retention bonuses as well as non-wage perks such as flexible work arrangements. In an exception, one manufacturer found it easier to fill positions recently than in the first half of the year. Manufacturing contacts reported higher labor turnover that some attributed to the lagged effects of the pandemic, and that others had seen in response to vaccine mandates\u2014although one firm said that its vaccine mandate had not caused any quits. Most software contacts experienced normal turnover, however. Headcounts were mixed but in most cases were either flat or down, as turnover and hiring difficulties left firms below desired staffing levels.\nPrices\nPrices were flat at software and IT firms but generally increased among manufacturing and retail contacts, in some cases by large margins. A furniture retailer enacted price increases of over 30 percent since February 2021, driven by increased shipping and materials costs. An apparel contact increased its usage of air freight\u2014historically a very costly way to transport goods\u2014as an offset to skyrocketing shipping costs and delays. New and used car prices climbed further, as demand for autos continued to outstrip inventories and the chip shortage persisted. Hotel room rates increased moderately but remained 27 percent lower than in 2019. Manufacturers faced increased input prices\u2014in the 10 to 30 percent range on a year-over-year basis\u2013and two-thirds of firms raised output prices in the third quarter by moderate to robust margins, while the remainder held prices firm. Software contacts reported no changes in prices other than increases that were built into existing contracts, but one company is considering making price changes in 2022.\nRetail and Tourism\nFirst District retailers reported ongoing strength in sales in the third quarter of 2021. A furniture seller enjoyed record-setting revenue this past summer despite a modest decline in units sold from the second quarter, outcomes that reflected the roughly 30 percent increase in the seller's prices since February. A clothing retailer recorded recent sales that exceeded its comparable pre-pandemic levels by low double-digit percentages, amid strength in both online and in-store sales despite a recent decline in foot traffic at its shops. Sales of both new and used automobiles held steady at a robust pace.\nTravel industry respondents reported that airline passenger traffic through Boston picked up steadily in recent months, and in August and September was off by \"only\" about 35 percent compared with the same months in 2019. Scheduled passengers in October are expected to narrow that gap further, although international and business travel continue to trail domestic leisure travel. Hotel occupancy rates and room rates in the greater Boston area also saw further modest improvements in recent months. Occupancy rates in August averaged around 65 percent, the highest rate since the start of the pandemic, despite still falling short of 2019 levels by about 20 percentage points.\nManufacturing and Related Services\nManufacturers reported mixed revenue performance. Two saw modest declines in recent sales, two had stable results, and two registered at least modest revenue increases. Most contacts nonetheless said that sales were higher than they were one year ago, and most had sales above pre-pandemic levels. Most contacts continued to complain of supply-chain disruptions that either dulled recent sales or threatened to crimp future business. These included three firms that faced production delays and two that had trouble keeping inventories at their desired levels (due to input shortages as well as robust demand). Capital expenditures were stable at high levels, with no major revisions to spending plans moving forward. The outlook remained mostly positive, but some faced ongoing risks related to supply-chain issues.\nSoftware and Information Technology Services\nThree out of four software and IT contacts in the First District reported higher sales in the third quarter, by modest to very large margins. Two contacts said that demand for their products enjoyed an ongoing boost from firms' increased reliance on virtual business formats during the pandemic, shifts that were seen as largely permanent, but one firm said that pandemic-related supply issues presented an ongoing drag on their business. On a year-over-year basis revenues were up at two firms and were stable or down modestly at two others. Labor shortages threatened to delay the fulfillment of orders at one firm, and another reported increased wage pressures for new hires. Capital spending was mixed across firms\u2014one was spending less after switching to less capital-intensive technologies, another was ramping up investments to tap new markets, and others had stable spending. Contacts were mostly optimistic looking ahead, but two perceived that COVID-19 presented ongoing risks to economic activity.\nCommercial Real Estate\nCommercial real estate activity in the First District was mixed across submarkets and mostly unchanged in recent weeks. The industrial and life sciences markets continued to enjoy strong leasing demand, with rents steady at high levels and very low vacancy rates. The life sciences market in Boston has maintained near-zero vacancies. Office leasing was flat at a sluggish pace, with mostly short-term lease renewals, as the Delta variant surge caused delays in return-to-office dates and added to uncertainty. Contacts still expect office tenants to reduce footprints permanently as they pursue hybrid work moving forward, but the size of such reductions remains unclear. Office rents were mostly flat and vacancy rates were flat or up slightly. Retail leasing activity remained weak in Boston and Connecticut and comparatively strong in Maine and Rhode Island. Grocery-anchored and experiential retail continued to outperform other categories. The lending market for commercial real estate stayed highly competitive, driven by banks and institutional investors flush with capital. Investment demand was robust across multiple markets, excepting office, but some contacts forecasted an uptick in office sales in 2022. The outlook for leasing in the weaker segments (big box retail and office) hinged on the resolution of uncertainty over the course of the virus in the coming months.\nResidential Real Estate\nLow inventories and upward pricing pressure persisted in the residential real estate markets of the First District in August. Over-the-year changes to August 2021 were reported for all but two New England states; data from Connecticut and Vermont were not available.\nAs in the previous report, median sales prices increased, and inventories fell year-over-year in all reporting areas. Sales of single-family homes were down year-over-year, indicating a slight deceleration in activity from July. While condo sales once again increased year-over-year in Rhode Island, Massachusetts, and Boston, condo sales fell over-the-month in August in Massachusetts and Boston and fell over-the-year in New Hampshire and Maine. All contacts found the declines in sales noteworthy, and the slowdown was attributed to a combination of buyers' frustrations over high prices and low inventories as well as to increased vacation-taking compared with August 2020.\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nOctober 20, 2021\nThis report was prepared at the Federal Reserve Bank of Richmond based on information collected on or before October 8th, 2020. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic activity grew at a modest to moderate rate, according to the majority of Federal Reserve Districts. Several Districts noted, however, that the pace of growth slowed this period, constrained by supply chain disruptions, labor shortages, and uncertainty around the Delta variant of COVID-19. A majority of Districts indicated positive growth in consumer spending; however, auto sales were widely reported as declining due to low inventory levels and rising prices. Travel and tourism activity varied by District with some seeing continued or strengthening leisure travel while others saw declines that coincided with rises in COVID cases and the start of the school year. Manufacturing grew moderately to robustly in most parts of the country, as did trucking and freight. Growth in nonmanufacturing activity ranged from slight to moderate for most Districts. Loan demand was generally reported as flat to modest this period. Residential real estate activity was unchanged or slowed slightly but the market remained healthy, overall. Reports on nonresidential real estate varied across Districts and market segments. Agriculture conditions were mixed and energy markets were little changed, on balance. Outlooks for near-term economic activity remained positive, overall, but some Districts noted increased uncertainty and more cautious optimism than in previous months.\nEmployment and Wages\nEmployment increased at a modest to moderate rate in recent weeks, as demand for workers was high, but labor growth was dampened by a low supply of workers. Transportation and technology firms saw particularly low labor supply, while many retail, hospitality, and manufacturing firms cut hours or production because they did not have enough workers. Firms reported high turnover, as workers left for other jobs or retired. Child-care issues and vaccine mandates were widely cited as contributing to the problem, along with COVID-related absences. Many firms offered increased training to expand the candidate pool. In some cases, firms increased automation to help offset labor shortages. The majority of Districts reported robust wage growth. Firms reported increasing starting wages to attract talent and increasing wages for existing workers to retain them. Many also offered signing and retention bonuses, flexible work schedules, or increased vacation time to incentivize workers to remain in their positions.\nPrices\nMost Districts reported significantly elevated prices, fueled by rising demand for goods and raw materials. Reports of input cost increases were widespread across industry sectors, driven by product scarcity resulting from supply chain bottlenecks. Price pressures also arose from increased transportation and labor constraints as well as commodity shortages. Prices of steel, electronic components, and freight costs rose markedly this period. Many firms raised selling prices indicating a greater ability to pass along cost increases to customers amid strong demand. Expectations for future price growth varied with some expecting price to remain high or increase further while others expected prices to moderate over the next 12 months.\nHighlights by Federal Reserve District\nBoston\nBusiness activity in the First District expanded at a modest to moderate pace in August and September 2021. Wages increased moderately as firms competed for scarce workers. Retailers and manufacturers posted moderate to steep price increases amid ongoing supply disruptions. The outlook was cautiously optimistic.\nNew York\nGrowth in the regional economy slowed to a modest pace in recent weeks, as supply disruptions and labor shortages have impeded economic activity. Employment and wages increased. Businesses reported ongoing widespread escalation in both input costs and selling prices. Despite the slowdown, contacts continued to express optimism about future business prospects.\nPhiladelphia\nBusiness activity grew modestly during the current Beige Book period \u2013 slower than the prior period \u2013 but remained below pre-pandemic levels. Fear and uncertainty of the Delta variant continued to constrain growth, but contacts were most worried by ongoing labor shortages and supply chain disruptions. Overall, employment continued to grow modestly, while wages and prices continued to rise at a moderate pace.\nCleveland\nEconomic activity remained strong in the District. While demand was still solid, supply chain disruptions tempered the pace of sales and output growth. The expiration of supplemental unemployment insurance benefits and a return to school did little to alleviate worker shortages, and wages continued to rise. This and higher nonlabor input costs put further upward pressure on selling prices.\nRichmond\nThe regional economy increased at a modest rate as growth was constrained by labor shortages and shortages and delays receiving goods and raw materials needed for business. Employers across sectors had difficulties finding and keeping workers, which led to offering higher wages and bonuses to recruit and retain staff. Prices remained elevated compared to year-ago levels.\nAtlanta\nEconomic activity expanded moderately. Labor markets remained tight and wage pressures intensified. Some nonlabor costs stayed elevated. Retail sales increased. Leisure travel was strong, but hotel occupancy levels declined. Residential real estate demand remained robust. Commercial real estate conditions were stable. Manufacturing activity expanded. Banking conditions were steady.\nChicago\nEconomic activity increased modestly. Employment, manufacturing, and business spending grew moderately, but consumer spending and construction and real estate were little changed. Wages and prices increased strongly while financial conditions were flat. District corn and soybean harvests were larger than expected and near record levels.\nSt. Louis\nEconomic conditions have continued to improve at a moderate pace since our previous report. Labor shortages and supply chain issues continue to be cited as primary issues. Increased input costs have led to cost pressures across industries, and firms with the power to do so report passing on increased costs to consumers.\nMinneapolis\nDistrict economic activity grew moderately since the previous report. Employment increased, though hiring demand continued to outstrip labor availability, and wage pressures were strong. Price pressures remained elevated; certain input prices eased, but firms were passing more of their input costs through to final prices. Manufacturing increased, with one contact noting that passing along higher prices hadn't hampered demand.\nKansas City\nEconomic activity continued to grow at a moderate pace and was broad-based. Ongoing growth in manufacturing alongside renewed growth in the energy sector supported the regional economy. Consumer spending at restaurants and hotels was resilient through the recent surge in COVID cases. However, business travel did not resume as expected in September, with many large events being postponed.\nDallas\nThe District economy expanded at a solid rate, with broad-based growth across sectors. COVID-19 and labor and supply-chain constraints remained headwinds. Employment growth was robust, and wage and price growth remained highly elevated. Outlooks stayed positive, with most contacts expecting stronger business six months from now, though uncertainty rose.\nSan Francisco\nEconomic activity in the District strengthened moderately. Labor market tightened further as wages and price levels climbed up. Retail sales expanded moderately while activity in consumer services slowed down somewhat. Conditions in the agriculture and manufacturing sectors strengthened slightly. Lending activity increased further while residential construction expanded notably.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"October 20, 2021\nSummary of Economic Activity\nEconomic activity in the Sixth District expanded at a moderate pace from mid-August through September. Demand for labor was strong, and worker supply remained extremely tight. Reports of wage increases, along with signing and retention bonuses, were widespread. Some nonlabor costs continued to rise, and pricing power improved. Retail sales activity strengthened, but the pace of new car sales slowed due to supply chain constraints. Domestic leisure travel activity remained strong. Demand for housing was robust, inventories declined, and home prices rose. Commercial real estate conditions were mixed. Manufacturing activity was robust, but production slowed as labor shortages caused more idle time. Conditions at financial institutions were stable, and consumer and residential loan demand improved.\nEmployment and Wages\nDistrict contacts continued to report strong demand for labor and the supply of available workers remained extremely tight. Turnover increased as staff left jobs for higher wages, greater flexibility, and better work environments. At the same time, the number of retirements increased. A few firms noted that recent surges in COVID-19 cases caused higher rates of absenteeism than in previous waves. Several employers said they have been forced to make daily evaluations on which operations can be supported based on the number of employees who came to work. The most severe shortages were among hospital nurses who were noted as migrating to other practices where they can have a stable schedule, or to traveling positions where they can earn multiples of their prior hourly rate. Most employers shared that they would like to implement COVID-19 vaccine mandates but were concerned about losing employees. Worries about employee mental health, burnout, safety, and vaccine mandates impacting company culture were mentioned.\nUpward pressure on wages intensified over the reporting period and reports were relatively widespread. Several contacts mentioned that escalating living expenses have become a part of wage negotiations. Wage increases continued to be noted along with signing and retention bonuses. Employers were offering greater flexibility to retain and attract workers when possible and several noted new hires negotiating for more paid time off.\nPrices\nDistrict contacts reported persistent increases in some nonlabor costs. In particular, steel and freight costs rose markedly. The volatility of these and other input costs, exacerbated by supply chain constraints, delayed construction projects across sectors, with uncertainty around expected completion timelines. Food prices also rose. Contacts continued to note an ability to pass through input cost increases. The Atlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs were relatively unchanged in September at 3.2 percent, from 3.3 percent in August. Year-ahead expectations also remained generally stable at 3.1 percent in September, compared to 3 percent in August.\nConsumer Spending and Tourism\nDistrict retailers reported strong demand since the previous report. However, several cited missed sales opportunities due to of a lack of inventory and persistent labor shortages that resulted in reduced hours of operation. The pace of new vehicle sales continued to slow due to supply chain constraints.\nDomestic leisure travel continued to drive tourism activity for much of the District, though occupancy at limited-services hotel properties declined due to a rise in COVID-19 cases and the start of school. In New Orleans, tourism plummeted following Hurricane Ida; however, the city has since opened, and contacts expect activity will improve over the balance of the year. Some contacts indicated further deterioration in business travel and convention bookings due to rising COVID-19 cases and expressed uncertainty over the next three months.\nConstruction and Real Estate\nDemand for housing throughout the District remained strong, though activity moderated slightly from record highs. Real estate contacts noted multiple offers on properties for sale. On a year-over-year basis, inventory levels declined, and home prices rose by double digits in most markets. Declining home ownership affordability was a growing concern for some buyers, resulting in more moderate growth in sales and declining homebuyer sentiment. The decline in affordability was widespread, with markets in Central and South Florida experiencing the sharpest decline in the District.\nCommercial real estate activity was mixed. Conditions in the multifamily sector improved notably from last year, though there was growing uncertainty regarding future effects from the end of the eviction moratorium. Activity in the retail segment continued to improve. The office sector remained challenged as employers expressed uncertainty about future space needs. Negative rates of absorption and new deliveries pushed office vacancies upward. Contacts report that competition is accelerating among CRE lenders. Smaller banks and non-bank lenders have been identified by market contacts as some of the more aggressive CRE lenders.\nManufacturing\nDistrict manufacturers reported robust demand over the reporting period. However, materials shortages and longer supply delivery times continued to slow production, and some firms experienced increased down time due to higher absenteeism caused by COVID-19 illnesses. Several manufacturers anticipate further strengthening in demand but expressed uncertainty about future production levels.\nTransportation\nActivity in the transportation sector strengthened, on balance, since the previous report. Logistics contacts reported robust demand as the peak shipping season commenced. East coast ports saw record container volumes. However, growing numbers of container ships idled off the coast, as short supplies of chassis, trucks, and labor slowed throughput. Operations resumed for Gulf coast ports after Hurricane Ida caused shutdowns due to damaged facilities and power outages. Air cargo contacts reported a resumption of cargo-only flights to capitalize on bottlenecks at ports. Contacts expect gridlocks at ports and other supply chain disruptions to continue into 2022.\nBanking and Finance\nConditions at District financial institutions remained stable. Margin pressures persisted as a result of the low interest rate environment, weak loan growth, and elevated liquidity. Loan balances declined for multiple loan portfolios, including commercial and industrial loans. Banks reported improvements in consumer and residential loan demand. Deposit levels remained high but growth moderated, causing some institutions to increase short-term borrowings. Asset quality remained healthy without notable increases to nonperforming loans or charge-offs.\nEnergy\nEnergy industry contacts reported damage to infrastructure servicing production in the Gulf of Mexico as a result of Hurricane Ida. However, some indicated that resiliency efforts made since Hurricane Katrina in 2005, including the hardening of energy infrastructure and investments in diesel-driven power generation, accelerated the recovery. Reduced oil and gas output was primarily attributed to challenges in redeploying workers since reentry into some communities was difficult or impossible after the storm. However, collaboration with private entities and state government helped alleviate immediate post-hurricane labor tightness. Some contacts expressed concern about short-term natural gas supply and pricing pressures resulting from reduced output. Further, reduced investment in oil and gas exploration and production in recent months is anticipated to result in long-term cutbacks in supply. Utilities contacts continued to cite strengthening residential, commercial, and industrial sales, as well as significant investment in renewables, particularly wind and solar power.\nAgriculture\nAgricultural conditions remained mixed. Widespread rain kept the District free of drought, but left parts of the District in abnormally moist to excessively wet conditions. Producers continued to assess damages from Hurricane Ida; initial estimates indicated damage to row and vegetable crops, sugarcane, timber, livestock, and infrastructure. On a year-over-year basis, production forecasts for corn, soybean, peanut, and cotton crops were up while rice and sugarcane forecasts were down. The USDA reported year-over-year prices paid to farmers in August were up for corn, cotton, soybeans, cattle, broilers, and eggs, but down for rice and milk. On a month-over-month basis, prices were up for corn, rice, cattle, broilers, and eggs but down for cotton, soybeans, and milk.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy\u2010matters/regional\u2010economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

