The Beige Book

Summary of Commentary on
Current Economic Conditions by
Federal Reserve District

April 2025

FEDERAL RESERVE SYSTEM

i

Contents

About This Publication .................................................................................................... ii

National Summary ........................................................................................................... 1

Federal Reserve Bank of Boston .................................................................................. 5

Federal Reserve Bank of New York .............................................................................. 9

Federal Reserve Bank of Philadelphia ....................................................................... 13

Federal Reserve Bank of Cleveland ............................................................................ 17

Federal Reserve Bank of Richmond ........................................................................... 21

Federal Reserve Bank of Atlanta ................................................................................ 25

Federal Reserve Bank of Chicago .............................................................................. 29

Federal Reserve Bank of St. Louis ............................................................................. 32

Federal Reserve Bank of Minneapolis ....................................................................... 36

Federal Reserve Bank of Kansas City ........................................................................ 40

Federal Reserve Bank of Dallas .................................................................................. 44

Federal Reserve Bank of San Francisco .................................................................... 48

 ii

About This Publication

What is the Beige Book?

The Beige Book is a Federal Reserve System publication about current economic conditions
across the 12 Federal Reserve Districts. It characterizes regional economic conditions and pros-
pects based on a variety of mostly qualitative information, gathered directly from each District’s
sources. Reports are published eight times per year.

What is the purpose of the Beige Book?

The Beige Book is intended to characterize the change in economic conditions since the last
report. Outreach for the Beige Book is one of many ways the Federal Reserve System engages
with businesses and other organizations about economic developments in their communities.
Because this information is collected from a wide range of contacts through a variety of formal
and informal methods, the Beige Book can complement other forms of regional information gath-
ering. The Beige Book is not a commentary on the views of Federal Reserve officials.

How is the information collected?

Each Federal Reserve Bank gathers information on current economic conditions in its District
through reports from Bank and Branch directors, plus interviews and online questionnaires com-
pleted by businesses, community organizations, economists, market experts, and other sources.
Contacts are not selected at random; rather, Banks strive to curate a diverse set of sources that
can provide accurate and objective information about a broad range of economic activities. The
Beige Book serves as a regular summary of this information for the public.

How is the information used?

The information from contacts supplements the data and analysis used by Federal Reserve econo-
mists and staff to assess economic conditions in the Federal Reserve Districts. The qualitative
nature of the Beige Book creates an opportunity to characterize dynamics and identify emerging
trends in the economy that may not be readily apparent in the available economic data. This infor-

Note: The Federal Reserve officially identifies Districts by number and Reserve Bank city. In the 12th District, the Seattle
Branch serves Alaska, and the San Francisco Bank serves Hawaii. The System serves commonwealths and territories as
follows: the New York Bank serves the Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank
serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. The Board of Governors revised
the branch boundaries of the System in February 1996.
iii The Beige Book

mation enables comparison of economic conditions in different parts of the country, which can be
helpful for assessing the outlook for the national economy.

The Beige Book does not have the type of information I’m looking
for. What other information is available?
The Federal Reserve System conducts a wide array of recurring surveys of businesses, house-
holds, and community organizations. A list of statistical releases compiled by the Federal Reserve
Board is available here, links to each of the Federal Reserve Banks are available here, and a sum-
mary of the System’s community outreach is available here. In addition, Fed Listens events have
been held around the country to hear about how monetary policy affects peoples’ daily lives and
livelihoods. The System also relies on a variety of advisory councils—whose members are drawn
from a wide array of businesses, non-profit organizations, and community groups—to hear diverse
perspectives on the economy in carrying out its responsibilities.
 1

National Summary

Overall Economic Activity

Economic activity was little changed since the previous report, but uncertainty around international
trade policy was pervasive across reports. Just five Districts saw slight growth, three Districts
noted activity was relatively unchanged, and the remaining four Districts reported slight to modest
declines. Non-auto consumer spending was lower overall; however, most Districts saw moderate to
robust sales of vehicles and of some nondurables, generally attributed to a rush to purchase
ahead of tariff-related price increases. Both leisure and business travel were down, on balance,
and several Districts noted a decline in international visitors. Home sales rose somewhat, and
many Districts continued to note low inventory levels. Commercial real estate (CRE) activity
expanded slightly as multifamily propped up the industrial and office sectors. Loan demand was
flat to modestly higher, on net. Several Districts saw a deterioration in demand for non-financial
services. Transportation activity expanded modestly, on balance. Manufacturing was mixed, but
two-thirds of Districts said activity was little changed or had declined. The energy sector experi-
enced modest growth. Agricultural conditions were fairly stable across multiple Districts. Cuts to
federal grants and subsidies along with declines in philanthropic donations caused gaps in ser-
vices provided by many community organizations. The outlook in several Districts worsened consid-
erably as economic uncertainty, particularly surrounding tariffs, rose.

Labor Markets
Employment was little changed to up slightly in most Districts, with one District reporting a modest
increase, four reporting a slight increase, four reporting no change, and three reporting a slight decline.
This is a slight deterioration from the previous report with a few more Districts reporting declines. Hiring
was generally slower for consumer-facing firms than for business-to-business firms. The most notable
declines in headcount were in government roles or roles at organizations receiving government funding.
Several Districts reported that firms were taking a wait-and-see approach to employment, pausing or
slowing hiring until there is more clarity on economic conditions. In addition, there were scattered
reports of firms preparing for layoffs. Most Districts and markets reported an improvement in overall
labor availability, although there were some reports of constraints on labor supply resulting from shifting
immigration policies in certain sectors and regions. Wages generally grew at a modest pace, as wage
growth slowed from the previous report in multiple Districts.

Note: This report was prepared at the Federal Reserve Bank of Atlanta based on information collected on or before
April 14, 2025. This document summarizes comments received from contacts outside the Federal Reserve System and is
not a commentary on the views of Federal Reserve officials.
2 The Beige Book

Prices
Prices increased across Districts, with six characterizing price growth as modest and six characterizing
it as moderate, similar to the previous report. Most Districts noted that firms expected elevated input
cost growth resulting from tariffs. Many firms have already received notices from suppliers that costs
would be increasing. Firms reported adding tariff surcharges or shortening pricing horizons to account
for uncertain trade policy. Most businesses expected to pass through additional costs to customers.
However, there were reports about margin compression amid increased costs, as demand remained
tepid in some sectors, especially for consumer-facing firms.

Highlights by Federal Reserve District

Boston
Economic activity increased slightly, as the outlook became more pessimistic on tariff-related con-
cerns. Prices rose modestly, but contacts perceived new upside risks to inflation. Employment
edged up, although hiring plans became more cautious in response to increased uncertainty. IT
services contacts experienced strong