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"Beige Book Report: Kansas City\nOctober 20, 2021\nSummary of Economic Activity\nThe Tenth District economy expanded at a moderate pace through September. Ongoing growth in manufacturing alongside renewed growth in the energy sector and steady consumer spending supported the regional economy. Increases in oil and natural gas prices led to an expansion of energy activity in several locations throughout the Tenth District. Consumer spending continued to grow during the most recent surge in COVID cases. Unlike previous experiences during the pandemic, the growth in consumer spending was resilient at restaurants and other leisure and hospitality businesses. Business travel did not resume as expected in September, and many large events were postponed. Conditions in the agricultural sector remained strong, except in cattle markets where drought conditions and cost pressures adversely affected ranchers. Employment gains were broad based with jobs being added at a moderate pace. Contacts continued to report rising costs for materials, and also highlighted rising transportation costs as significant and persistent price pressure.\nEmployment and Wages\nTenth District employment gains were moderate and broad-based over the past month. The number of hours worked increased at most manufacturing and service businesses, including at restaurants and hotels. Entertainment venues were an exception where employment declined more than is attributed to seasonal shifts.\nComparing current labor market conditions to earlier in the summer, the majority of businesses reported difficulties filling open positions have not eased. Contacts noted recruiting for entry-level and low-skill positions remains just as difficult compared to a few months ago. Despite the challenges recruiting qualified workers, most businesses have not changed their hiring plans from earlier this summer. Those that have changed their plans now expect to add more workers than before.\nWages continued to rise broadly in September. Contacts noted increases in other labor expenses such as benefits and job training to attract and retain workers. Furthermore, contacts in several sectors reported using more premium pay for temporary workers as they sought to offset labor shortages.\nPrices\nOutput prices rose across most sectors of the Tenth District economy during September. Material input prices also increased, but contacts were mixed on their ability to pass on higher material and labor costs to their customers. Businesses either reported being able to pass along the majority of higher costs to their customers or only a small portion. Price pressures from transportation costs also expanded in recent weeks. Construction materials continued to be an exception to rising input prices, declining further over the past month.\nConsumer Spending\nRetail spending growth picked up moderately in September, including spending at restaurants. Demand at other leisure and hospitality businesses grew modestly, but contacts noted that the consumer segment of the hospitality industry is growing at a robust rate. Expectations for a resumption of business travel in September were not realized and several event bookings were postponed, which held down overall travel-related spending somewhat. Businesses reported broad confidence that consumer spending will continue to grow over the next six months.\nManufacturing and Other Business Activity\nManufacturing activity continued to expand at a robust pace in September due to increased production of durable goods. Expectations for growth in durable good production over the next six months increased again as new orders from District businesses rose. Several contacts noted that an inability to find sources of steel products and higher steel prices were substantial constraints on overall activity. Labor shortages also weighed on manufacturing activity. Overall production of nondurable goods was unchanged in recent weeks, yet most contacts continue to expect conditions to improve over the next six months.\nTransportation costs for Tenth District manufacturing businesses increased in recent weeks, both for domestic and international shipping. Several contacts cited transportation costs as a significant cost pressure being passed to customers and suggested this cost pressure may linger into 2022. Material shortages and delays in deliveries of inputs worsened over the last month.\nCapital expenditures are expected to increase at a robust rate among both manufacturing and services businesses. Several contacts noted investments in labor-saving technologies amid worker shortages as well as investments in equipment to scale production amid higher demand.\nReal Estate and Construction\nResidential real estate activity declined slightly, which most contacts attributed to seasonal factors and a low supply of homes for sale. Home prices continued to rise, with several contacts noting that home price growth in resort areas continues to exceed other parts of the market. Lot prices for new construction also rose during the past month.\nVacancies in commercial real estate properties throughout the Tenth District increased slightly, turning from their slow decline during past months. Expectations for vacancy rates over the next six months also rose. However, commercial property values and underlying rents continued to rise at a robust rate. Demand for industrial and warehouse space continued to grow and exceeds available supply. Contacts across segments of commercial real estate reported that their ability to access credit did not change over the last month.\nSales of construction materials declined at a robust rate, with selling prices and inventory levels also declining. Contacts reported difficulties finding qualified drivers for deliveries and workers for fabrication of materials.\nBanking\nBankers in the Tenth District reported slight growth in overall loan demand in recent weeks. Changes in conditions were mixed across individual loan categories, with contacts indicating a slight increase in commercial real estate loan demand, but a slight decrease in consumer and agricultural lending. Demand for residential real estate loans declined modestly in September but remained at a high level. Bankers reported steady commercial and industrial loan demand at low levels, as PPP loan forgiveness diminished demand for credit by businesses. Deposits levels have grown slightly over the last six weeks. Credit standards held steady for most categories, except commercial real estate and agricultural lending, which underwent a slight tightening. Overall loan quality has improved moderately in comparison to a year ago and is expected to hold steady over the next six months.\nEnergy\nTenth District energy activity expanded at a moderate pace in September. The number of active oil and natural gas rigs increased in several areas including Oklahoma, New Mexico, and Wyoming. While contacts reported that access to credit expanded slightly in recent months, they also noted investor and lender preferences limiting credit flows to the sector were significant factors constraining further expansion of activity. A majority of firms reported higher revenues and profits as commodity prices increased considerably. Surveyed respondents indicated prices needed for drilling to be profitable increased on average, which some businesses attributed to rising labor costs. Most contacts expected natural gas prices to remain high in coming months. Over half of firms reported minor delays or disruptions due to COVID-19 infections over the past quarter.\nAgriculture\nConditions in the Tenth District agricultural sector remained strong. Prices for corn, soybeans and hogs decreased slightly since August, but, along with wheat and cotton prices, remained at multi-year highs. Several contacts noted a desire to hold larger inventories of agricultural products compared to past years, and that the allocation of supply to building inventories is contributing somewhat to current high price levels. Contacts reported ongoing concerns about rising inputs costs putting downward pressure on farm incomes in coming months. Weakness in the cattle industry persisted as concerns about drought and higher input costs intensified. Low cattle prices continued to limit profit margins for ranchers.\nFor more information about District economic conditions visit: www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

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"October 20, 2021\nSummary of Economic Activity\nThe Ninth District economy grew moderately since late August. Employment saw moderate growth, with hiring demand continuing to outpace labor availability. Wage pressures were strong, while price pressures increased slightly from an already elevated level. Growth was noted in commercial construction and manufacturing, while consumer spending, commercial real estate, and energy activity were stable. Residential construction and real estate activity decreased, while agricultural conditions deteriorated. Business activity reports were mixed among minority- and women-owned businesses.\nEmployment and Wages\nEmployment saw moderate growth since the last report, with hiring demand continuing to outpace labor availability. Job postings rose further in September in District states, and recent surveys and sector contacts report strong hiring demand. At a September business conference in west-central Minnesota, \"every person \u2026 raised their hand saying that they are currently trying to hire people,\" according to a workforce contact. Minnesota staffing firms reported that both total clients and job orders were up; placements were also higher, but unfilled job orders were rising even faster. Firms continued to struggle finding labor. Overall, Minnesota staffing firms reported a modest increase in labor availability after pandemic-era unemployment benefits stopped. However, other business workforce contacts reported little increase in labor supply. Federal vaccine mandates were expected to exacerbate labor problems, though in most cases the number of quits induced by the mandate has been smaller than anticipated.\nWage pressures were strong. A majority of firms across several surveys reported wage increases of 3 percent or more. Wage increases were strongest in retail, hospitality, health care, and construction. A North Dakota retail contact noted that recent wage growth was strong and that \"the highest increase was at the lowest-paying jobs.\" However, contacts also noted that higher wages were not always attracting more applicants.\nWorker Experience\nLabor supply remained tight across the District. Initial unemployment claims in District states in September were flat overall compared with August; however, recent levels were still 70 percent higher than similar pre-pandemic levels. Continuing claims fell about 20 percent over this same period in the District, but remained elevated, particularly in Minnesota and Wisconsin. Labor contacts in the construction trades reported strong enrollment in apprenticeships for workers to be trained as drywall installers, electricians, and iron workers. According to a labor contact, employment of sheet metal workers was \"pretty much normal for this time of year.\" A workforce development contact said some companies have adopted more flexible and tolerant practices to retain existing employees; for example, one company has provided means for workers to observe their religious practices. The absence of large conferences and meetings continued to affect hospitality workers. Lack of child care or reliable transportation, fears over COVID exposure, and uncertainty with school schedules continued to influence people's employment decisions.\nPrices\nPrice pressures increased slightly from an already elevated level since the previous report, while prices for certain inputs eased. Surveys and comments from contacts indicated that firms were passing more of their input costs through to final prices. Half of respondents to a survey of Ninth District firms characterized their nonlabor input costs as up significantly in the third quarter, while about a fifth said they had increased their output prices significantly. Contacts in manufacturing continued to report significant price increases for metals, electronic components, and shipping, while other contacts reported that the pace of increase had slowed recently, though prices remained much higher than a year ago. Retail fuel prices increased slightly in most District states since the previous report.\nConsumer Spending\nConsumer spending was flat overall since the last report, sustaining a high overall level, but held back by low product inventories and some evidence that the delta variant was negatively influencing some consumer behavior. Hospitality and tourism firms reported strong activity through the end of summer, but many were more cautious regarding their fall outlook. Convention and other large-group activities have reportedly softened just as the sector was seeing some growth. A large Minnesota resort said it was seeing more inquiries on large group events \"until delta hit, and then I think it shook people's confidence again.\" Labor difficulties, supply chain problems and higher input prices were also forcing many restaurants and other retailers to pull back on hours and even days of operation. Retail contacts reported solid demand but also delays in product delivery and sometimes receiving less than ordered.\nConstruction and Real Estate\nCommercial construction grew moderately since the last report, despite continued challenges. Industry data showed that new project starts grew across District states toward the end of summer. Available permit data also showed growth in August and September compared with last year in many of the District's larger cities. Sector contacts, however, continued to note concern over higher input prices, supply chain disruptions, and labor constraints which, in turn, have increased project delays and negatively affected demand. Residential construction fell slightly, with single-family permits falling in September compared with last year in many markets. Contacts said rising input prices were beginning to have material effects on project timelines, cancellations, and new demand, and the sector in general was slowing from very strong levels earlier in the year.\nCommercial real estate was flat overall. Office subleasing and vacancy rates increased in many markets as larger firms continued to reconsider their space needs. However, multifamily markets were healthy, with vacancy rates holding or declining in many markets while rents saw solid increases despite strong activity in new multifamily construction. Retail contacts reported improved conditions; a mall contact noted an increase in store openings and overall leasing, though rent levels and lease terms \"continue to be a challenge.\" Residential real estate conditions softened slightly. Closed sales in August and September were lower in many locations compared with last year due to tight inventory and rapidly rising prices.\nManufacturing\nDistrict manufacturing activity increased moderately since the previous report. A regional manufacturing index indicated increased activity in Minnesota, North Dakota, and South Dakota in September relative to the previous month. Several contacts reported record performance in the third quarter, even though supply chain problems were constraining their ability to meet demand. Regarding input cost pressures, one respondent commented, \"Passing along rising prices does not seem to be denting demand.\"\nAgriculture, Energy, and Natural Resources\nDistrict agricultural conditions deteriorated somewhat since the previous report. While producers continued to benefit from solid commodity prices, most of the District remained in severe or worse drought condition. Yields and production of wheat and other small grain crops in District states for 2021 will be sharply lower than the previous year. Most of the District's corn and soybean crops were rated in fair or poor condition. District oil and gas exploration activity was unchanged since the previous report. District iron ore mines continued to operate at full capacity.\nMinority- and Women-Owned Business Enterprises\nBusiness activity reports were mixed among minority- and women-owned business enterprises (MWBEs) in the region. Tight labor markets continued to put pressure on MWBEs, and some found it difficult to compete with the higher wages offered by larger businesses. \"We cannot find enough workers, and short staffing is impacting our productivity,\" said an entrepreneur. Three-quarters of respondents to a recent survey targeting MWBEs said that their input costs were higher, and almost half reported having increased prices for their final products or services. Entrepreneurs expressed caution as the delta variant has disrupted momentum in the recovery and uncertainty as the immediate future has become harder to predict, but they also raised their need and willingness to innovate and adapt. Some expected an increase in capital expenditures in the next quarter.\nFor more information on the Ninth District economy, visit: minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

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"October 20, 2021\nSummary of Economic Activity\nEconomic activity in the Fourth District remained strong in recent weeks, although the pace of growth moderated somewhat amid persistent supply chain disruptions. Broadly speaking, demand for both consumer and business goods and services remained solid, but contacts in some sectors suggested that product shortages were resetting customers' expectations. For example, one auto dealer said that customers weren't coming into showrooms because they knew inventories were limited, and a manufacturer said that demand for its products was shifting based on the availability of close substitutes. On net, contacts expect demand for their goods and services to increase in coming months, but their optimism has been moderating since early summer as supply disruptions intensified and COVID cases rose. That waning optimism was accompanied by lowered expectations for capital spending. Meanwhile, most contacts indicated that input costs (labor and nonlabor) increased in recent weeks, and a majority had raised selling prices. Finally, in a now familiar refrain, labor demand remained solid, but many contacts continued to suggest that hiring was limited by a dearth of job applicants.\nEmployment and Wages\nEmployment increased modestly in recent weeks. More than 40 percent of our contacts reported increases in staffing, and half said that employment was steady. Many of those who reported no change said that they would hire more workers if workers were available. Several contacts noted that turnover had increased. In fact, some of those who reported declines in staffing said they could not fill recently vacated positions. Many firms said worker shortages hindered their ability to meet demand, thereby exacerbating supply chain disruptions. But one auto dealer said that supply chain disruptions were causing his labor challenges, adding, \"nothing to sell makes it hard to keep employees.\" Contacts noted very little change in labor availability since supplemental unemployment insurance benefits programs expired and many children went back to in-person instruction.\nHeightened competition for workers pushed wages up for more firms. Nearly 60 percent of contacts raised wages recently, while the remaining 40 percent said that wages had not changed. Increasingly, firms raised wages to retain employees \"as a preventive measure after losing some to poachers,\" as one contact stated it. In addition, many firms reportedly enhanced other parts of compensation (such as health insurance, tuition reimbursement, and time off) to attract and retain workers.\nPrices\nNonlabor input costs continued to rise. Nearly three-quarters of our contacts reported cost increases in the prior two months, while a quarter saw no change. Reports of cost increases were widespread across industry sectors but were most prominent in manufacturing and construction, in which supply chains were most disrupted. Many contacts in these sectors suggested that prices were rising \"across the board.\" The remaining firms often reported that just as some input costs decreased, others rose, resulting in higher overall costs. Looking forward, two-thirds of contacts expected costs to rise in the months ahead because they did not anticipate meaningful relief from supply chain disruptions.\nSelling prices continued to rise. Nearly 65 percent of all contacts, and 75 percent of retailers, said they increased prices in the prior two months. Many contacts argued that they increased prices to protect margins amid rising input and labor costs. However, others said that strong demand conditions allowed them to raise prices and boost margins. One manufacturer said that some of his largest multinational customers had recently initiated conversations with him offering \"generous\" price increases in order to secure delivery of product in the future. He said this is the first time a customer has come to him offering to pay higher prices.\nConsumer Spending\nConsumer spending increased modestly. General merchandisers and apparel retailers said that demand for goods remained strong, and many noted solid back-to-school sales. Hoteliers and restaurateurs that cater to regional leisure customers reported continued improvement in activity, though one hospitality contact said that business travel continued to lag behind leisure travel. Auto dealers reported a dip in sales despite generally strong demand as tight inventories and higher prices deterred some buyers. Contacts were optimistic that nonauto consumer spending would continue to improve in the coming months. However, auto dealers suggested that sales will remain weak until inventory levels recover.\nManufacturing\nDemand for manufactured goods grew strongly, though manufacturers' ability to meet that demand varied by sector. For example, steelmakers said that orders from automakers fell as chip shortages constrained vehicle production, while orders from agricultural equipment manufacturers rose as output in that sector increased. Supply chain disruptions remained broad, motivating some customers to order inputs ahead of time as a precaution against future delays or price increases. Some producers continued to sit on goods for which they could not secure shipping or could not finish assembling because of a shortage of labor or parts. On net, contacts expected conditions to improve in coming months, although the continued shortage of microchips, rising materials prices, and inflation fears tempered expectations.\nReal Estate and Construction\nDemand for residential real estate and construction remained strong. One real estate agent noted that home sales experienced a typical seasonal slowdown in recent weeks, but demand was stronger than usual for this time of year. Homebuilders also reported that demand was solid despite persistent supply chain disruptions that have led to price increases and extended lead times. Overall, contacts anticipated that activity would remain robust throughout the remainder of the year.\nNonresidential construction and real estate activity continued to increase as firms revisited expansion plans previously put on hold. One developer suggested that many clients have begun to move forward with new construction projects despite elevated prices to avoid losing their market share. Overall, contacts were optimistic that demand would remain robust, though many expressed concerns that persistent supply shortages could delay projects and dampen activity.\nFinancial Services\nBanking activity increased modestly, although growth cooled somewhat from that of recent reporting periods. Contacts noted that demand for auto loans and mortgages remained somewhat elevated even though limited inventories in both markets dampened activity. While business lending remained relatively soft, multiple contacts reported an improvement in demand and a stronger loan pipeline. Lenders said that delinquency rates for consumer and commercial loans were still low and that the number of active forbearance agreements for each continued to decline. Looking ahead, bankers were optimistic that loan demand, especially business lending, would continue to improve in the near term as the economy continues to grow.\nProfessional and Business Services\nDemand for professional and business services remained robust as their clients' outlooks for the overall economy continued to improve. Technology firms experienced robust demand as businesses furthered their investments in technology software and solutions. The need for authentication services also remained strong as consumers continued to favor remote transactions. Contacts expected demand to increase further throughout the remainder of the year as more businesses look to plan for the future and invest in additional technology.\nFreight\nFreight activity grew moderately from an already high level both because of an increase in international trade flows and continued economic recovery in the United States. Contacts reported that continued shortages of truck drivers and tractor trailers limited the sector's ability to meet demand, fueling the poaching of workers from competitors and preemptive wage increases. Looking forward, there is general optimism that strong demand will continue into next year and that carriers will maintain their above-prepandemic levels of pricing power.\nFor more information about District economic conditions visit: www.clevelandfed.org/region\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nOctober 20, 2021\nSummary of Economic Activity\nEconomic conditions have continued to improve at a moderate pace since our previous report. Contacts continued to cite labor shortages and supply chain disruptions as primary issues. Increased input costs have led to cost pressures across industries, and firms with the power to do so reported passing along these costs to their customers. Consumer spending has remained steady since our previous report. Residential real estate inventories increased slightly, but prices remained high. Industrial real estate has experienced strong growth, with major projects launched around the District. Banks reported declines in lending activity due to increased uncertainty related to the COVID-19 Delta variant.\nEmployment and Wages\nEmployment has increased modestly since our previous report, with widespread hiring attempts hindered by the continuing labor shortage. Firms reported various strategies to attract scarce workers. Some redesigned open positions to be more attractive; others held job fairs; others turned to offshoring; and many reported sign-on and retention bonuses. One large retailer planned to raffle off a car to seasonal employees with good attendance. Several firms emphasized a new focus on students and young workers: One contact at a transportation technical institute remarked that, in contrast to typical years, every student graduating this year has already found a job. Other contacts simply reported adapting to worker shortages\u2014automating jobs, cutting down on business hours, or turning to contractors as necessary. One Indiana school district, lacking bus drivers, temporarily returned to remote learning.\nWages continued to increase strongly in the tight labor market, with small firm wages rising more slowly. One real estate contact reported giving employees raises every pay period, which they feared was unsustainable; an agriculture employer reported that a 20% wage increase still left them with significantly fewer workers than they wanted.\nPrices\nPrices have increased moderately since our previous report. Contacts across industries reported increased input costs. Some industries, such as construction, have been able to pass these cost increases to consumers, whereas contacts in the healthcare industry noted difficulty passing along increases in input costs. One contact noted double-digit price increases on farming equipment. In the construction industry, contacts reported lower lumber prices but noted the high cost for items such as steel and shingles. One contact reported that steel suppliers will honor discussed prices only for a day.\nConsumer Spending\nGeneral retailers, auto dealers, and hospitality contacts reported that activity has been unchanged since our previous report. September seasonally adjusted credit and debit card spending increased in Illinois, Indiana, Mississippi, and Missouri relative to August and decreased in Arkansas and Tennessee. In West Tennessee, consumer perceptions of the current economic situation declined slightly and expectations for the future of the economy declined significantly. Auto dealers and restaurants continued to report that supply chain issues and labor shortages are restraining sales. A truck dealer reported record demand and all-time high profitability. A St. Louis hospitality contact reported that revenue per available room exceeded 2019 levels in early October for the second time since the pandemic began.\nManufacturing\nManufacturing activity has seen a moderate increase since our previous report. Firms in both Arkansas and Missouri reported upticks in new orders and production, although the rate of growth has slowed slightly. Supply chain delays and availability have continued to be issues, affecting the prices of intermediate goods in steel, concrete, and timber. Manufacturers are beginning to explore producing these goods domestically to address shortages. Contacts are still optimistic about future growth but remain concerned over global supply chains and wage inflation. The industry is undergoing significant physical expansion in the District, with plans for a paper mill in Henderson, KY, battery plants in Kentucky and Tennessee, and a speculative industrial warehouse in St. Louis.\nNonfinancial Services\nActivity in the nonfinancial service sector has increased slightly since our previous report. Airport passenger traffic remains near 80 percent of pre-pandemic levels due to strong leisure travel; several airport contacts were optimistic about business travel as more firms return to in-person work. Several transportation contacts noted that demand is strong, but shortages of shipping containers and barges remain an issue. A healthcare contact noted that, while revenue has improved since this time last year, surgery and emergency room revenues have not returned to pre-COVID levels. Several healthcare contacts mentioned that hospitals are busy, in part due to COVID patients, and face staffing issues.\nReal Estate and Construction\nThe residential real estate market has remained strong since our previous report. Inventory remains restricted, but there are some increases in inventory across all price ranges. Prices remained steady, but there are fewer bidding wars and some price reductions. Residential construction has remained strong since our previous report, but the industry is struggling with supply chain shortages and retaining workers. Many input materials continued to have extended lead times. Some buyers who purchased a property and planned to build on it have elected to delay construction until supply chain issues are resolved.\nThe commercial real estate market has remained mixed since our previous report. Industrial real estate remains strong, and many major firms are buying build-to-suit and spec industrial space across the District. The office market is improving, but prices and vacancy rates have not returned to pre-pandemic levels. One contact reported companies are more willing to sign leases but are still wary of signing full five-year lease contracts. There is very little financing available for office space, which is causing delays as landlords and tenants disagree over who should pay for repairs and improvements. The market for retail space struggled last year, but demand has improved rapidly since February. A contact in the healthcare sector noted that rising construction prices are hindering infrastructure updates for rural hospitals.\nBanking and Finance\nBanking conditions have worsened slightly since our previous report. Contacts noted a pause in lending activity due to uncertainty surrounding the Delta variant. Consumer, commercial, and industrial loans declined moderately, while real estate loans increased modestly. A contact in Kentucky reported strong growth in residential real estate lending due to higher construction costs. Delinquency rates remained low, but some lenders are concerned that delinquencies will increase as unemployment benefits have expired. Loan pricing remained competitive, and multiple contacts cited concerns over elevated deposit levels and interest margin compression.\nAgriculture and Natural Resources\nAgriculture conditions have slightly improved since our previous report. Overall crop yields have increased moderately over the previous year. Contacts are very optimistic about the current conditions in the District. Farmers have reported a strong harvest season combined with high prices, which have contributed to a strong season overall. Hurricane Ida caused some slight delays but was not a major disruption to the District's agribusiness. There is, however, some concern about rising input prices, global supply chain disruptions, and the lack of labor necessary for both low- and high-skilled agriculture work.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"October 20, 2021\nSummary of Economic Activity\nSolid expansion continued in the Eleventh District economy, though COVID-19 and labor and supply-chain constraints remained headwinds. Growth in the manufacturing and nonfinancial services sectors was strong, and retail sales rose at an average pace. Home sales were steady at elevated levels. Overall loan volumes rose broadly, and the energy sector continued to experience robust growth. Agricultural conditions were quite strong. Employment growth was robust, and wage growth remained highly elevated amid widespread labor shortages. Notable price increases were seen across sectors, with contacts noting that ongoing supply-chain disruptions continued to drive up costs. Outlooks improved, with most contacts expecting stronger business six months from now, though uncertainty increased.\nEmployment and Wages\nEmployment expanded robustly overall, though job growth moderated slightly in the service sector. Hiring picked up in manufacturing, energy, and retail despite continued reports of difficulty finding workers. These labor shortages continued to pervade other industries as well, perhaps most acutely for entry-level workers. Numerous firms said restrained headcounts were hampering expansion plans or even the ability to meet current demand. Some contacts noted delays and difficulties in bringing workers back onsite, either due to the resurgence of COVID-19 or increased pushback from employees to remain remote. Some staffing services contacts expect recruiting to become easier in upcoming months now that federal unemployment benefit programs have ended.\nWage growth remained highly elevated, and numerous contacts said they were having difficulty filling vacancies even at much higher wages. Multiple contacts cited entry-level wage increases of 15 to 20 percent over the past six months.\nPrices\nPrices continued to rise strongly, with upward pressure on both input costs and selling prices holding near historically high levels. Input costs rose fastest in the manufacturing sector, followed by oil and gas support services and retail. Supply-chain bottlenecks were widely cited as a key factor driving up costs. Many contacts reported passing on at least a portion of the higher costs to customers, though some noted their profit margins continued to be pressured by selling price increases not matching cost increases. Contacts in the construction industry noted elevated but fairly stable input costs overall, with declining lumber costs offsetting rises in other materials. Looking ahead, most contacts expect elevated price increases to continue for at least the next six months.\nManufacturing\nRobust expansion continued in the Texas manufacturing sector, though the vast majority of firms noted supply-chain disruptions or delays. In many cases these disruptions have been going on for a while, and firms have yet to see relief\u2014nearly 90 percent say supply issues are the same or worse now versus a month prior. Despite these challenges, output growth was widespread across sectors, led by nondurable goods manufacturing, primarily food and chemicals. Optimism waned amid rising uncertainty and continued labor and supply-chain constraints, though a majority of contacts still expect higher output six months from now.\nRetail Sales\nModerate sales growth continued in the retail sector. Growth was led by wholesalers, while auto dealers continued to report declining sales amid particularly acute supply-chain issues and tight inventories. Numerous contacts said transportation problems\u2014a shortage of containers, trucks, and truck drivers\u2014were exacerbating other supply-chain issues like limited product availability and extended lead times. Outlooks were slightly more bullish than six weeks ago, but retailers note it will take time to get out of the supply issues they are experiencing.\nNonfinancial Services\nTexas service sector activity continued to grow at a slightly above-average pace, with revenue growth strongest among professional, scientific and technical services firms. Solid revenue growth was also seen in the health care sector after some weakness in prior months. Leisure and hospitality firms saw a decline in revenues over the reporting period, citing cancellations and slowed business due to the Delta variant. Staffing firms reported strong demand across industries, with particularly robust demand in healthcare, construction, and information technology. An airport said summer passenger volume in 2021 was more than double that of 2020, but down about 15 percent from summer 2019. The contact also noted that August domestic ecommerce air cargo volumes were higher than any August in the past 20 years, though international cargo volumes have yet to recover to pre-pandemic levels. Shipping cargo volumes at Texas ports also pushed to a record high in August, driven by increased consumer spending and retailers trying to build up inventory. Overall, outlooks remained strong with most firms expecting higher revenues six months from now, though uncertainty continued to creep higher.\nConstruction and Real Estate\nHousing demand remained strong. Contacts noted that sales were levelling off at above-average levels, in part due to tight inventories, buyer hesitancy and declining affordability. Home price appreciation moderated, but land and lot prices continued to accelerate. Labor challenges and supply shortages remained widespread, resulting in delays in lot development and home closings. Builders' margins have widened, however, and outlooks were optimistic.\nApartment demand increased further, with leasing activity rising in both urban and suburban locations. Annual rent growth was at a record high in many Texas markets. For industrial properties, contacts noted robust growth in demand and construction. Net absorption of office space was mixed, but availability of sublease space and vacancies remained high, with little improvement expected in the near term. Activity in the retail space market was generally positive since the last report. Investment sales activity was elevated for industrial and multifamily properties.\nFinancial Services\nLoan demand growth remained solid, pushing up overall loan volumes. Residential real estate loans led volume growth over the past six weeks, followed closely by commercial real estate, and commercial and industrial lending picked up notably from the prior period. Nonperforming loans continued to decrease, and credit standards and terms remained largely unchanged. According to financial industry contacts, general business activity continued to increase, though respondents cited concerns that supply-chain disruptions, labor shortages, and the Delta variant were disrupting businesses and increasing uncertainty. Outlooks for loan demand and broader business activity six months from now remained optimistic.\nEnergy\nElevated growth continued in the oil and gas sector. Optimism improved among contacts, spurred by higher oil and natural gas prices, though supply-chain problems continued to worsen. Contacts said current prices are conducive to increasing production, and drilling and well completion activity rose steadily over the past six weeks. Orders for new equipment were up, though availability is narrower, lead times longer, and prices higher. Looking ahead, contacts expect rising production and noted more upside risk than before.\nAgriculture\nSoil conditions remained mostly adequate in Texas, though drought conditions persisted in parts of southern New Mexico. Crop conditions were quite favorable, boosting expectations for substantially higher production this year than last across a variety of crops, including cotton, sorghum, and corn. Agricultural prices generally softened slightly over the reporting period. Pasture conditions were fair to good, and promising soil moisture conditions for the planting of winter wheat increased optimism for crop performance.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

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"Beige Book Report: New York\nOctober 20, 2021\nSummary of Economic Activity\nEconomic growth in the Second District slowed to a modest pace, as supply disruptions and labor shortages have impeded economic activity. Still, contacts remained largely optimistic about the near-term business outlook. The job market has remained exceptionally tight, as firms continued to add workers and raise wages. Businesses reported ongoing widespread escalation in both input costs and selling prices. Consumer spending was flat to slightly lower, pulled down by sharply weaker vehicle sales attributed to severe supply shortages. The home sales market was mixed but on balance a bit stronger, while rental markets have continued to rebound; there were scattered signs of improvement in office markets. Both residential and commercial construction activity increased modestly, despite shortages of materials. Finally, contacts in the broad finance sector reported flat activity, while regional banks reported steady loan demand and unchanged delinquency rates.\nEmployment and Wages\nThe job market has remained exceptionally tight, with businesses continuing to add workers\u2014particularly in the leisure & hospitality and transportation industries. Most contacts noted severe labor shortages despite federal supplementary jobless benefits expiring. Many businesses reported difficulty hiring and retaining workers, and some contacts noted that more people are retiring early. An upstate New York employment agency noted especially strong demand for tech workers and salespeople. A New York City agency reported more moderate hiring but expects a pickup as companies bring more people back to the office. Many businesses said they plan to continue hiring in the months ahead.\nWages have continued to grow strongly across all service industries except finance, where wage hikes are reported to be modest. A New York City employment agency similarly noted that its clients\u2014mostly financial service firms\u2014have been holding the line on wage gains. However, agencies in upstate New York reported sizable wage increases. Looking ahead, businesses across all major industries expect widespread wage hikes to persist.\nPrices\nFirms continued to report broad-based escalation in input prices\u2014particularly in goods production and distribution industries. Rising prices were widely mentioned for steel, aluminum, lumber, gasoline, and freight-related services. Contacts in all sectors anticipate widespread input price hikes in the months ahead.\nSelling prices continued to climb, with particularly widespread price hikes again reported by manufacturers and wholesalers. Notably, more retailers than at any time in recent years indicated that they have raised prices. A sizable proportion of contacts in most sectors plan to hike prices in the months ahead.\nConsumer Spending\nConsumer spending weakened in the latest reporting period. Non-auto retailers reported steady to lower activity in recent weeks and have grown somewhat less optimistic about the upcoming holiday season. One retail chain indicated that sales at New York City stores continued to lag well below pre-pandemic levels, largely due to the lack of office workers and international visitors. Consumer confidence among New York State residents, though still fairly high, fell to its lowest level of the year in September.\nAn intensifying dearth of new vehicle inventories has led to a sharp drop-off in sales. Most of the incoming inventory has already been pre-sold. Ongoing severe microchip shortages have constrained inventories of new vehicles and replacement parts, and dealers expect this situation to continue at least through the end of the year. Moreover, the decline in new sales has also led to a dwindling supply of used autos and a subsequent drop in sales due to fewer trade-ins.\nManufacturing and Distribution\nWhile wholesale trade businesses indicated some further moderation in growth, manufacturers continued to report fairly solid growth, and those in the transportation & warehousing sector noted ongoing brisk growth. Contacts noted that their businesses have been increasingly constrained by widespread supply delays and disruptions and worker shortages. Looking ahead to the next six months, companies in these sectors remained widely optimistic about business prospects, despite concerns about labor shortages and supply bottlenecks.\nServices\nService industry contacts reported some deceleration in activity to a modest pace of growth in recent weeks. Contacts in the leisure & hospitality and information sectors have become somewhat less upbeat about both recent trends and the near-term outlook. However, businesses engaged in professional & business services and education & health services remained positive about future business prospects.\nTourism has continued to increase since the last report. Rochester's major convention center recently re-opened to hosting major events, giving a lift to local tourism. However, in much of upstate New York, a dearth of Canadian visitors, due to the ongoing border closure, has constrained growth. In New York City, tourism activity picked up in September, buoyed by the UN General Assembly and the U.S. Open, as hotel occupancy rates climbed to their highest levels since the start of the pandemic. While domestic leisure visitations are roughly back to normal levels, business and international travel to the city have remained moribund\u2014the latter driven largely by ongoing travel restrictions.\nReal Estate and Construction\nHousing markets have been steady to slightly stronger, on balance, in recent weeks. Sales activity picked up noticeably across New York City, far exceeding pre-pandemic levels; the inventory of unsold homes receded but remained higher than normal, especially in Manhattan. Across the rest of the District, sales activity slowed somewhat, constrained by very low inventories. Home prices continued to rise, approaching pre-pandemic levels in Manhattan but far exceeding them across the rest of the District.\nNew York City's rental market has continued to rebound, with vacancy rates declining and leasing activity remaining brisk, though a bit less so than during the summer. Rents have continued to rebound, though a local industry expert noted a striking divergence in Manhattan between the lower and higher ends of the market\u2014underscoring this point, rents are up roughly 2 percent from 2019 levels in doorman buildings but down roughly 15 percent in non-doorman buildings. A good deal of new apartment development (rentals and condos) is currently in the pipeline.\nCommercial real estate markets have improved somewhat across the District. New York City's office market, which had been weakening steadily throughout the pandemic, appears to have stabilized in recent weeks with availability rates and asking rents leveling off. Across the rest of the District, office vacancy rates were steady to slightly lower, and rents were steady to up modestly. The industrial market continued to strengthen, with vacancy rates declining to near record lows and rents rising at a 5-10 percent pace across the District. The retail leasing market, in contrast, has remained sluggish.\nBoth multi-family residential and non-residential construction starts have picked up further in recent weeks, and there continues to be a substantial amount of ongoing construction. However, industry contacts reported that activity slowed somewhat in September, citing major delays in acquiring construction materials, as well as disruptions from tropical storm Ida in early September, which caused extensive flooding. Still construction sector contacts continue to be cautiously optimistic about prospects for the months ahead.\nBanking and Finance\nBusinesses in the broad finance sector indicated that activity has flattened out since the last report. Some contacts have expressed growing concern about cyber- and ransom-ware attacks, both in their own industry and among customers and borrowers. Small to medium-sized banks across the District reported that loan demand was flat overall\u2014stronger for commercial mortgages and commercial & industrial loans but weaker for consumer loans and residential mortgages. Refinancing activity remained little changed, on net. Loan spreads narrowed for consumer loans and commercial & industrial loans. Credit standards and delinquency rates were little changed across all categories.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"October 20, 2021\nSummary of Economic Activity\nEconomic activity in the Seventh District increased modestly in late August and September, and contacts expected growth to continue at that pace in the coming months. Labor and materials supply constraints as well as the spread of COVID-19 continued to weigh on the expansion. Employment, manufacturing, and business spending grew moderately, but consumer spending and construction and real estate were little changed. Wages and prices increased strongly while financial conditions were flat. District corn and soybean harvests were larger than expected and near record levels.\nEmployment and Wages\nEmployment increased moderately over the reporting period, and contacts expected a similar pace of growth over the next 12 months. Contacts across sectors reported continued difficulty in finding workers at all skill levels, though a few contacts noted an uptick in the number of job applicants. Some businesses, particularly in the restaurant and manufacturing sectors, continued to limit operating hours because of a lack of workers. Contacts pointed to childcare challenges, retirements, COVID-19 health safety concerns, and vaccination requirements as factors limiting labor supply. Many contacts indicated that they were delaying the return to in-person work because of high numbers of COVID-19 cases. In addition, absences due to COVID-19 exposure were higher than a few months ago. Overall, wage and benefit costs increased strongly. A scarcity of applicants for open positions led numerous contacts to raise wage offers, and many reported giving additional pay raises on top of regular annual increases to retain their existing workforce. Some contacts said they did not hire applicants because asking wages were higher than their business models could support. There were reports of workers shifting sectors to pursue higher compensation and preferred working conditions.\nPrices\nOverall, prices rose strongly in late August and September, though contacts expected increases to slow to a moderate pace over the next 12 months. There were large increases in producer prices, driven by passthrough of higher materials, energy, labor, and transportation costs. A few contacts noted that they were changing prices more frequently than usual. Consumer prices moved up robustly overall. Contacts pointed to solid demand, limited inventories, increased costs, and a greater ability to pass cost increases on to customers as sources of the higher consumer prices.\nConsumer Spending\nConsumer spending was little changed over the reporting period, but remained at a high level. Spending on leisure and hospitality declined, especially at hotels and restaurants. In contrast, nonauto retail sales increased moderately. Contacts indicated that demand for furniture and home furnishings, appliances, and electronics remained robust. Spending for home improvement and groceries was flat but continued at high levels. Light vehicle sales decreased somewhat, as declines in new vehicles outweighed a rebound in used vehicle sales. Auto dealer profit margins remained high but dropped further from their summer peak. Contacts reported that ordering vehicles according to customers' preferences was likely to become standard practice, allowing for lower dealer inventories. Auto service and parts sales were reported to be up moderately.\nBusiness Spending\nBusiness spending increased moderately in late August and September. Retail inventories remained at low levels in numerous sectors due to supply chain bottlenecks, and contacts expected the issues to continue into the second half of 2022. New and used light vehicle inventories were incredibly low, as auto production remained hampered by supply constraints. In manufacturing, for-sale inventories were very low, and there were shortages of a wide range of inputs including certain metals, plastics, and microchips. Demand for transportation services remained elevated, with many contacts reporting continued domestic and international shipping delays. Capital expenditures increased moderately, and contacts expected a similar pace of expansion over the next twelve months. Commercial and industrial energy consumption was flat but remained higher than pre-pandemic levels.\nConstruction and Real Estate\nConstruction and real estate activity was similar to that of the prior reporting period. Residential construction was unchanged, as shortages of materials and labor continued to slow projects. Residential real estate activity was also little changed. Home sales were flat, while prices increased moderately. One contact pointed to rising inventories as a source of cooling price growth. Rents were up modestly, and contacts noted that signing bonuses were now lower than before the pandemic. Nonresidential construction activity increased slightly. Growth was concentrated in the industrial segment, with contacts highlighting strong demand for facilities to house inventory close to company operations and customers. In contrast, office construction was reportedly weaker. Commercial real estate activity was unchanged. Leasing and sales of industrial and multi-family properties remained steady at high levels. Meanwhile, leasing and sales activity within the office segment remained substantially below pre-pandemic levels. That said, office property showings increased in recent weeks, and some offices moved to new spaces to avoid the costs of reconfiguring to accommodate COVID-19 protocols.\nManufacturing\nManufacturing production grew moderately in late August and September, and contacts reported growing order backlogs. The majority of manufacturing contacts indicated that business was at or above pre-pandemic levels, with most running at full capacity subject to ongoing labor and logistical challenges. Auto output remained flat at low levels as shortages of microchips and other materials limited production, leading to some order cancelations for auto parts suppliers. Demand for heavy machinery grew moderately, led by higher sales in the agriculture and construction industries. Heavy truck demand was strong, particularly for used trucks. Contacts reported higher steel demand from most industries, particularly for specialty products. Steel service center inventories increased, but were expected to stay below pre-pandemic levels over the long term. Building materials demand remained solid, supported by homebuilding and remodeling projects.\nBanking and Finance\nFinancial conditions were flat on balance over the reporting period. Participants in equity and bond markets reported little net change in conditions. Business loan demand was also about the same, with contacts reporting continued strong demand for M&A loans. Business loan quality was unchanged overall, though standards loosened somewhat. In consumer markets, there was a mild increase in loan demand. Contacts noted that residential mortgage activity continued to be strong. With all-time low delinquency rates in the housing, auto, and credit card markets, both loan quality and standards were unchanged.\nAgriculture\nIn spite of drought in some areas, corn and soybean harvests in the District were larger than expected and near record levels. More plentiful supplies of both crops were putting downward pressure on prices. That said, corn and soybean prices were higher than a year ago. Cattle prices were flat, while milk prices recovered some. Facing higher feed costs, dairy farm margins tightened. Rising energy prices and logistical problems were creating concerns about the cost and availability for 2022. Farmland prices and rents continued to grow. Cash from government programs and product sales were holding back demand for agricultural lending.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

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"Beige Book Report: San Francisco\nOctober 20, 2021\nSummary of Economic Activity\nEconomic activity in the Twelfth District strengthened moderately during the reporting period of mid-August through September. The overall price level moved up notably, driven by increases in transportation and input costs. Conditions in the labor market tightened further as modest increases in employment were accompanied by strong upward wage pressures in almost all sectors. Retail sales moderately expanded while activity in consumer services slowed down somewhat. Conditions in the agriculture and resource sectors as well as the manufacturing sector strengthened somewhat, as consumer demand remained solid. Activity in the residential real estate market expanded at a strong pace, while commercial real estate activity was largely subdued. Lending activity picked up further over the reporting period.\nEmployment and Wages\nConditions in the labor market remained tight while overall employment levels expanded modestly. Demand for workers continued to be exceptionally strong. Contacts across the District reported having substantial difficulties finding qualified candidates, particularly for lower-skilled positions. Industries reporting the tightest constraints included hospitality, retail, and food services. In fact, a few contacts in these sectors noted that they did not see any significant improvement after the expiration of supplemental benefits or the start of the school year. Worker shortages were also noted in manufacturing, higher education, nonprofit organizations, and financial institutions. Most contacts mentioned needing longer time for filling open positions, although some reported they were having an easier time finding remote workers, especially those from nonurban areas.\nWage growth climbed further due to intensified competition for talent and workers' willingness to switch jobs, with one contact from the banking sector characterizing it as a wage war. Apart from increasing starting salaries as much as 20 percent by some employers' estimates, most contacts across sectors reported offering hiring bonuses, gift cards, and other incentives. Conversely, wages in the entertainment and energy sectors remained mostly flat. In addition, an entertainment industry contact in California reported an upcoming union vote to decide whether its members will go on strike to oppose low wages and long working hours.\nPrices\nPrices moved up notably over the reporting period. Construction material costs, such as steel, asphalt, and wallboard, increased sizably. Lumber prices, despite receding and stabilizing during the summer months, started noticeably increasing in some areas recently. Robust demand for the regions' agricultural products together with lower crop yields continued to drive food prices up. Additionally, price pressures arose from increased transportation, energy, and labor costs. One banking sector contact noted rising labor costs as having the biggest impact on their business and prices.\nRetail Trade and Services\nSales of retail goods, notably for food and beverage, picked up over the reported period. Several contacts mentioned strong e-commerce sales. High demand, labor shortages, and supply chain disruptions have kept inventories low, in some cases restricting retailers from meeting consumer demand. Sales of vehicles and electronics were hindered by semiconductor shortages and other ongoing disruptions to inventory building.\nActivity in the consumer and business services sectors slowed down somewhat. Although demand in travel, leisure and hospitality, and food services had been rising, the recent spike in Delta variant cases has dampened growth in these sectors. Hospitality services related to business travel also continued to underperform. One contact noted many reservations were cancelled as in-person business events were switched to only being held virtually. On the supply side, reports across the District noted that labor shortages in hospitality and food services have constrained business capacity. One contact reported that many hotel rooms remained vacant due to the lack of staff to service them. Demand for health-care services remained high, particularly for COVID-19 testing. Several contacts noted an increase in clinical volumes especially due to pent-up demand for elective procedures that had been delayed by COVID-19.\nManufacturing\nActivity levels in the manufacturing sector rose slightly. Operational disruptions due to the pandemic have eased somewhat, normalizing manufacturing activity and capacity utilization. Nonetheless, supply-chain bottlenecks and labor shortages continued to hold back many manufacturing processes. Manufacturers expecting disruptions to persist mentioned plans to stockpile raw materials and find suppliers closer to their production sites. High demand for renewable energy continued, although with some delays in orders as customers await more clarity on new federal policies.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource sectors strengthened somewhat. Demand for the regions' agricultural products continued to be robust both domestically and internationally. Crop yields on tree fruit, wheat, and grapes were lower due to warmer temperatures and water shortages. A few contacts reported farmers leaving a portion of their acreage fallow to use water on more profitable crops. As a result, some fruit inventories were reduced. Several contacts noted price pressures coming from increased transportation and labor costs. Some producers in the Pacific Northwest highlighted that labor shortages led them to hire most of their seasonal workers through the temporary workers visa program as opposed to locally. Supply chain disruptions and shipping delays continued to weigh on producers with one contact reporting about 25 percent of orders being unshipped. The overall sales volume for the energy sector remained at normal levels, despite the shift in customer usage from commercial to residential during the pandemic.\nReal Estate and Construction\nActivity in the residential real estate market expanded at a brisk pace. Demand for both single and multifamily housing was strong across the District. Lack of affordable single-family housing is further increasing the demand for multifamily houses, with several contacts observing growth in new construction to meet current demand. Additionally, a few contacts noted increases in building permit activity and construction loan requests for single-family and multifamily projects. Reports from Alaska point at continuing delays in construction due to uncertainty about the availability and cost of labor and materials. House prices continued to increase across the region. Several Southern California contacts reported noticeably strong price surges in recent weeks, including rents. However, a report from Arizona suggested that prices have stabilized somewhat in the region, yet at a higher level.\nCommercial real estate activity was largely subdued. The spread of the Delta variant as well as labor shortages hindered the recovery of office, retail, and hotel sectors. Consequently, rents and leases in commercial real estate were noted to have fallen, and vacancy rates increased largely in California. Conversely, conditions in the industrial real estate sector strengthened, partially due to increased demand from manufacturers.\nFinancial Institutions\nLending activity picked up further over the reported period. Consumer demand for loans remained strong, with most origination stemming from residential loans and credit card lending. At the same time, auto lending was muted due to inventory restrictions. Bankers across the District highlighted that loan competition was reportedly at record highs, as liquidity levels remained elevated and interest margins were further squeezed. Business investments were largely muted due to uncertainty faced by business owners.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

/beige-book-reports/2021/2021-10-ph

"October 20, 2021\nSummary of Economic Activity\nOn balance, business activity in the Third District grew modestly \u2013 a slower pace than during the prior Beige Book period. Moreover, activity in most sectors had still not returned to pre-pandemic levels. The rate of all persons being fully vaccinated against COVID-19 was about 60 percent. However, COVID-19 cases rose throughout most of the period, which was widely cited by contacts as prompting confidence to slump and activity to flag. Many firms reported imposing vaccine mandates with relatively few resignations. Generally, contacts expressed greater concerns about ongoing supply chain disruptions and persistent labor shortages. Net employment continued to grow modestly, while prices and wages rose moderately. About one-half of the nonmanufacturers and one-third of the manufacturers expressed positive expectations for continued economic growth over the next six months \u2013 a further narrowing of optimism. Numerous firms indicated that they had learned to produce with fewer employees and, therefore, did not expect to refill all prior positions.\nEmployment and Wages\nEmployment continued to grow modestly overall. The share of firms reporting employment increases held steady at one-fifth of the nonmanufacturing firms but edged below one-third among the manufacturers. Overall, increases in average hours worked edged lower among nonmanufacturers (to one-fifth) but rose among manufacturers (to one-third).\nDespite the return of children to school and the end of enhanced unemployment benefits, staffing firms and other contacts reported only a slight uptick in new applicants, at best. Many interview candidates were arriving with other offers in hand. Firms are also working harder to retain workers by raising wages. Contacts noted that childcare issues, early retirements, and general burnout continued to depress the labor supply.\nApart from labor supply issues, many contacts do not expect to employ as many workers for the same level of output as they had before. Manufacturers, builders, retailers, and hospitality managers all note that operational changes and automation are allowing their businesses to function with fewer workers.\nWages continued to rise moderately. The share of nonmanufacturing firms reporting higher wage and benefit costs per employee held steady at two-fifths \u2013 comparable with pre-pandemic levels. Only a few firms reported lower compensation. Wage pressures remained high for lower-wage jobs; one staffing firm wouldn't accept new clients that offer below $15 an hour. Wage pressures are rising for higher-wage positions as well. One firm is now offering up to $90,000 for a second-year CPA position that might have commanded $65,000 before the pandemic.\nPrices\nOn balance, prices continued to rise moderately over the period. The share of manufacturers reporting higher prices for factor inputs edged lower to about 70 percent, while those receiving higher prices for their own products remained near one-half. The share of nonmanufacturers reporting higher prices for their inputs remained near one-half, while the share receiving higher prices from consumers for their own goods and services edged lower to below one-fourth.\nAbout 60 percent of the manufacturing contacts reported they expect to pay higher prices over the next six months, and slightly more than that expected to receive higher prices for their own goods. According to contacts in manufacturing, construction, and finance, there is too much uncertainty and too little labor to pursue capital expansions that might address the product scarcity and high prices resulting from the supply chain disruptions.\nManufacturing\nOn average, manufacturing activity continued to grow moderately. However, while net increases of shipments continued, new orders fell further from the prior period's level. Net backlogs and delivery times continued to increase, but among fewer firms. Net inventories rose again after a brief period of decline.\nContacts reported no end in sight to the ongoing supply chain disruptions. Many firms reported long delays for obtaining key factor inputs while also noting unreliable delivery service of completed orders via their distributors. Overall, production levels and employment remained below pre-pandemic levels.\nConsumer Spending\nRetailers (nonauto) and restaurateurs reported slight, incremental growth. Some noted that consumers had retreated a bit as COVID-19 cases rose again. Supply chain disruptions and labor shortages continued to limit shelf inventories and hours of operation.\nOnce again, supply chain issues were most severe for auto dealers. Contacts reported that new car sales were down sharply \u2013 inventories on dealers' lots were numbered in single digits or the teens rather than dozens or hundreds as is the norm. The disruptions were no longer limited to microchips. Contacts noted numerous other components that have been held up by plant shutdowns and bottlenecks throughout the global supply network.\nTourism continued to decline modestly. Contacts noted that the Delta variant wave further delayed business travel plans just as leisure travel entered its seasonal downturn. While domestic tourism remained strong at resort locations, contacts in various sectors noted that conferences and trade shows were still being canceled.\nNonfinancial Services\nOn balance, nonmanufacturing activity grew modestly \u2013 a bit slower than last period. The share of firms reporting increases in sales and in new orders held steady; however, the share reporting decreases rose significantly.\nMoreover, output remained below pre-pandemic levels for most sectors. Even as some entertainment venues reopened for the first time, other firms reported that consumers had pulled back as Delta variant cases rose. Many firms also delayed their return to the office; one reversed its prior return.\nFinancial Services\nThe volume of bank lending (excluding credit cards) held steady during the period (not seasonally adjusted); during the same period in 2019, by contrast, loan volume growth was strong. Commercial and industrial loans continued to contract significantly, while home equity lines fell modestly. Auto lending, home mortgages, and other consumer loans grew modestly, and commercial real estate lending grew slightly. Credit card volumes grew moderately \u2013 faster than the slight pace during the same period in 2019.\nBankers, accountants, and bankruptcy attorneys continued to report few problems with bad debt. However, they noted increased mergers and acquisitions, or closings, as small business owners seek early retirement at increasingly younger ages. A dry cleaner closed on the expectation that demand would not return. A bar owner was worried because fewer people were staying between 10:00 p.m. and closing \u2013 a period that previously provided a healthy percentage of its profits.\nReal Estate and Construction\nHomebuilders continued to note a slight decline in sales but still describe the overall market as strong. The number of serious buyers remains limited by higher prices and patience, as most current contracts are for delivery in mid-2022. Existing home sales held steady with no significant increase of new sellers, but somewhat less frenzy from buyers. Multiple offers and cash deals are still common but offers are not as high above asking price as earlier.\nConstruction activity for nonresidential projects ebbed slightly. While warehouse, institutional, and multifamily projects remain strong, the overall pipeline of new projects narrowed as uncertainty clouds the office market. Likewise, while leasing activity was strong for industrial and lab space, demand for office space fell. Expectations that some firms will downsize their workforces and others will shift to more permanent remote workforces are being realized as the office sublease market has become more active.\nFor more information about District economic conditions visit: www.philadelphiafed.org/research-and-data/regionaleconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2021/2021-10-ri

"October 20, 2021\nSummary of Economic Activity\nThe regional economy grew modestly in recent weeks. Firms across a variety of sectors noted that demand outpaced their ability to meet it because of shortages in labor, finished goods, parts, and raw materials. Manufacturers saw a slight slowdown in activity amid strong demand due to labor and input constraints. Ports and trucking companies continued to report robust volumes and difficulties delivering those shipments because of labor and equipment shortages. Retail sales increased modestly and saw low levels of inventory, some of which were due to the microchip shortage. Travel and tourism slowed slightly but remained strong, overall. Restaurants struggled to keep up with demand and also faced challenges with the availability of labor and ingredients. Demand for nonfinancial services rose moderately and firms struggled to meet demand amid labor and input shortages. Residential real estate demand remained strong, but sales decreased modestly in recent weeks. Commercial real estate leasing rose modestly, with growth mainly coming from the industrial and multifamily segments. Financial institutions saw modest growth in loan activity, overall. Employment rose modestly, but the demand for workers strengthened. On balance, wages grew moderately and employers continued to offer bonuses to recruit and retain workers. Price growth held steady at an elevated rate.\nEmployment and Wages\nTotal employment in the Fifth District rose modestly in recent weeks. The demand for workers strengthened from an already robust level, and employers increasingly reported difficulties filling open positions. Many firms also saw increased turnover, leading some to offer both monetary and nonmonetary incentives, such as flexible work arrangements, to retain staff. A few employers expressed concern that federally mandated COVID regulations, such as vaccine requirements, could exacerbate their workforce challenges. Average wages increased moderately as firms offered higher starting pay and increased wages to recruit and retain staff. Many also continued to provide sign-on and stay-on bonuses.\nPrices\nPrice growth was little changed in recent weeks but remained significantly elevated on a year-over-year basis. According to our surveys, service sector firms reported, on average, slightly more than four percent growth in their selling prices compared to last year. Services firms continued to report strong price growth for inputs as well, but those prices moderated slightly in recent weeks. Manufacturers, on the other hand, reported a slight increase in their selling prices and a sharp increase for input costs.\nManufacturing\nFifth District manufacturers reported a slight slowing of activity since our last report. While many manufacturers still saw strong demand, labor constraints and shortages of materials limited production. Long lead times and high prices of inputs led some manufacturers to substitute inputs or halt production of certain products. Additionally, many manufacturers were unable to obtain packaging or saw shipping delays on finished products. A cabinet manufacturer reported that customers were not able to accept orders on schedule because of construction delays. Some manufacturers also reported that delays in obtaining parts to repair machinery slowed production.\nPorts and Transportation\nFifth District ports saw strong growth in recent weeks, as volumes continued to break records. Growth was largely driven by imports, but exports grew as well. Imports of furniture, food, and machinery showed especially strong growth while agricultural products drove much of export growth. While auto parts held steady, finished auto imports dropped amid the microchip shortage. One contact noted that vessels normally used for finished new vehicles are now being used to ship trailers of goods. Port operations were smooth on the vessel side, but delays in inland transportation left imports sitting at the ports for extended times. These delays were caused largely by shortages of chassis and drivers as well as rail delays and warehouse space constraints. One contact noted that companies are increasingly storing products on chassis, exacerbating the problem.\nFifth District trucking companies reported moderate increases in demand from already high levels since our last report. Volumes were high in nearly all areas of both retail and industrial shipping. Truckers were unable to meet demand and had to turn away business from both new and existing customers, as a shortage of drivers constrained capacity. Some companies also struggled with shortages of trucks and trailers as new vehicles and repair parts were delayed.\nRetail, Travel, and Tourism\nFifth District retailers reported a modest increase in demand since our last report. However, lack of inventories often limited actual sales. Supply of automobiles was especially low, which contacts attributed to the microchip shortage. High prices led to record profits for some auto dealers, but contacts believed profits were not sustainable, as inventories continue to drop. Other retailers also struggled with long lead times for and limited availability of products as well as high shipping costs. Supply chain disruptions disproportionately affected smaller retailers who were often unable to secure containers for imports.\nTravel and tourism in the Fifth District were strong but decreased slightly in recent weeks. The seasonal shift from leisure to business travel led to this slowdown, as many businesses have not resumed normal travel operations. Despite the slowdown, hotels saw strong bookings and high rates, but many limited services and the number of rooms offered because of staffing shortages. Restaurants also were unable to meet high demand and had to cut operating hours because they did not have enough employees. Many restaurants struggled with availability of ingredients and were forced to change their menus daily, depending on what ingredients they received.\nReal Estate and Construction\nDemand for Fifth District homes remained robust but decreased modestly in recent weeks. Realtors reported they continued to get multiple offers on homes but fewer offers than in the past year. Sale prices rose overall, but sellers increasingly had to sell for under listing price. Inventories and average days on the market were low but increased somewhat as more homes came onto the market. Builders continued to struggle with low inventories and supply chain disruptions that delayed construction. Many sellers of existing homes also experienced delays getting new appliances, paint, or other materials they wanted for improving homes before showing them.\nCommercial real estate leasing increased modestly since our last report. More companies looked to lease office space, but many remained hesitant because of uncertainty surrounding space needs, and occupancy was little changed. Rents held steady, and concessions and incentives remained high, mostly consisting of free rent at the beginning of a lease and increased tenant improvement allowances. Demand and rental rates for industrial leasing remained high. Contacts reported rising demand for restaurant space, as new restaurants opened and existing ones added locations. Multifamily leasing was strong, as landlords saw high occupancy and rising rental rates.\nBanking and Finance\nOverall, respondents reported that loan activity was modest this period, with moderate growth in residential mortgages amid continued low rates. Financial institutions indicated a slight increase in demand for commercial real estate and business loans, but noted that firms are reluctant to make capital investments due to uncertainty related to the Delta variant and supply chain shortages. Auto lending has decreased due to lack of inventory on car lots. Deposit growth was moderate despite many banks further lowering rates on interest-bearing accounts. Credit quality remained excellent, but a few respondents noted increased rate competition on loans.\nNonfinancial Services\nNonfinancial services firms reported a moderate increase in demand in recent weeks, but many businesses indicated that they were not able to fully meet demand due to shortages of workers as well as shortages and delays in receiving other business inputs. In many cases, those shortages also led to higher costs. Community college enrollment remained below pre-pandemic levels. Meanwhile, nonprofit organizations generally saw strong giving and were hiring, but they had to compete with for-profit companies for workers.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2021/2021-09-ri

"September 8, 2021\nSummary of Economic Activity\nThe regional economy continued to grow at a moderate rate in recent weeks, but firms across a variety of sectors reported constraints to growth. Manufacturing activity picked up moderately, but some manufacturers were unable to keep up with demand due to shortages of inputs and labor. Ports and trucking companies continued to report strong demand growth from already high volumes. Retailers reported moderate growth in sales but faced low inventory levels, longer lead times, and higher costs. Travel and tourism remained strong, largely driven by consumer travel. Home sales slowed slightly, and more homes came on the market, but the market remained strong overall. Commercial real estate activity picked up moderately in recent weeks although office vacancies remained high. Reports from financial institutions echoed that demand for mortgages eased but was somewhat offset by moderate commercial loan growth. Nonfinancial services reported little change in recent weeks as several firms cited labor and inventory shortages constraining growth. Employment rose moderately and demand for workers intensified, giving way to moderate wage growth. Price growth picked up in recent weeks and was robust compared to a year ago as many firms increased prices in response to higher costs.\nEmployment and Wages\nEmployment in the Fifth District increased moderately since our previous report. Demand for workers intensified with contacts across industries reporting an acute shortage of labor. In several cases, the shortage of workers constrained growth and led some firms to modify business operations by reducing hours or services. Some employers noted that the rise of COVID cases due to the Delta variant led to delays and challenges bringing workers back to the office. Wages rose moderately, on balance, as contacts reported increasing wages to both recruit and retain workers. One manufacturer noted that they not only increased starting wages but also offered guaranteed raises after three and six months.\nPrices\nPrice growth increased moderately in recent weeks and, compared to a year ago, price growth was robust. According to our surveys, both manufacturing and service sector firms reported a substantial rise in prices paid for non-wage inputs in recent weeks, particularly for materials in short supply due to global supply chain disruptions. Gas and freight prices also rose from already high levels. Many firms reported raising their prices in response to higher input costs for materials, energy, transportation, and labor.\nManufacturing\nFifth District manufacturers saw moderate growth in shipments and new orders in recent weeks. Furniture, food, and packaging manufacturers saw especially high demand, which they were often unable to meet. Inventories of both materials and final products declined. Lead times continued to lengthen, and many manufacturers of perishables turned away business. Low and unpredictable supply of inputs as well as labor shortages constrained production. Contacts also noted increasing difficulty finding transportation, both domestically and internationally, which was delaying shipments of finished products as well as arrivals of materials.\nPorts and Transportation\nFifth District ports saw robust growth in volumes since our last report, mostly driven by imports. Furniture imports were especially strong, along with food, machinery, and textiles. Auto parts imports showed some strengthening. Ships were delayed arriving at ports but port operations ran smoothly upon arrival. Rail delays, along with a chassis and truck driver shortage, left containers waiting at ports for an extended time before being shipped inland. An airport contact noted that passenger planes that had helped with excess imports during the pandemic are now being used for passenger flights thereby decreasing the number cargo flights.\nTrucking companies in the Fifth District reported that demand remained robust in recent weeks. Volumes were high across most goods, with contacts noting particular strength in home goods. Truckers reported turning away business amid high demand as a lack of drivers restricted capacity. Contract and spot market rates were high, giving many companies record margins despite high operating costs. Contacts also noted that a long backlog of parts for repairs is leaving trucks and trailers out of use for extended periods of time.\nRetail, Travel, and Tourism\nFifth District retailers reported moderate sales growth in recent weeks. Demand for cars continued to exceed supply while inventories were low, leading to lower carrying costs and increased margins for auto dealers. Clothing sales rose, and demand for furniture and home goods remained strong. Retailers noted shortages of and increased lead times for merchandise, particularly on foreign-made goods. One contact reported refunding several bridal parties because dresses did not arrive on time for weddings. Many retailers were able to maintain margins despite increases in costs of products and shipping.\nTravel and tourism remained strong and were little changed in the Fifth District since our last report. Hotels and short-term rentals had solid bookings, and daily rates remained strong. Leisure travel remained strong through the summer, and outdoor attractions continued to see high visitations. However, some contacts expressed concerns as they saw delays in bookings for conferences, businesses travel, and group travel, resulting from uncertainty surrounding COVID variants. Hotels continued to limit services because of lack of staffing, and some restaurants temporarily shut down because they were unable to find workers.\nReal Estate and Construction\nFifth District home sales remained strong but decreased modestly since our last report. Sale prices continued to rise, but growth of prices slowed. Days on the market remained low but increased in some areas. Buyer traffic softened slightly, which contacts reported could be partly seasonal. Listings of resale homes rose, boosting inventories. However, builders remained sold out of lots. New construction was strong, but builders faced delays and rapidly rising costs resulting from supply chain disruptions in materials and appliances. Realtors reported an increasing number of investors in the market for homes to remodel and resell.\nCommercial real estate leasing grew moderately in recent weeks. Demand for industrial space remained high, driving rental rates higher. Both speculative and built-to-suit industrial construction were strong, but developers struggled to find space. Multifamily occupancy and rents rose. Contacts reported new multifamily construction was filling quickly and was increasingly including office space for one- and two-bedroom apartments. Retail rental rates were strong, with especially high occupancy for restaurants as new restaurants replaced ones that had closed during the pandemic. Office vacancies remained high and were little changed despite landlords offering increased incentives and concessions.\nBanking and Finance\nOverall, loan growth was moderate this period reflecting solid underlying economic conditions but was tempered by uncertainty related to COVID variants. Financial institutions indicated modest demand for conventional commercial lending, but a slowdown in mortgage lending activity due to a cooling of the housing market with some lenders also noting fewer refinancing requests. Competition remains strong for A-rated commercial loans, particularly around lower fixed rates and longer maturity terms. Deposit growth was modest despite the low interest rates paid on accounts. Credit quality continued to be excellent and delinquencies remained at historically low levels.\nNonfinancial Services\nNonfinancial service firms saw little change in revenues in recent weeks despite continued strong demand. Several firms noted that revenue growth was being suppressed by supply side factors, such as low inventories and labor shortages and turnover. Several business across a variety of professional and legal services said that they recently lost employees to competitors, which impacted their ability to meet demand.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

San Francisco

/beige-book-reports/2021/2021-09-sf

"Beige Book Report: San Francisco\nSeptember 8, 2021\nSummary of Economic Activity\nEconomic activity in the Twelfth District increased at a moderate pace during the reporting period of July through mid-August. Employment levels continued to expand despite labor shortages, and upward wage pressures intensified in almost all sectors. Prices rose substantially, driven by rising input costs and continued supply chain disruptions. Retail sales increased modestly, while conditions in the services sectors deteriorated somewhat due to the spread of the Delta variant. Manufacturing activity strengthened slightly, as did activity in the agriculture and resources sectors. Conditions in the residential real estate market deteriorated somewhat, while activity in the commercial real estate sector picked up slightly. Lending activity was largely unchanged.\nEmployment and Wages\nOverall employment levels continued to increase at a moderate pace. Employment gains were led by agriculture, leisure, hospitality, and government, as well as education as schools reopened for the fall 2021 semester. However, almost all employers across the District reported significant challenges in attracting and retaining talent at all skill levels. In particular, contacts in the transportation, manufacturing, construction, hospitality, and retail sectors mentioned having many unfilled positions. Employment levels in energy and financial services were more stable. Employee turnover was noted to have increased, with one contact in the hospitality sector observing that almost half of new employees quit after only one or two months on the job. Several employers across the District mentioned implementing vaccine mandates for all new hires. Some contacts in the financial services sector highlighted increased reports of skilled workers demanding more flexible work arrangements. A few contacts noted a rise in Delta variant outbreaks among employees, which led to an increase in absenteeism, reinstatement of indoor face covering requirements, and delays in return-to-office plans.\nWage pressures intensified further, especially for entry-level service jobs. To combat low availability of labor and high turnover rates, many employers significantly increased wages, including those in the leisure, hospitality, manufacturing, technology, and health-care services. In addition, employers reported offering sign-on and retention bonuses, overtime pay, and one-time cash benefits such as gift cards. Several contacts in the health-care and financial services sectors mentioned planning further wage increases across the board in 2022.\nPrices\nPrices rose substantially over the reporting period. Although lumber prices have dropped significantly, prices for other building materials, such as metals, cement, and wallboard have continued to climb. Other price increases were noted for energy, information technology, textiles, airline tickets, and agricultural products, such as fruits, meats, and seafood. The reported biggest drivers of these price hikes included higher shipping and logistical costs, continued supply chain disruptions, and rising labor costs. One contact in California noted that recent import tax changes in Europe have also added to e-commerce costs domestically.\nRetail Trade and Services\nRetail sales increased modestly in the past several weeks. Online spending, as well as shopping at big box retailers and grocery stores, strengthened further, driven by pent-up demand and excess savings. However, foot traffic at large shopping centers retreated a bit due to the spread of the Delta variant. In addition, reports across the District mentioned widespread shortages of various goods, such as paper products, food products, and hardware equipment, which limited sales growth. These shortages were caused by continued supply chain disruptions, especially at ports in China and Europe. Sales at home improvement stores and specialty retailers decreased as more consumer spending shifted from goods back to services.\nConditions in the consumer and business services sectors deteriorated somewhat. The spread of the Delta variant and reinstated social-distancing restrictions have led to a slowdown in demand for travel, leisure, hospitality, and food services. Labor shortages have severely reduced capacity at some hotels, airlines, and restaurants, with one hotel in the Mountain West having to close off several floors due to a lack of housekeeping staff. Demand for health-care services and medical testing increased with the spread of the Delta variant. The entertainment industry, which had been recovering well during the summer, was also affected recently by the spread of the variant, causing some production shoots to shut down.\nManufacturing\nManufacturing activity continued to strengthen, albeit slightly. New orders grew further for fabricated metals, renewable energy equipment, and aerospace manufacturing. Capacity utilization rates at metal and steel manufacturers were noted to have exceeded pre-pandemic levels. However, supply chain disruptions and raw material shortages continued to be a major problem, causing lean inventories and delays in order fulfillment. These obstacles were further exacerbated by outbreaks of the Delta variant in Asia, which caused some auto manufacturers to curb production heading into the fall. A wood product manufacturer in the Pacific Northwest noted that after a year of strong growth, supply has now exceeded demand, and sawmills in the District have curtailed hours and shifts in the past several weeks.\nAgriculture and Resource-Related Industries\nConditions in the agriculture and resource sectors improved modestly on net. Domestic and international demand for meats, fruits, vegetables, nuts, and seafood remained strong. Supply chain disruptions continued to hinder trade with Asia, although shipping delays were noted to have eased somewhat in the past several weeks. At the same time, several growers in the Pacific Northwest noted that extreme heat and drought conditions have caused considerable damage to this year's wheat and tree fruit yields, which is projected to reduce available inventory even further. A contact in California observed that recalls of poultry, fish, and other food products caused temporary disruptions in final sales.\nReal Estate and Construction\nActivity in the residential real estate market edged down somewhat compared to the previous reporting period. The spread of the Delta variant and rapid home price increases have led some potential buyers to delay their purchases. Despite the recent drop in lumber prices, homebuilders across the District continued reporting delays in construction due to shortages of labor and other raw materials. Additionally, several contacts in the Pacific Northwest noted a shortage of undeveloped land. Growth in home prices was noted to have slowed down a bit. Order backlogs remained high, as did new permit issuances. Demand for multifamily homes increased further, with one contact noting a surge in apartment permitting heading into the fall. A housing developer in Alaska observed that, although rental applications have increased, there has also been an increase in less qualified applicants, with some of them moving to new housing to forestall the impact of the end of eviction moratoriums.\nDemand for commercial real estate picked up slightly on balance. Sales of office and retail spaces were noted to have increased in the Mountain West and California. On the other hand, demand for new hospitality spaces decreased following the spread of the Delta variant. Demand for industrial, warehouse, manufacturing, and other mixed-use spaces continued to be strong. Many contacts across the District noted that they have postponed or reversed their return-to-work plans until 2022 due to the Delta variant, causing some to reconsider their office space needs.\nFinancial Institutions\nLending activity was largely unchanged over the reporting period. Most new loan origination concentrated in mortgage refinancing, construction activities, and commercial real estate purchases. Credit card activity among consumers increased slightly, while demand for commercial and industrial loans was muted. Reports from across the District mentioned increased competition for loans, although credit quality and liquidity levels remained healthy. A contact in Southern California observed that while SPAC (special purpose acquisition companies) activity decreased dramatically in recent months, investor interest in sustainability and clean energy technology remained high.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

New York

/beige-book-reports/2021/2021-09-ny

"Beige Book Report: New York\nSeptember 8, 2021\nSummary of Economic Activity\nEconomic growth in the Second District returned to a more moderate pace in the latest reporting period, as the Delta variant has become more prevalent. Still, contacts continued to express fairly widespread optimism about the business outlook. The job market has remained exceptionally tight, as firms continued to add workers and raise wages amidst extensive reports of labor shortages. Input price pressures have continued to broaden, and a large majority of businesses report that they have continued to hike selling prices. Consumer spending has leveled off, reflecting a combination of decelerating demand and extensive supply bottlenecks. Home sales and rental markets have been strong, while office markets were steady in much of the District but remained weak in New York City. Construction activity has picked up. Finally, contacts in the broad finance sector reported modest growth in activity, while regional banks reported steady loan demand and ongoing declines in delinquency rates.\nEmployment and Wages\nThe job market has remained exceptionally tight, with businesses continuing to add workers and planning further hiring in the months ahead, but worried about widespread labor shortages. A major New York City employment agency reported an increase in job postings, noting that employers and job candidates remain far apart not only on compensation but also on flexibility regarding hybrid work arrangements. An upstate New York employment agency indicated a slight increase in hiring activity\u2014particularly for salespeople\u2014and also reported ongoing labor shortages, noting that businesses have been increasingly looking outside the region for candidates.\nBusinesses anticipate further widespread hiring in the months ahead, especially in the professional & business services and wholesale trade sectors. In particular, businesses are expected to hire more administrative support people if and when business travel picks up. Many firms that have been operating remotely have pushed back a return to the office from September to later in the year.\nWage growth has picked up further, particularly in the leisure & hospitality and retail trade sectors. An upstate New York employment agency noted a sharp increase in wages, while a New York City agency reported moderate wage growth. Looking ahead, fairly widespread wage hikes are anticipated across all major industries.\nPrices\nFirms have continued to report exceptionally widespread increases in input prices\u2014particularly in the construction, manufacturing, wholesale trade, and transportation & warehousing industries. Contacts in all sectors anticipate widespread input price hikes for the remainder of 2021.\nSelling prices accelerated further, with particularly widespread price hikes reported by manufacturers and wholesalers. Retail prices have risen to varying degrees: effective prices for both new and used vehicles are up sharply, while prices for general merchandise have risen moderately. A sizable share of contacts in all sectors plan to increase prices over the next six months.\nConsumer Spending\nConsumer spending has leveled off in the latest reporting period. Non-auto retailers reported some plateauing in activity in recent weeks, though one major chain did note continued improvement in sales in August, led by brisk back-to-school spending. In New York City, sales have continued to trend up, as mask and vaccine mandates have alleviated some safety concerns, but they remain well below pre-pandemic levels, hampered by an ongoing dearth of international visitors and office workers. Retailers have grown somewhat less optimistic about prospects for the remainder of 2021. Consumer confidence among New York State residents remained near record highs in July.\nAn increasingly severe shortage of auto inventories has led to weakening sales of new vehicles in recent weeks. Dealers perceive no end in sight to the microchip shortage that has severely limited their inflow of new vehicles. At this point, new cars being delivered to dealers are largely already spoken for. Sales of used autos have also weakened somewhat but remain at high levels.\nManufacturing and Distribution\nContacts in the manufacturing and wholesale trade sectors indicated that growth has slowed markedly in recent weeks, while those in the transportation & warehousing sector noted a pickup in growth. Contacts continued to note that their business has been constrained by supply disruptions and worker shortages. Looking ahead to the second half of this year, companies in these sectors remained widely optimistic about business prospects, though labor shortages remained a major concern.\nServices\nService industry contacts reported continued growth in activity but at a slower pace than in recent months. The information and leisure & hospitality industries, which had looked overwhelmingly positive in the prior report, grew more moderately. Similarly, firms in professional & business services and education & health services reported moderate improvement. Looking ahead, contacts in all these sectors continued to express optimism about business prospects.\nTourism has been mixed but slightly softer, on balance, since the last report. Across upstate New York, major outdoor events, such as the state fair, have been well attended, contributing to a brisk summer tourism season. But the extension of restrictions on visitors, especially from Canada, has dampened activity in some areas.\nIn New York City, rising concerns about the Delta variant and the extension of federal restrictions on foreign visitors have constrained activity and led to the cancellation of summer events, such as the Fancy Foods Show and the Auto Show. Still, as hotels have reopened, occupancy rates remained above 50 percent, and a number of major events, such as the U.S. Open and ComicCon, are still on.\nReal Estate and Construction\nHousing markets have been mixed but, on balance, steady in recent weeks. Sales markets outside New York City have remained robust, though volume has receded somewhat\u2014largely reflecting a lack of supply and a typical summer lull. Inventories have remained exceptionally lean, and prices are up fairly dramatically from pre-pandemic levels and have continued to rise, though bidding wars have become less prevalent and overbids have become more subdued. In New York City, market conditions have been mixed but mostly stronger. In Manhattan, prices have trended up but are still down 7 percent from 2019 levels, while inventory remains elevated; sales volume is reported to be 16 percent higher than before the pandemic. In the rest of the city, conditions are more akin to suburban markets, with prices at record highs and inventories lean.\nNew York City's rental market has continued to rebound, with leasing activity reported to be exceptionally brisk and vacancy rates retreating. Rents have continued to rebound but are still down 10 percent from early-2020 levels in Manhattan and down 3-5 percent across the rest of New York City. Rents have generally rebounded more strongly on larger than on smaller units. A substantial supply of new apartments (rental and condo) is currently in development.\nCommercial real estate markets have remained mixed across the District. New York City's office market has continued to slacken, with record-high sublet space available and rents still trending down. While some firms, notably large tech companies, have leased more space, many others have reduced their footprint in Manhattan or plan to do so. In suburban markets around New York City, market conditions have stabilized, with availability rates leveling off and rents steady to down slightly. Office markets across upstate New York have shown signs of rebounding.\nIn New York City, a sizable amount of space is currently under construction, and new construction has picked up for both office and multifamily structures. Construction sector contacts expect business to improve in the months ahead but have continued to express concern about the cost and availability of materials and labor.\nBanking and Finance\nBusinesses in the broad finance sector indicate that activity has increased moderately since the last report. Bankers reported a slight pickup in overall loan demand, with increased demand for commercial mortgages but slightly weaker demand for consumer and commercial and industrial loans. Refinancing activity decreased on net. Credit standards were reported as unchanged across all categories, while loan spreads decreased across the board. Finally, delinquency rates continued to improve across all categories.\nFor more information about District economic conditions visit: www.newyorkfed.org/regional\u2010economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Minneapolis

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"September 8, 2021\nSummary of Economic Activity\nNinth District economic activity grew at a moderate pace since mid-July. Employment saw strong growth, though hiring demand continued to outpace labor's response. Wage and price pressures were strong, with wholesale price pressures remaining higher than those for consumer prices. Growth was noted in consumer spending, construction, manufacturing, agriculture, and energy. Real estate activity slowed slightly. Minority- and women-owned businesses in the District reported moderate improvements in business activity.\nEmployment and Wages\nEmployment saw strong growth since the last report. Large firms reported strong net staffing growth, while growth at smaller firms was softer overall. Larger firms also reported comparatively higher wage increases, which was likely helping their recruitment. Firms of all sizes were upbeat regarding future hiring. A mid-August survey of construction firms across the District found that 70 percent have been hiring in some capacity of late. One Minneapolis-St. Paul firm said it needed workers \"now, and a year from now, and two years from now based on what we have lined up.\" Another survey found that three-quarters of hospitality and tourism firms in Minnesota were hiring to either expand staffing or replace turnover. Firms in every sector reported continued difficulty attracting labor.\nWage pressures were strong. District-wide, about one-third of all firms, and almost half of large firms, said wages had risen by 3 percent or more over the last year. Surveys of construction and hospitality firms also showed strong wage growth. A Minnesota hotelier said housekeeping wages were increased from $13 to $15 an hour. \"It didn't attract labor, but it made our current [staff] very happy and felt great to be able to afford this increase.\" Two of Minnesota's largest public employee unions settled new contracts with 2.5 percent wage increases.\nWorker Experience\nLabor supply remained tight across the District. Initial unemployment claims continued to decline through mid-August and claims in traditional unemployment insurance programs fell as of early August relative to earlier in the summer, particularly in the Dakotas and Montana. Claims in pandemic-era unemployment programs in Minnesota and Wisconsin only were modestly lower at the end of July compared with earlier in the summer. A workforce development contact in northern Minnesota pointed out that labor scarcity was causing some currently employed workers to be overworked and tired. Two recent surveys revealed that people want higher wages, flexibility, and better benefits in current or future positions as they continued to confront other life challenges. Low-wage workers in Minneapolis-St. Paul expressed concerns with being able to pay for housing, utilities, and food. Workforce development professionals in Montana also highlighted housing and childcare affordability as major challenges faced by job seekers. COVID-19 exposure remained a big concern among workers and job seekers.\nPrices\nPrice pressures remained elevated since the previous report. One-third of respondents to a general business survey reported that non-labor input costs were up by more than 10 percent relative to pre-pandemic levels; one-quarter said that they had increased prices charged to customers for their products or services by more than 10 percent over the same period. Hospitality firms reported steep input price pressures, but flat final prices on balance. While some lumber and wood prices retreated from recent highs, a construction survey found steep increases for most building materials. Retail fuel prices were little changed in most District states except Montana, where they rose moderately.\nConsumer Spending\nConsumer spending was moderately higher since the last report, sustaining a high overall level. Summer tourism has been strong, with contacts reporting record activity in western District states. Hospitality and tourism firms in northern and central Minnesota reported strong overall activity, with many exceeding 2019 levels; those in Minneapolis-St. Paul saw recent gains but remained far below normal seasonal levels. Passenger traffic at District airports continued to improve, reaching 80 percent of normal seasonal levels in August. In Minnesota, vehicle sales in July and August were mostly flat. A Montana vehicle dealer said August sales were slower due to very low inventory, and reduced trade-in volume also negatively affected used-car sales. \"We can't build up any ground stock, but demand is solid.\"\nServices\nActivity in the services sector increased moderately since the previous report. Contacts in accounting remained busy. A majority of professional services respondents to a recent survey reported steady to increased revenues in the most recent quarter. Conditions were more mixed among transportation and warehousing firms, as they continued to deal with supply-chain disruptions.\nConstruction and Real Estate\nCommercial construction grew moderately since the last report. Firms across the District reported that recent activity and sales were higher both year-over-year and quarter-over-quarter. However, firms doing infrastructure work reported slower activity. There were fewer reports of project cancellations, but project delays increased. Firms also reported a slowing of new projects out for bid, particularly for public projects. Labor availability, supply chain constraints, and high costs for materials were widely cited for project delays, the slowing of new projects out for bid, and lower firm profits. Residential construction grew moderately overall, but firms also reported more cancellations due to rising costs, as well as significant increases in project delays. However, the outlook for future projects remained positive.\nCommercial real estate was flat overall. Industrial property continued to be strong. Retail and office sectors were poised to improve before the recent increase in Delta variant infections, which has affected return-to-office plans for many downtown employers and was likely to influence future leasing and new-construction demand. Residential real estate slowed. Closed sales in July were lower in many larger District markets compared with a year earlier, thanks to very low inventories of homes for sale and steeply rising prices.\nManufacturing\nDistrict manufacturing activity increased moderately since the previous report. A regional manufacturing index indicated increased activity in Minnesota, North Dakota, and South Dakota in July relative to the previous month. Manufacturing respondents to recent surveys reported solidly increased revenues over the previous three months and a positive outlook for the coming quarter. Industry contacts described continued strong demand, with most concerns related to input costs, supply-chain disruptions, and difficulty finding workers.\nAgriculture, Energy, and Natural Resources\nWhile extreme drought conditions were taking a toll in many areas, District agricultural producers continued to benefit from strong commodity prices. Agricultural bankers indicated broadly increased farm income and spending in the second quarter, with a positive but more moderate outlook for the third quarter. However, livestock and dairy producers were suffering from the drought's impact on hay availability and pasture conditions, while corn and soybean crop conditions were deteriorating. District oil and gas exploration activity increased modestly since the previous report.\nMinority- and Women-Owned Business Enterprises\nMinority and women-owned business enterprises (MWBEs) in the region reported moderate growth in business activity. Labor supply continued to challenge businesses' ability to sustain operations, and many continued to report having raised wages to retain workers and/or attract applicants. Entrepreneurs also reported that increased nonlabor input prices and supply chain disruptions were major challenges for their business. A considerable number of MWBE survey respondents reported having passed on increased costs to customers by raising their own prices. A non-profit contact in Minnesota reported an increase in the number of aspiring entrepreneurs. Access to funding and information remained a challenge for some startups.\nFor more information on the Ninth District economy, visit: minneapolisfed.org/region-and-community\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

St Louis

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"Beige Book Report: St Louis\nSeptember 8, 2021\nSummary of Economic Activity\nEconomic conditions have continued to improve at a moderate pace since our previous report. Contacts reported that ongoing labor and raw material shortages are holding back growth. Customer spending has been unchanged since the previous report. The rise in COVID-19 Delta variant cases was cited as a reason for increasing consumer wariness. Cost pressures remain high, with around half of firms reporting increased prices and additional increases anticipated. The residential real estate sector saw volumes slow slightly, but home and rental prices remained high. Despite high demand, new construction projects continued to be hampered by supply disruptions. Banks reported a slight decline in overall loan demand. Contacts remained optimistic, although less so than the last time they were surveyed in mid-May. On net, 11 percent of contacts expect economic conditions during the remainder of 2021 to be better or somewhat better than the same period one year ago.\nEmployment and Wages\nEmployment has increased slightly since our previous report, though smaller firms reported more mixed trends. Worker scarcity was frequently cited as the limiting factor in firm growth; contacts reported a net decline in applicants per job since May. Firms struggled to hire and retain workers; contacts reported offering on-the-job training, sign-on and retention bonuses, and other benefits. Firms again presented mixed evidence that some states' discontinuation of federal UI enhancements affected their pool of applicants.\nWages have grown strongly, though small firm wages continued to rise more slowly. On net, 60% of contacts reported raising wages\u2014well above historical values. One manufacturer reported attracting few workers despite increasing starting wages above $17 per hour.\nPrices\nPrices have increased moderately since our previous report. About half of contacts have increased prices to consumers this quarter. Half of contacts plan to increase prices to consumers in the near future. A regional boat dealer reported new boat prices have increased 10% on average since last year and will likely increase another 10% over the next year. Over two-thirds of contacts reported increased input costs, including robust year-over-year increases specifically in the transportation and construction industries. Several construction contacts reported pausing some projects until the rapid increases in materials costs decline or stabilize. A contact reported that the price for concrete has increased about 20% over the past few months and the price for electric wire has rapidly increased. Contacts reported that lumber prices have recently declined. A contact in the auto repair industry reported price increases in the range of 30-60% for certain auto parts. A contact that sells electrical signs and billboards reported that prices for input materials such as polycarbonate, aluminum, steel, wood, and electrical parts are \"skyrocketing.\" A regional brewery reported that their supplier increased prices twice between order and delivery for a pallet of aluminum.\nConsumer Spending\nGeneral retailers, auto dealers, and hospitality contacts reported mixed business activity since our previous report. July real sales tax collections decreased slightly in Arkansas, Kentucky, and West Tennessee and increased in Missouri relative to June. General retailers reported mixed sales over the past six weeks. Auto dealers reported mixed sales, with continued high demand but low inventories and limited availability of low-cost units. Restaurants reported severe supply and staffing shortages. A St. Louis hotel contact reported that business is slightly down relative to early July. In August, an outdoor concert venue in Arkansas held its first significant event since 2019. The venue was pleased with ticket sales but surprised only half of tickets were punched for entry, which they attributed to the rise in coronavirus cases.\nManufacturing\nManufacturing activity has strongly increased since our previous report. Survey-based indices suggest production, capacity utilization, and new orders have strongly increased. Production continues to be below operating capacity due to labor shortages, and retailer order windows have lengthened as a result. Worker scarcity has also led to issues in quality control, with surges in retail returns and auto repairs due to product defects. Firms have increased their focus on technological innovation to increase labor productivity and product quality. On average, firms reported they expect strong increases in production, capacity utilization, and new orders in the coming quarter.\nNonfinancial Services\nActivity in the nonfinancial services sector has been mixed since our previous report. Airport passenger traffic has increased slightly since our previous report. Several large health care providers have increased their minimum pay rates for workers. Nursing shortages have been an issue as COVID cases rise. A hospital contact reported increased cancelations of elective procedures. Several contacts reported increased transportation costs; a distribution contact noted that it has been difficult to find trucks and hire new drivers. A health and wellness contact noted that COVID concerns continue to hurt business. A large public university in Arkansas reported record enrollment this fall due to a large freshman class and increased graduate student enrollment.\nReal Estate and Construction\nResidential real estate activity has decreased slightly since our previous report, with some contacts reporting the residential market is cooling off. Total home sales have dipped slightly, and available inventory has increased. Home prices and median days on the market remain stable. Most contacts expect the market to improve slightly or remain roughly the same in the next quarter. Demand for multifamily homes increased and is expected to continue. Rental prices continue to increase across the District. The overall average rent in Memphis is up 17% since last year. A contact in St. Louis observed that the eviction moratorium has prevented landlords from removing problem tenants with past due rent.\nCommercial real estate activity has remained mixed since our previous report. Demand for and speculative building of industrial properties continued to increase, while the office and retail markets remain mixed. Industrial property inventories remained high in Memphis and Little Rock. While demand for new industrial properties remains elevated, supply chain issues, increased prices for building materials, and labor shortages are preventing projects from continuing. One contact reported that steel joists ordered now will not arrive until roughly the middle of the second quarter of 2022. Some contacts report that previously planned projects are being put on hold or cancelled due to these problems.\nBanking and Finance\nBanking conditions have been unchanged since our previous report. Banking contacts reported a slight decrease in overall loan demand since the past survey period. Auto loan demand declined modestly and demand for credit cards fell moderately. But contacts noted a continued modest growth in real estate lending. Creditworthiness improved slightly in mortgage and commercial and industrial lending. Delinquency rates also declined modestly across all major loan types and credit standards remained largely unchanged. District banks reported that about three-quarters of PPP loans have been forgiven. Outlooks were positive, although the spread of the Delta variant has increased uncertainty.\nAgriculture and Natural Resources\nAgriculture conditions have remained unchanged from our previous report. Relative to early July, the percentage of corn and soybeans rated fair or better has decreased slightly while the percentage of rice increased slightly and cotton experienced no change. Contacts indicated that both nonlabor and labor costs have increased but income is up as well. One contact noted the drought in South America has raised grain prices. They also noted COVID-related shortages of maintenance parts.\nNatural resource extraction conditions fell slightly from June to July, with seasonally adjusted coal production decreasing just under 2%. But production is up 14% from a year ago.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Kansas City

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"Beige Book Report: Kansas City\nSeptember 8, 2021\nSummary of Economic Activity\nThe Tenth District economy grew at a modest pace through August, as the pace of growth in the services sector slowed slightly. Most businesses indicated they do not anticipate changes in activities due to the recent surge in COVID cases, but many did note that they altered their business operations in some way and expect overall activity to decrease in coming months. Retail spending grew in August at a slower pace than in recent months, primarily due to a decline in spending on motor vehicles. Consumer spending on other services continued to grow at a modest pace, as activity at leisure and hospitality businesses expanded over the last month. Growth in manufacturing remained robust, and expectations for conditions over the next six months continued to be elevated. Energy activity increased modestly but without gains in employment. Declines in oil prices contrasted with increases in natural gas prices left revenues and profits mixed among District contacts. Conditions in the agricultural sector were generally strong, but drought conditions adversely affected several states in the Tenth District. Wage growth remained elevated, and employment expanded amid broad labor shortages. Across sectors contacts reported higher prices for materials, and anticipated higher selling prices.\nEmployment and Wages\nDistrict employment gains were mixed across sectors. Within services, contacts at motor vehicle dealers, health care providers, and accommodation businesses reported declines in employment. These losses were more than offset by hiring within other service sectors and gains in employment at manufacturing businesses. Most contacts expected to further expand the size of their workforces in coming months.\nWage growth continued at a robust pace across most sectors of the Tenth District economy. Contacts indicated that they expect wage growth to continue over the next six months.\nThe number of workers leaving their jobs for other employment was elevated and labor shortages continued to restrain hiring. Firms adopted a variety of strategies to attract and retain workers, including wage increases, sign-on bonuses and on-the-job training, particularly when recruiting for entry-level occupations. Several contacts indicated that rising wages for new hires led to wage compression among existing employees, causing them to raise wages across much of their workforce.\nAlthough rising COVID cases led some firms to alter their operations, few contacts reported reducing employee hours in response to the recent surge.\nPrices\nContacts across sectors reported robust increases in input prices that are being passed on, at least in part, to customers, as selling prices also rose. Most contacts also noted expectations for further price increases over the next six months. Lumber prices were a notable exception to rising input prices as contacts at construction supply businesses reported declining prices. Across manufacturing sectors, several contacts pointed to rising prices and limited availability of steel products as constraints on meeting business demand.\nConsumer Spending\nConsumer spending grew modestly throughout July and August. Demand at restaurants and hotels expanded. However, several contacts noted that reservations were down in recent weeks more than anticipated, and others reported expectations for activity at food and accommodation businesses to decline in coming months due to the rising number of COVID cases. Retail activity rose, but at a slower pace than in recent months. Auto sales declined, as did activity at health services businesses. Sales at wholesale businesses continued to grow at a moderate pace, and few contacts in the sector expected headwinds from the recent surge in COVID cases.\nManufacturing and Other Business Activity\nManufacturing activity expanded at a robust pace in July and August, particularly for producers of durable goods. Contacts expect demand to remain elevated for durables and the number of new orders remains high. Durables manufacturers increased employment despite facing difficulties in recruiting and retaining workers. Supply constraints continue to beleaguer businesses, yet contacts reported that they expect the backlog in orders to diminish somewhat in coming months. Inventories of materials grew modestly from June levels. Activity among producers of nondurable goods declined slightly, however expectations for growth over the next six months remained elevated. In particular, activity at food manufacturing plants declined slightly despite strong demand because of difficulties maintaining a workforce. Expectations for future capital expenditures were unchanged and continued to be high across manufacturing firms.\nOutside of manufacturing, activity grew at a slight pace. Conditions were mixed across businesses, though professional and high-tech services and transportation services expanded generally.\nContacts continued to point to labor shortages as constraints on activity. Across manufacturing and other businesses, the number of workers leaving their jobs for higher compensation was elevated, as was the number of workers who reported leaving for retirement. When attempting to recruit new workers, businesses noted that the number of applications for open positions was low, and that applicants often lacked requisite qualifications or were not willing to accept offered levels of compensation.\nReal Estate and Construction\nResidential real estate activity expanded slightly and expectations for the next three months were somewhat lower than reported previously. Buyer demand remained elevated but the inventory of homes for sale remained flat, resulting in robust growth in home prices. Contacts reported new starts for construction of homes were targeted toward middle-income buyers and that both material costs and lot prices for new projects increased in recent months. Vacancies at commercial real estate properties continued to decline, while both sales and prices of commercial properties grew at a moderate pace. Contacts reported robust growth in demand and valuations for warehouse properties. Activity at construction supply businesses exceeded expectations in July and August.\nBanking\nWhile overall loan demand showed modest growth in recent weeks according to Tenth District banking contacts, that growth was due solely to increases in demand for commercial real estate loans. All other categories, including commercial, industrial, residential real estate, consumer installment, and agriculture lending, faced a slight decline in demand. Credit standards remained stable across all categories. Average loan quality has increased strongly compared to a year ago, although bankers expect it to decline slightly over the next six months. Deposit levels continued to increase at a moderate rate, with anecdotal evidence suggesting the growth has been concentrated in demand deposit accounts.\nEnergy\nDistrict energy activity expanded modestly during July and August. The number of active oil and natural gas rigs ticked up slightly in Oklahoma, New Mexico, and Wyoming. Production levels were relatively steady across most district states compared to a year ago but increased more in New Mexico. However, contacts reported that oil and natural gas inventories are lower than a year ago. Energy employment was mostly unchanged compared to the previous survey period and is still below pre-COVID levels. Oil prices declined somewhat, while natural gas prices increased moderately. Thus, depending on the composition of activities, contacts reported varying levels of revenues and profits as compared to recent months. Most firms continued to expect higher commodity prices moving forward over the next six months.\nAgriculture\nIn the Tenth District agricultural economy, farm income and credit conditions continued to improve despite weakness in the cattle industry and severe drought in some areas. Crop and hog prices remained at multi-year highs, and the condition of corn and soybeans was slightly better than the national average in most District states through early August. However, profit opportunities for cattle producers remained limited. Contacts in the meat packing industry also reported that tight labor markets were slightly constraining production capacity at some facilities. As a result of widespread drought, over 60% of pasture and range land in Wyoming was in poor or very poor condition as of early August; compared with about 30% in Colorado and New Mexico and 20% or less in all other states.\nFor more information about District economic conditions visit: www.KansasCityFed.org/research/regional-research\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Philadelphia

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"September 8, 2021\nSummary of Economic Activity\nOn balance, business activity in the Third District continued to grow moderately during the current Beige Book period; however, activity in most sectors has not yet returned to pre-pandemic levels. The rate of adults being fully vaccinated against COVID-19 slowed but rose above 55 percent. Contacts noted that the rise in Delta variant cases has impacted activity in retail, restaurants, and travel. Meanwhile, supply chain disruptions grew worse. Net employment continued at a modest pace of growth, while prices, and now wages, grew moderately. About two-thirds of the nonmanufacturers and less than half of the manufacturers expressed positive expectations for continued economic growth over the next six months. Optimism has narrowed as the Delta variant has disrupted plant production, delayed a return to many offices, and increased uncertainty about the success of school reopenings this fall.\nEmployment and Wages\nEmployment continued to grow modestly overall. The share of firms reporting employment increases held steady at one-fifth of nonmanufacturing firms and over one-third among the manufacturers. Overall, average hours worked rose for about one-fourth of all firms.\nHiring and retaining workers remained a challenge for many firms across all sectors. Contacts at staffing firms continued to report better candidate flow and are hoping for greater availability as schools reopen. However, contacts at other firms tended to report a decline in applicants per job since May \u2013 citing early retirements, career changes, childcare issues, and enhanced unemployment benefits. Reports of burnout are rising among workers and owners alike. The ongoing lack of workers has forced smaller retail and restaurant owners back to the register, the kitchen, and the dish room.\nWages rose moderately overall \u2013 somewhat more so than in the prior period. Wage pressure remains greatest for lower-wage jobs. The unusually high degree of labor market churn makes it difficult for firms to find an attractive wage. Two manufacturing firms reported opposing results from offering a $20 an hour wage \u2013 one noted improved hiring at all locations, another reported no applicants.\nOver two-fifths of the nonmanufacturing firms reported higher wage and benefit costs per employee \u2013 comparable with pre-pandemic levels. Almost no firms reported lower compensation. The rate of growth in total compensation that firms expect over the next year has nearly doubled since last year.\nPrices\nOn balance, prices continued to rise moderately over the period. The share of manufacturers reporting higher prices for factor inputs edged down to three-fourths, while those receiving higher prices for their own products edged a bit above one-half. However, the share of nonmanufacturers reporting higher prices for their inputs remained at about one-half, while the share receiving higher prices from consumers for their own goods and services edged below one-third.\nAbout two-thirds of the manufacturing contacts reported they expect to pay higher prices over the next six months, and slightly more than that expected to receive higher prices for their own goods.\nLooking ahead one year, the prices that firms anticipate receiving for their own goods and services rose further still \u2013 the expected rate of growth has nearly tripled among manufacturers since last year and has more than doubled for nonmanufacturers.\nManufacturing\nOn average, manufacturing activity continued to grow moderately. However, net increases of shipments and of new orders waned further from the prior period's level. Firms also reported lower net levels of backlogs and delivery times, while inventories turned negative. Contacts continued to note strong demand; however, production levels and employment remained below pre-pandemic levels.\nLabor shortages continued and supply chain disruptions grew worse, according to many contacts. Many firms are still searching for an acceptable wage, others are waiting for government benefits to expire, and some continue to pursue automation where they can.\nConsumer Spending\nRetailers (nonauto) and restaurateurs continued to report modest growth. Labor shortages continued, and supply chain disruptions worsened \u2013 prompting one firm to rent its own refrigerated trucks to deliver food to its restaurant locations when the large distributors delay scheduled deliveries. Some contacts also noted a rising number of belligerent customers.\nAuto dealers reported that new car sales fell significantly as factories have cut production predominantly because of the ongoing microchip shortage. Contacts opined that this situation may continue until at least next summer. Meanwhile, the lack of supply is driving prices (and margins) higher for new and used cars; the latter continue to sell at high levels.\nTourism contacts noted modest declines in activity as concerns about the Delta variant rose. Domestic tourism remained strong at mountain and shore destinations; however, some business and group bookings were canceled or postponed.\nNonfinancial Services\nNonmanufacturing activity continued to grow moderately; however, firms reporting increases in sales or revenues fell well below half. Moreover, on balance, output remained below pre-pandemic levels. A large service-sector firm noted steady growth and a low rate of nonpayment among its customers.\nFinancial Services\nThe volume of bank lending (excluding credit cards) fell modestly during the period (not seasonally adjusted); during the same period in 2019, by contrast, loan volumes grew modestly. Once again, commercial and industrial loans contracted significantly, while home equity lines and other consumer loans fell modestly. Auto lending and home mortgages grew modestly, and commercial real estate lending was flat. Credit card volumes grew moderately \u2013 faster than the modest pace during the same period in 2019.\nBankers, accountants, and bankruptcy attorneys continued to report that very few problems with bad debt have emerged. Their concerns over personal and small business bankruptcies have waned; however, some still expect an uptick of small business bankruptcies after passage of another six months. Contacts continued to note the value that government assistance provided in keeping businesses afloat through the pandemic. However, they also noted that some businesses that were in trouble before the pandemic and were kept alive are beginning to fail now.\nReal Estate and Construction\nHomebuilders reported a slight drop-off in sales activity since the spring \u2013 attributed to rising prices, limited inventory, and less urgency from buyers. Many builders now have contracts to build houses that extend well into 2022. However, supply chain problems have worsened and are expected to continue for another year.\nExisting home sales held steady, and availability remained low, but the market may have cooled a bit. Sellers still receive multiple offers, but with prices that are not as high above asking price as before. Contacts reported that the for-sale inventory ticked up from June to July (measured as months of supply), and one broker noted that sellers are currently waiting until the fall to list their houses.\nConstruction and leasing activity remained steady for nonresidential projects. Warehouses, institutional, and multifamily projects remain strong, while demand for office space has paused.\nFor more information about District economic conditions visit: www.philadelphiafed.org/research-and-data/regionaleconomy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

National Summary

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"Beige Book: National Summary\nSeptember 8, 2021\nThis report was prepared at the Federal Reserve Bank of New York based on information collected on or before August 30, 2021. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.\nOverall Economic Activity\nEconomic growth downshifted slightly to a moderate pace in early July through August. The stronger sectors of the economy of late included manufacturing, transportation, nonfinancial services, and residential real estate. The deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most Districts, reflecting safety concerns due to the rise of the Delta variant, and, in a few cases, international travel restrictions. The other sectors of the economy where growth slowed or activity declined were those constrained by supply disruptions and labor shortages, as opposed to softening demand. In particular, weakness in auto sales was widely ascribed to low inventories amidst the ongoing microchip shortage, and restrained home sales activity was attributed to low supply. Growth in non-auto retail sales slowed a bit in some Districts, rising at a modest pace, on balance, across the nation. Residential construction was up slightly, on balance, and nonresidential construction picked up modestly. Trends in loan volumes varied widely across Districts, ranging from down modestly to up strongly. Reports on the agriculture and energy sectors were mixed across Districts but, on balance, positive. Looking ahead, businesses in most Districts remained optimistic about near-term prospects, though there continued to be widespread concern about ongoing supply disruptions and resource shortages.\nEmployment and Wages\nAll Districts continued to report rising employment overall, though the characterization of the pace of job creation ranged from slight to strong. Demand for workers continued to strengthen, but all Districts noted extensive labor shortages that were constraining employment and, in many cases, impeding business activity. Contributing to these shortages were increased turnover, early retirements (especially in health care), childcare needs, challenges in negotiating job offers, and enhanced unemployment benefits. Some Districts noted that return-to-work schedules were pushed back due to the increase in the Delta variant. With persistent and extensive labor shortages, a number of Districts reported an acceleration in wages, and most characterized wage growth as strong\u2014including all of the midwestern and western regions. Several Districts noted particularly brisk wage gains among lower-wage workers. Employers were reported to be using more frequent raises, bonuses, training, and flexible work arrangements to attract and retain workers.\nPrices\nInflation was reported to be steady at an elevated pace, as half of the Districts characterized the pace of price increases as strong, while half described it as moderate. With pervasive resource shortages, input price pressures continued to be widespread. Most Districts noted substantial escalation in the cost of metals and metal-based products, freight and transportation services, and construction materials, with the notable exception of lumber whose cost has retreated from exceptionally high levels. Even at greatly increased prices, many businesses reported having trouble sourcing key inputs. Some Districts reported that businesses are finding it easier to pass along more cost increases through higher prices. Several Districts indicated that businesses anticipate significant hikes in their selling prices in the months ahead.\nHighlights by Federal Reserve District\nBoston\nEconomic activity in the First District expanded at a modest to strong pace over the summer of 2021. Contacts reported higher prices and wages but complained more about an inability to get supplies and to hire workers. Contacts were optimistic and hoped supply issues would ease in 2022.\nNew York\nGrowth in the regional economy moderated, though contacts remained optimistic about the near-term outlook. Employment and wages increased, with businesses reporting widespread labor shortages. Tourism leveled off, and service-sector businesses reported some deceleration in activity. Input price pressures remained widespread, and more businesses have raised or plan to raise their selling prices.\nPhiladelphia\nBusiness activity continued at a moderate pace of growth during the current Beige Book period \u2013 still below levels attained prior to the pandemic. The rise of Delta variant cases has trimmed growth in some sectors, while labor shortages and supply chain disruptions continued apace. Overall, wage growth increased to a moderate pace, while prices continued growing moderately and employment continued to grow modestly.\nCleveland\nEconomic activity grew solidly, but supply constraints limited many firms' ability to meet demand. Staff levels increased modestly amid intense labor shortages. Reports of rising nonlabor costs, wages, and prices continued to be widespread. Firms expected demand would remain strong in the near term, but they were less optimistic that labor and supply challenges would abate enough to ease the upward pressure on wages and costs.\nRichmond\nThe regional economy expanded moderately, but many firms faced shortages and higher costs for both labor and non-labor inputs. Port and trucking volumes picked up from already high levels, but manufacturers and services firms experienced delays and long lead times for goods. Employment rose moderately as labor shortages and wage increases were widely reported. Price growth picked up and was robust compared to last year.\nAtlanta\nEconomic activity expanded moderately. Labor markets improved and wage pressures became more widespread. Some nonlabor costs rose. Retail sales increased. Leisure travel was strong and hotel occupancy levels rose. Residential real estate demand remained solid. Commercial real estate conditions were steady. Manufacturing activity expanded. Banking conditions were stable.\nChicago\nEconomic activity increased moderately. Employment increased strongly, manufacturing grew moderately, business spending was up modestly, construction and real estate rose slightly, and consumer spending decreased slightly. Wages and prices increased strongly while financial conditions slightly improved. There was some retreat in prospects for agricultural income.\nSt. Louis\nEconomic conditions have continued to improve at a moderate pace since our previous report. Across all industries, contacts are concerned about the Delta variant and its economic impact. Contacts continued to report that labor and material shortages. Overall inflation pressures remain elevated, but firms reported varying degrees of pass-through to customers.\nMinneapolis\nThe District economy saw moderate growth despite continued inventory shortages and higher prices. Employment grew strongly but hiring demand continued to outstrip labor response by a wide margin. Consumer demand remained strong, leveraging growth in services, tourism, and manufacturing. Drought took a growing toll on agriculture, though higher prices benefitted farmers. Minority and women-owned business enterprises saw moderate growth in activity.\nKansas City\nEconomic activity continued to grow at a moderate pace through August. Demand remains elevated for most businesses, and a majority of contacts expect activity to remain elevated amid the recent surge in COVID cases. Wages grew at a robust pace, but labor shortages persist. As a result of widespread drought, pasture and range land in several states was in poor or very poor condition.\nDallas\nThe District economy expanded at a solid rate, with broad-based growth across sectors. Employment growth was robust, with a pickup seen in the service sector. Wage and price growth remained elevated amid widespread labor and supply chain shortages. Outlooks stayed positive, though surging COVID-19 cases has added uncertainty to outlooks.\nSan Francisco\nEconomic activity in the District expanded moderately. Hiring activity intensified further, as did upward pressures on wages and inflation. Retail sales increased modestly, while conditions in the services sector deteriorated somewhat. Activity in the manufacturing and agriculture sectors increased slightly. Residential construction edged down somewhat, while lending activity remained largely unchanged.\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Dallas

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"September 8, 2021\nSummary of Economic Activity\nSolid expansion continued in the Eleventh District economy, though surging COVID-19 cases has added uncertainty to outlooks. Growth in the manufacturing and nonfinancial services sectors remained strong, and retail sales rose in August after holding steady in recent months. Home sales remained solid but eased. Overall loan volumes rose broadly, led by commercial real estate lending. Energy activity rose steadily, and agricultural conditions were very strong. Employment growth was robust, and wage growth remained elevated amid widespread labor shortages. Ongoing supply chain disruptions continued to drive up prices, though pressures eased slightly over the reporting period. Outlooks improved, though uncertainty increased.\nEmployment and Wages\nEmployment expanded robustly overall, with a marked pickup in service sector job growth. Retail employment was mostly flat. Difficulty hiring remained widespread across skill levels and was quite severe for many contacts, particularly small businesses. A Dallas Fed survey of more than 350 Texas businesses showed that about 70 percent were trying to hire in August, and the vast majority named a lack of applicants as an impediment. Staffing shortages were particularly acute in health care and especially among nurses, exacerbated by the recent surge in COVID-19 cases. Hospitals also reported a lack of a large-scale return of applicants for low-wage positions, despite the end of federal unemployment benefits.\nWage growth remained elevated, and numerous contacts noted significant wage pressure to attract and retain employees. Among firms trying to hire, about half said a key impediment was applicants looking for higher pay than what was being offered. Energy industry contacts reported substantial pressure on wages and benefits, with some firms increasing wages as much as 15 to 20 percent to keep workers from defecting to competitors or adjacent industries.\nPrices\nPrices continued to rise, albeit at a slightly slower pace in July and August than in June. Rising input prices continued to outpace selling price growth, compressing margins. Input costs rose particularly fast in the manufacturing sector, where supply chain disruptions were widespread. Contacts noted unprecedented increases in steel and aluminum prices, and others noted that material cost increases were happening more frequently than before. Construction materials were also seeing sizeable price increases, though builders noted some reprieve in lumber costs. Looking ahead, expectations for future cost increases abated slightly in the service sector but picked up among manufacturers.\nManufacturing\nTexas factory activity continued to expand at an above-average pace in July and August. Growth was led by nondurables manufacturing, particularly food. Refiners saw increased demand as motor fuel consumption rose seasonally but noted that margins were still muted. Petrochemical firms reported strong demand, with one noting record earnings. Many contacts noted persistent materials shortages and extended lead times. Nearly three-fourths of manufacturers said supply chain disruptions were restraining their revenues, according to a Dallas Fed survey of 90 manufacturing executives. Labor availability issues also hampered firms' ability to meet orders. Overall, outlooks among manufacturers remained optimistic, though the Delta variant and surging COVID-19 cases were driving up uncertainty.\nRetail Sales\nRetail sales were fairly flat in July but rose in August, despite widespread supply chain issues and tight inventories, particularly among auto dealers. A Dallas Fed survey of 42 Texas retailers showed that nearly three-fourths of respondents cited supply chain disruptions as a primary factor restraining revenues. Outlooks were mildly positive, though uncertainty continued to increase.\nNonfinancial Services\nBroad-based, solid expansion continued in nonfinancial services. Growth was led by transportation services. Airlines said air travel continued to surge in July and in early August, boosted by pent-up demand for leisure travel, but has eased more recently, driven by rapidly rising Delta-variant infections, seasonality, and a delay in the return of business travel. Cargo tonnage through Texas seaports set new records in July, as businesses worked to build up inventory amid elevated levels of consumer demand and persistent supply chain disruptions. Staffing firms report slightly slower growth, with some contacts pointing to uncertainty caused by the Delta variant as a contributing factor to the deceleration. Leisure and hospitality firms noted revenues rose in July but were fairly flat in August, and restaurants said worker shortages were constraining operations. Overall, outlooks were positive, though less optimistic in August than in prior periods as the surging Delta variant, persistent labor and supply shortages, and rising costs are expected to dampen the economic recovery. Previous forecasts for a strong return of business travel and events this fall have been adjusted downward by the pandemic resurgence.\nConstruction and Real Estate\nActivity in the single-family housing market moderated during the reporting period. Sales were still generally solid but not as frothy as they had been earlier in the year, partly due to seasonality. Several builders were no longer capping sales, and some cited reintroducing incentives or slight discounting. Construction backlogs remained large, and completion times were elongated due to labor challenges and supply shortages for items like windows, bricks, and appliances. Home prices have begun to stabilize. Outlooks were generally positive.\nApartment leasing activity remained solid, strengthening occupancy and rents. Buyer interest in multifamily properties was near record highs. Activity in the industrial market was still booming. Demand for office space continued to languish due to the fallout from work-from-home policies, and contacts do not expect much improvement in the near term.\nFinancial Services\nLoan demand continued to increase at a robust pace, pushing up overall loan volumes. Commercial real estate lending continued to lead growth, while growth in commercial and industrial lending abated over the last six weeks. Nonperforming loans continued to decrease and credit standards remained largely unchanged. Loan pricing remained competitive, with multiple respondents citing concerns regarding too much liquidity and margin compression. Outlooks remained optimistic, though less so than the previous reporting period. Multiple bankers expressed concern that the Delta variant could slow spending and growth.\nEnergy\nDrilling and completion activity rose steadily over the past six weeks. Orders for new equipment were up. Contacts generally felt that current oil and gas prices are sufficient for producers to meet capital expenditures goals and even slightly grow production. Optimism among contacts was largely unchanged, and most contacts discounted the impact of the current surge in COVID-19 on the demand outlook.\nAgriculture\nTexas was nearly drought free by the end of the reporting period, though drought conditions persisted in New Mexico. Sufficient soil moisture boosted crop conditions for wheat and row crops alike, allowing many producers to reap strong yields. Preliminary reports point to higher production this year versus last year for Texas' major crops\u2014cotton, sorghum, corn and soybeans. Crop prices remained strong, supporting profitability. Rising production costs are a concern going forward, but outlooks were generally optimistic. In the livestock sector, pasture conditions were favorable, and prices rose for cattle and poultry.\nFor more information about District economic conditions visit: www.dallasfed.org/research/texas\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Boston

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"September 8, 2021\nSummary of Economic Activity\nBusiness activity continued to grow at a modest to strong pace in the First District in the Summer of 2021. Contacts across a wide cross-section of the economy reported strong demand. Residential real estate markets across the region continued to experience exceptional strength characterized by high prices and low inventories. One contact characterized the current situation in the semiconductor industry as a \"golden age.\" Even in-store retail and restaurants in the region were upbeat. The main constraint on sales appeared to be shortages of parts and logistics problems. Supply issues have translated in some pricing pressure but mostly disrupted delivery of products and services. Labor markets remained very tight but employers complained more about unfilled openings than about high wages. Firms continued to be optimistic. Some contacts thought increases in demand were temporary but have revised their views.\nEmployment and Wages\nContacts continued to report tight labor markets with strong labor demand but limited labor supply and employment growth. Reasons varied. Some attributed this to expanded Unemployment Insurance (UI) benefits but others said that hiring was equally difficult for high wage workers and workers in states which had discontinued expanded UI. Contacts indicated that labor market tightness was most felt on the extensive margin, complaining more about an inability to hire at all versus having to pay higher wages. Some contacts said that pay equity across workers made it difficult to raise wages for new hires. Salaries for specific occupations have gone up with one contact saying that pay for logistics specialists had doubled since the start of the pandemic.\nPrices\nContacts reported generally higher input prices but, as with labor, they were mostly concerned about getting the supplies they needed versus the price. Firms did raise prices to offset higher costs but also said they tried to cut costs to maintain margins. Restaurants indicated that they were raising prices to cover higher costs.\nRetail and Tourism\nRetail contacts noted continued strength in apparel, home decor, salvaged goods, and online sales of home furnishings. Travel restrictions along the Canadian border have limited sales for some contacts. Online sales of home furnishings have remained well above pre-pandemic levels and revenue increased last quarter from the prior quarter, but year-over-year sales reflect a modest decline relative to the very strong sales last summer. In-store sales of home goods and apparel continued to rebound since the spring with same store sales up nearly 20 percent relative to summer 2019 in some cases.\nTourism and hospitality respondents noted strong restaurant sales throughout the summer, but they reported disruptions related to COVID-19 with some restrictions reinstated since the last round. Menu prices have continued to rise since the spring as food, delivery, and labor costs have all continued to increase in recent months. Higher menu costs have resulted in modestly larger tips for front of the house staff, and efforts have been made to increase wages across restaurants to attract more workers.\nManufacturing and Related Services\nMost of our contacts reported higher sales versus the same period one year ago. Firms connected to the semiconductor industry reported exceptional strength with one referring to the current period as a \"golden age\" for the industry. A furniture manufacturer said sales were high by normal standards but low relative to the summer of 2020. Several contacts said that supply constraints limited growth. Specifically, they claimed that shortages and supply chain disruptions had a relatively small effect on prices but mostly affected their ability to make promised deliveries on schedule. Almost all contacts mentioned that logistics continued to be a problem. Most contacts said that they had limited price increases to customers and had dealt with higher input prices by cutting costs and increasing productivity. Hiring remained challenging. Contacts reported wage pressure especially for specific occupations. One contact said that pay had doubled for logistics specialists. Several contacts reported revising capital expenditures higher because of strong demand since the start of the pandemic. Contacts were generally optimistic although some had made downward revisions to their forecasts due to shortages of parts. Contacts expected supply disruptions to ease in 2022.\nStaffing Services\nStaffing firms reported strong performance during the summer months, with quarterly increases as high as 20 percent following a strong 2021Q1. Demand for labor remains high across all sectors and supply is tight. Contacts said clients were lowering their required qualifications and experience for job candidates and offering on-the-job training and opportunities for upward mobility. Reliability stands out as the primary concern for these employers. Pay rates remain elevated, and several contacts reported bidding wars to attract qualified candidates. While several contacts cited continued UI benefits as a cause of the worker shortage, other contacts cited childcare options as the primary obstacle. Pandemic-related health concerns remained an issue. Contacts were generally optimistic about their performance the rest of the year, with several firms expecting growth in labor supply as increased recruitment efforts continue and UI benefits expire.\nCommercial Real Estate\nCommercial real estate sales and leasing in the First District remains mixed with strength in industrial and life science while uncertainty continues to surround retail and office space. The industrial and life sciences markets continue to be characterized by high leasing demand with high rents and near-zero vacancy levels. Lack of availability has led to reductions in industrial and life science leasing activity in part of the district. Development and construction activity in these sectors have remained strong throughout the district but continue to be affected by high construction costs, and many new projects now incorporate an \"escalation factor\" into budgets. Contacts described slow and even \"anemic\" conditions in the office market\u2014departing from greater optimism during the previous calling cycle. Concerns about the Delta variant has increased uncertainty and many tenants opt to sign short-term renewals only when necessary. Office rents remained mostly flat, with landlords continuing to offer some non-rent concessions. Sales activity continues to be limited in the office market, as office property owners prefer to wait rather than discount or sell their properties. Retail real estate activity is mixed with strong demand for grocery- and gas-anchored retail along with lifestyle retail and experiential restaurants. Contacts still hold generally optimistic outlooks, but also expressed greater uncertainty regarding the office and retail markets.\nCommercial real estate lending and investment have been characterized by highly competitive and loose market conditions for warehouses, multi-family housing, and life sciences products. Banks and institutional investors, that are flush with cash and under pressure to invest, are driving robust price increases. In competitive final bidding rounds, price increases have been 10 to 20 times greater than in normal market conditions. Loan and capitalization rates alike have compressed by a further 5 to 25 basis points from the previous cycle.\nResidential Real Estate\nLow inventory continued to push prices upward in the First District's residential real estate markets in July. Sales levels for single family homes were unchanged or lower year-on-year and sales of condos were unchanged or slightly up. Inventory is down by double digit percentages for all reporting markets year-over-year but the inventory declines have moderated. Median sales prices are higher for all types of residential real estate but price growth has slowed slightly since last cycle. Contacts expect high demand to continue to outpace supply into the fall and winter for as long as mortgage rates remain low.\nFor more information about District economic conditions visit: www.bostonfed.org/regional-economy\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Chicago

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"September 8, 2021\nSummary of Economic Activity\nEconomic activity in the Seventh District increased moderately in July and early August and contacts expected growth to continue at that pace in the coming months. Labor and materials supply constraints as well as rising COVID-19 cases weighed on the expansion. Employment increased strongly, manufacturing grew moderately, business spending was up modestly, construction and real estate rose slightly, and consumer spending decreased slightly. Wages and prices increased strongly while financial conditions slightly improved. There was some retreat in prospects for agricultural income.\nEmployment and Wages\nEmployment increased strongly over the reporting period, and contacts expected a similar pace of growth over the next 12 months. Contacts across sectors reported increased difficulty in finding workers at all skill levels despite ramping up recruiting efforts. Some businesses, particularly in the restaurant and manufacturing sectors, were limiting operating hours because of a lack of workers. A contact at a workforce development agency noted that, with the ease of finding new positions, workers were being more discriminating about workplace environment, scheduling flexibility, and pay when choosing a new job. Contacts pointed to childcare challenges, retirements, and financial support from the government as important factors limiting labor supply. A number of contacts indicated that they were delaying the return to in-person work because of rising COVID-19 cases. Overall, wage and benefit costs increased strongly. A scarcity of applicants for open positions had forced a number of contacts to raise wage offers. And some noted that applicants were asking for higher wages than they could afford to pay. In addition, many contacts who usually raise pay annually had given mid-year raises to their existing workforce.\nPrices\nOverall, prices rose strongly in July and early August, though contacts expected a moderate increase in prices over the next 12 months. There were large increases in producer prices, driven by passthrough of higher materials, energy, labor, and transportation costs. Contacts highlighted significantly higher freight costs as well as price increases for a wide range of materials including metals, metal products, petroleum-based products, chemicals, electronics, and paper. At the consumer level, prices moved up robustly overall. Contacts pointed to solid demand, limited inventories, and increased costs as sources of consumer price increases.\nConsumer Spending\nConsumer spending decreased slightly over the reporting period but remained at a high level. Spending on leisure and hospitality slowed, with contacts attributing the decline to the spread of the Delta variant. Nonauto retail sales increased slightly. Sales at home improvement, furniture, appliance, electronics, and grocery stores remained at solid levels. Contacts indicated that back to school shopping started strong. A service that analyzes consumer foot traffic in brick-and-mortar stores indicated that activity in the Midwest had recovered to pre-pandemic levels. Light vehicle sales decreased again as new vehicle inventory became even more scarce. Dealer profit margins fell from their recent highs but remained at strong levels. Dealers continued to sell vehicles from their future allotments by automakers.\nBusiness Spending\nBusiness spending increased modestly in July and early August. Retail inventories remained lean in many sectors, and contacts expected inventories to stay lean through the holiday season and into early 2022. New and used light vehicle inventories were very low as auto production continued to lag. In manufacturing, for-sale inventories were moderately low and there were shortages of a wide range of inputs including aluminum, steel, copper, plastics, paints, pallets, paper, glue, and microchips. Some contacts said they were stocking up on inputs in the hopes of avoiding future shutdowns, and several had expanded their vendor portfolio to reduce the risk of supply chain problems. Demand for transportation services outpaced supply, with many contacts reporting delays and sharp increases in rates. Capital expenditures rose some, and contacts expected a similar pace of expansion over the next twelve months. Many contacts noted that lead times for capital equipment were much longer than usual. One contact again said higher inventory expenses were crowding out their capital purchases. Energy demand from commercial customers increased modestly, but demand from industrial customers declined slightly.\nConstruction and Real Estate\nConstruction and real estate activity moved up slightly from the prior reporting period. Residential construction was unchanged. Contacts said that higher costs for labor and materials were pushing up prices beyond what some buyers were willing to pay and forcing builders to pause projects. Residential real estate activity was also little changed as low inventories put a ceiling on sales volume. Prices continued to rise. Nonresidential construction activity was unchanged as well, as many existing projects remained hampered by long lead times for materials. Commercial real estate activity ticked up, with both sales and prices slightly higher in recent weeks. Demand for industrial and multi-family properties remained strong. In addition, demand for retail space in high-traffic corridors increased noticeably, as retailers that were able to survive the pandemic expanded their operations.\nManufacturing\nManufacturing production increased moderately in July and early August. Most manufacturing contacts reported that business was above pre-pandemic levels, and many were running at full capacity. Labor and supply chain challenges were widely reported as the primary factors limiting further growth. Auto output decreased as shortages of microchips and other materials hampered production. Demand for heavy machinery grew robustly, led by higher sales in construction and agriculture. Demand for heavy trucks was also strong. Contacts reported higher steel demand from most industries. Steel service center inventories were low, but not as tight as early in the year. Specialty metals and chemical manufacturers reported a moderate increase in sales. Although orders were up for some kinds of building materials, shipments of others moderated as home builders were squeezed by labor and materials costs.\nBanking and Finance\nFinancial conditions improved slightly over the reporting period. Participants in equity and bond markets said there was little change in conditions. Business loan demand increased slightly. Banking contacts noted that loan growth was a challenge as many potential borrowers had sufficient cash and others had nonbank sources of funds. Business loan quality increased some, with improvements reported across all sectors. Business loan standards loosened slightly on balance. There were reports of a pickup in M&A activity. In consumer markets, loan demand increased slightly, led by growth in vehicle and credit card volumes. Consumer loan quality improved, with one contact noting that quality was at an all-time high. High prices for vehicle repossessions helped reduce loan losses. Loan standards were unchanged on balance.\nAgriculture\nAlthough most agriculture prices were higher than a year ago, farm incomes were expected to be down in 2021 with the end of pandemic-related government support payments. Cattle and egg prices increased during the reporting period. Milk producers faced lower margins as transportation costs rose and output prices mostly moved sideways. Contacts hoped reopening schools would boost bottled milk demand. Hog, corn, and soybean prices retreated from their recent highs. Relatively tight supplies of crops helped support corn and soybean prices. District corn and soybean harvests were expected to be near record levels, though parts of the region still faced a drought. Concerns grew that strained logistics would lead to shortages of parts for farm equipment during harvest and clog the movement of crops to markets. Farmland values kept climbing.\nFor more information about District economic conditions visit: chicagofed.org/cfsbc\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Atlanta

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"September 8, 2021\nSummary of Economic Activity\nEconomic activity in the Sixth District expanded moderately from July through mid-August. Demand for labor intensified, and worker availability remained extremely tight. Reports of increasing wage pressures continued and were more wide spread. Some nonlabor costs continued to rise, and pricing power strengthened. Retail sales activity improved, but new car sales declined due to supply chain constraints. Leisure travel activity remained robust. Demand for housing was solid, inventories remained low, and home prices rose. On balance, commercial real estate activity was steady. Manufacturing activity increased and supply delivery times grew. Conditions at financial institutions were stable, on net, but deposit growth slowed, and loan demand declined.\nEmployment and Wages\nOverall, employment in the District strengthened since the previous report. Contacts indicated that labor supply remained extremely tight. Many noted that the expiration of unemployment benefits and the start of the school year in many parts of the District had not increased the supply of applicants as hoped. The recent uptick in COVID-19 cases further constrained worker availability as absenteeism increased due to illness or quarantine. Workers were also less willing to work overtime hours. Several employers noted that applicants did not have the skills they were looking for. Labor shortages continued to hold back activity for many firms\u2013production had been curtailed, projects placed on hold, store hours reduced, and menus at restaurants had been slimmed down. Some childcare centers facing workforce shortages have chosen to close infant rooms because they require a greater number of caregivers. Retention continued to be a growing problem for firms. Restauranteurs noted concerns over \"ghosting coasting,\" where a new hire works for a few days and moves on to the next restaurant without notice before they are let go due to lack of skills. Another growing concern for many employers was described as a \"gray wave\" of early retirements, particularly among nurses. Employers continued to expand efforts to attract and retain employees.\nWage pressures intensified over the reporting period and upward pressure on wages was relatively widespread. Wage pressure was most notable among entry-level positions. Additionally, mentions of sign-on bonuses was more prevalent. Several firms were actively re-evaluating salary ranges or adjusting wages in reaction to competitor pay increases to retain their workforce.\nPrices\nDistrict contacts continued to cite increasing nonlabor costs, especially for steel and freight, with multiple contacts referencing record increases in shipping container rates. The price of lumber stabilized but remained elevated relative to pre-pandemic levels, while mentions of increased food product costs became more widespread. Contacts cited the ability to pass through price increases with greater frequency, and with minimal resistance. With the exception of labor costs, most contacts still expect cost pressures to ease by 2022. The\u202fAtlanta Fed's Business Inflation Expectations survey showed year-over-year unit costs\u202fincreased significantly to\u202f3.3\u202fpercent on average in\u202fAugust, up from 2.9 percent in July.\u202fYear-ahead expectations\u202fincreased to 3 percent in August, up from 2.8 percent in\u202fJuly.\nConsumer Spending and Tourism\nRetail contacts reported strong sales and per capita spending, particularly in leisure travel destinations in the District. Due to persistent labor shortages, restaurants and retailers remained challenged with meeting demand. The pace of new vehicle sales slowed further due to supply chain constraints, and the forecast for 2021 annual sales was revised downward.\nLeisure travel activity was solid, on balance, with some hospitality contacts reporting occupancies near 2019 levels. Recent COVID-19 surges are expected to curb activity for the balance of August and increase uncertainty for the Fall season.\nConstruction and Real Estate\nDemand for housing remained strong. However, real estate contacts noted that buyers have become more reluctant to buy as home prices continued to reach peak levels and housing affordability declined in most markets throughout the District. Inventory shortages continued to create upward price pressure, especially in Florida, where prices rose by over 20 percent in some markets.. After limiting sales earlier this year, some builders, as a way to stay ahead of rising costs, have shifted to building more speculative inventory rather than preselling. Although lumber costs have declined, labor and other material costs continued to rise.\nCommercial real estate (CRE) activity was steady over the reporting period. Conditions in the retail and hotel sectors improved modestly. Multifamily activity strengthened, though contacts expressed growing uncertainty over the future impacts of the lifting of the eviction moratorium on the sector. The office sector remained challenged as low demand and new deliveries pushed office vacancies further upward. Contacts reported that competition among lenders for a small segment of CRE loans accelerated. Smaller banks and non-bank lenders were noted as the more aggressive CRE lenders.\nManufacturing\nManufacturing contacts indicated that demand improved since the previous report. Supply delivery times lengthened as supply chain disruptions continued, which coupled with worker shortages, continued to imped production for many manufacturers. Expectations for future production levels remains optimistic.\nTransportation\nDistrict transportation activity remained strong over the reporting period, and contacts noted that demand for transportation services continued to exceed supply amid prolonged labor shortages and constrained container, trailer, and truck capacity. Port contacts reported record container volumes of imported goods. Trucking companies saw robust freight shipments. Railroads experienced significant increases in intermodal traffic; however, dwell times in rail yards increased. Air cargo contacts noted steady demand, though there was growing uncertainty surrounding the impact of COVID-19 outbreaks on activity. Transportation contacts anticipate further strengthening in activity but no relief from supply chain disruptions over the next 3-6 months.\nBanking and Finance\nConditions at District financial institutions were stable. Net interest margins remained compressed, though earnings improved due to noninterest income generated through asset sales and increased transactions. Deposit levels remained elevated, but deposit growth slowed. On balance, lending activity decelerated. Commercial and industrial loan balances on institutions' balance sheets declined as new Paycheck Protection Program (PPP) originations ended and balance runoffs increased due to streamlining of the forgiveness process. Demand for consumer loans also declined. Residential real estate balances increased slightly amid increased competition for loans. Additions to allowances for loan losses slowed as delinquency rates held steady.\nEnergy\nActivity in the energy sector remained solid over the reporting period, however, contacts expressed uncertainty about the impacts of COVID-19 on global demand for oil and gas products, and consequently, refinery utilization. District contacts reported sustained improvement in oil and gas production and continued efforts to incorporate efficiencies into drilling activity. Utilities industry contacts noted stronger than expected residential sales, which were offset by weaker than expected commercial and industrial sales. They also continued to report power generation upgrades and significant investment in renewable energy development and production.\nAgriculture\nAgricultural conditions remained mixed. Widespread rain relieved the District of drought conditions. With planting completed, the District's corn, cotton, soybean, peanut, and rice crop conditions were mostly on par with this time last year. District crop production forecasts were up on a year-over-year basis for cotton, soybeans, corn, and peanuts but down for rice. On a month-over-month basis, the production forecast for Florida's orange crop was up in July while the grapefruit production forecast was unchanged; both forecasts remained below last year's production levels. On a year-over-year basis, the USDA reported cropland values were up across the District states. The USDA reported year-over-year prices paid to farmers in June were up for corn, cotton, soybeans, cattle, broilers, eggs, and milk, but down for rice. On a month-over-month basis, prices were up for corn, cotton, rice, cattle, and broilers but down for soybeans, eggs, and milk.\nFor more information about District economic conditions visit: www.frbatlanta.org/economy\u2010matters/regional\u2010economics\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Cleveland

/beige-book-reports/2021/2021-09-cl

"September 8, 2021\nSummary of Economic Activity\nEconomic activity grew solidly, albeit at a somewhat slower pace than in the previous reporting period. Customer demand was solid for firms across a broad range of industries. That said, supply constraints limited many firms' ability to keep up with growing demand. This challenge was particularly acute for homebuilders, manufacturers, and auto dealers, many of which reported shortages and delays in receiving key items. Staff levels increased modestly, despite reports of strong customer demand. Labor shortages remained intense, and many firms raised wages for new hires and current employees. Reports of rising nonlabor costs and prices were widespread. Firms generally attributed the higher prices to the persistence of supply chain disruptions and worker shortages. Firms were generally upbeat that customer demand will remain strong during the rest of the year, but they were less optimistic that labor shortages and supply chain disruptions would abate enough to alleviate some of the upward pressure on wages and input costs.\nEmployment and Wages\nStaff levels increased modestly, and many firms commented that it was difficult to fill open positions for a wide range of occupations and skill levels. Contacts generally indicated that the flow of job applicants had not improved in recent months, despite some District states' early ending of supplemental unemployment benefits. Businesses also struggled to keep up with the high pace of employee turnover and retirements. One metalworking firm remarked that one-fourth of its staff had been with the firm for three months or less because of high turnover of new employees. Many contacts were pessimistic about their ability to fully staff up in coming months. One producer of industrial robots expected it would take four to five months to hire 20 semi-skilled manufacturing techs, a timeline which would be far longer than typical.\nReports of wage increases remained widespread. About two-thirds of survey respondents increased wages during the past two months, the highest share since we began keeping records in 2016. More so than in recent surveys, contacts commented that pay increases were needed, not just to attract new hires, but also to retain current employees and to prevent poaching. Several contacts indicated that they were raising wages across pay grades. Also, several contacts said they were giving more frequent raises than usual. One trucking company said it had already given five pay raises this year.\nPrices\nReports of rising nonlabor costs were widespread, and many firms expected sizeable cost increases in the coming months. Just over 80 percent of contacts reported that their nonlabor costs had increased in the last two months, a slightly higher share than in the previous survey. Contacts highlighted higher costs for a wide range of inputs, including meat, steel, packaging, electronics, office supplies, and freight services. Cost increases were often attributed to ongoing supply disruptions, which in some cases had worsened. A dairy farmer said that his food service distributors were now routinely out of a dozen or more items. These disruptions caused him to seek alternative suppliers at greater cost.\nReports of firms' raising their selling prices were also widespread. About two-thirds of respondents raised prices, a similar share to that of the previous reporting period. Many contacts indicated they were passing through higher labor costs to customers, not just higher costs for materials and freight services as in recent surveys. Some firms noted they were increasingly using surcharges to cover higher costs. Contacts are expecting larger increases in their prices during the next year than they previously anticipated because of rapid changes to costs and the longer-than-expected persistence of supply constraints. One freight hauler was told by a truck producer that all 2022 orders were being canceled and repriced because costs were changing so quickly.\nConsumer Spending\nConsumer spending increased moderately. The spread of the Delta variant had mixed impacts on high-contact services. While contacts observed cancelations of group events and weaker demand for air travel, hospitality firms that cater to regional leisure customers reported continued improvement in activity and stronger demand for local getaways. Demand for goods remained strong. General merchandisers and apparel retailers said that in-store traffic picked up in recent weeks. One department store noted that early back-to-school sales were stronger than in 2020 and were in line with 2019 sales as most schools announced a return to in-person instruction. Auto dealers noted that demand remained elevated but that sales dipped as tight inventories and higher prices deterred some buyers. Contacts were optimistic that consumer spending would continue to improve in the coming months, although the spread of the Delta variant clouded their outlooks for high-contact services.\nManufacturing\nManufacturing orders increased strongly across a range of end-user markets. Many producers said they were unable to meet demand because of worker shortages and delayed deliveries of inputs. A sizeable minority of firms noted that capacity utilization was below desired levels because of such challenges, and some moved out their own delivery schedules. Contacts noted some customers were accelerating their orders in anticipation of future delays and shortages. Capital expenditures increased modestly, with firms directing additional spending towards automation. On balance, manufacturers expected demand to continue to rise in the coming months.\nReal Estate and Construction\nHousing demand remained robust. However, the limited supply of homes continued to put upward pressure on home prices, and homebuilders were concerned that persistent supply chain disruptions were inhibiting new home construction. Contacts anticipated that activity would level off because the intensely competitive buyer's market and rapidly rising prices have led some potential homebuyers to postpone purchasing a home. One real estate agent predicted that \"instead of super-hot, it will be a warm market where things will start to balance out.\"\nNonresidential construction and real estate activity increased moderately, although there was variation across segments. Demand for industrial space remained robust, while demand for retail space and office space was dampened somewhat by the increase in coronavirus infections and rapidly changing workplace requirements. Contacts were optimistic that activity would continue to improve, although some were concerned that frequent cost increases and shortages of materials could hinder activity.\nFinancial Services\nBanking activity increased moderately, although it cooled somewhat from that of recent reporting periods. Contacts noted that demand for auto loans and mortgages remained somewhat elevated even though limited inventories in both markets dampened activity. A few lenders reported stronger demand for commercial real estate loans. That aside, business lending was relatively soft, and some bankers said loan payoffs and cash balances were high. Contacts reported that delinquency rates for consumer and commercial loans were still low and that the number of active forbearance agreements continued to drop. Looking ahead, bankers expected loan demand to remain stable in the near term but noted that the spread of the Delta variant tempered their prior optimism.\nProfessional and Business Services\nProfessional and business services firms continued to report robust demand. Technology firms experienced increased activity as clients resumed software investments that had previously been put on hold. Firms also noted that the labor market's ongoing recovery led to heightened demand for human resources- and payroll-related software. Contacts were optimistic that activity would remain strong as the economy continues to grow, although some firms were concerned that the recent increase in coronavirus infections may begin to dampen overall economic activity and ultimately demand for their services.\nFreight\nDemand for freight services grew modestly from already high levels. One contact attributed the increased activity to customers' adding to their supply stockpiles and some firms' storing their products offsite when customers further down the supply chain were behind schedule. Several freight haulers reported that shortages of drivers or equipment led them to turn away some orders. Looking forward, contacts expected demand for freight services to remain elevated.\nFor more information about District economic conditions visit: www.clevelandfed.org/region\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"

Richmond

/beige-book-reports/2021/2021-07-ri

"July 14, 2021\nSummary of Economic Activity\nThe regional economy continued to grow at a moderate rate in recent weeks. Manufacturers experienced robust demand and increases in shipments and new orders. District ports reported strong growth in volumes driven by imports of retail goods and exports of agriculture products. Trucking companies also reported strong growth and a level of demand that exceeded supply. Retailers saw strong growth, particularly for home goods and clothing. Auto sales picked up, overall, but car sales were limited by low inventory levels. Travel and tourism, particularly in vacation destinations, was strong, but some companies had to limit services due to labor shortages. Nonfinancial businesses reported moderate growth in revenue and some firms cut back on advertising because demand was exceeding their ability to meet it. The residential real estate market remained strong and new listing sold quickly. Commercial real estate leasing picked up and office vacancies declined. Banks reported modest loan growth, solid credit quality, and historically low default rates. Employment rose modestly and firms continued to struggle to fill open positions. Wages rose modestly, overall, as firms increasingly turned to non-wage incentives to attract workers. Price growth edged up further from already elevated year-over-year rates.\nEmployment and Wages\nTotal employment in the Fifth District rose modestly in recent weeks. The demand for workers remained strong and contacts continued to report difficulties filling open positions. Some employers said that they were investing in automation or using more part-time workers as a result. A firm in Charlotte was able to recruit tech workers from the west coast by allowing them to work remotely. Overall, wages rose modestly. Many contacts continued to report raising entry-level wages, which created pressure to increase wages for existing employees. Additionally, employers were increasingly turning to non-wage cash incentives such as referral and sign-on bonuses to recruit workers.\nPrices\nPrice growth picked up slightly in recent weeks from an already elevated rate. According to our surveys, service sector firms reported, on average, a four percent increase in prices received compared to a year ago. Meanwhile, manufacturers reported little change in selling prices in recent weeks; however, on a year-over-year basis, price growth remained robust. Firms across sectors also reported sharp increases in input costs and many noted that they were only passing a portion of those higher input costs on to customers.\nManufacturing\nFifth District manufacturers reported robust growth in demand since our last report leading to increases in shipments and new orders. Producers of retail goods, including food and furniture, saw especially high demand. Many manufacturers were unable to meet demand as shortages of labor, raw materials, and equipment constrained output. Manufacturers tied to the auto industry reported slowing production because of the microchip shortage. Lead times and backlogs lengthened as inventories remained low. Transportation issues also caused delays in getting finished products to customers, both domestically and internationally.\nPorts and Transportation\nFifth District ports saw strong growth of both imports and exports and handled record volumes since our last report. Import growth was primarily attributed to retail goods, including furniture, home goods, and food. Industrial and medical imports were also strong. Export growth was largely driven by logs, grains and soybeans. Ports increasingly stored imports, as trucking and rail disruptions caused delays getting imports from ports to customers.\nTruckers in the Fifth District reported robust volume growth in recent weeks. Volumes were high for most goods, but especially for retail and industrial goods. Companies were unable to meet demand amid labor constraints and equipment shortages, which led to higher spot market prices and increased profit margins. Contacts reported keeping trucks and trailers longer than intended, to help with both increased demand and delays in equipment arrivals.\nRetail, Travel, and Tourism\nFifth District retailers saw robust growth in demand and revenues since our last report. Sales of hardware, furniture, and home goods grew from already strong levels. Clothing stores reported increased demand, particularly for formal apparel, including wedding dresses, as consumers began to plan events and return to the office. However, many retailers struggled with inventory shortages and delays in receiving products. Auto dealers, in particular, faced shrinking inventories of new cars because of microchip shortages, but experienced higher profit margins on sales of used cars.\nTravel and tourism in the Fifth District showed strong growth in recent weeks. Some beach communities reported record visitation, as hotels saw record-breaking occupancy and beach short-term rentals were booked solid through the summer and into the fall. Outdoor attractions continued to do particularly well, although some indoor attractions, such as movie theaters, museums, and bowling alleys also saw increased visitation. Many hotels and restaurants continued to report labor shortages that led them to limit capacity or services. Contacts attributed demand to domestic travel, and visitation to the District of Columbia strengthened but remained below pre-pandemic levels.\nReal Estate and Construction\nFifth District home sales remained strong, average selling prices rose, and the average days on the market declined. Inventories remained low as new listings sold quickly and many home builders were either sold out or limited the sales of homes. Realtors noted that many buyers offered cash in order to close quickly and then refinanced. One contact noted that buyers are increasingly willing to buy homes in poorer or unknown condition.\nFifth District commercial real estate leasing expanded moderately since our last report. Office leasing increased modestly as more companies returned to onsite work and began to sign longer term leases, leading to an overall decline in office vacancy. Office rental rates increased, but realtors noted that office tenants generally required high incentives and concessions. Demand for retail leasing grew, and contacts noted that many restaurants were looking for more land in order to add drive-throughs. Multifamily leasing also increased, and rents rose. Industrial leasing continued to grow from already high levels.\nBanking and Finance\nOverall loan demand increased modestly this period. Financial institutions indicated soft business loan demand and low utilization rates on commercial lines of credit, attributed in part to temporary labor and supply shortages. Respondents noted continual modest growth in both commercial real estate and mortgage lending but remarked that the limited inventory of homes on the market has reduced mortgage originations. However, contacts reported increased loan competition, particularly focused on interest rates. Deposits exhibited moderate growth this period. Banks stated that credit quality continued to be good and delinquencies remained at historically low levels.\nNonfinancial Services\nNonfinancial services firms reported a moderate increase in revenue and demand in recent weeks. An accounting firm saw steady growth with new activity coming from merger and acquisition and tax accounting work. Meanwhile, an IT service provider noted an increase in demand for cloud and security solutions. An advertising and marketing agency contact said that clients were cutting back on advertising because demand was strong and outpacing their ability to meet it, so they didn't want to attract any new business. Lastly, an education services provider was expanding summer programs for children and was looking for other creative ways to support workers with children.\nFor more information about District economic conditions visit: www.richmondfed.org/research/data_analysis\nWe serve the public by pursuing a growing economy and stable financial system that work for all of us.\n"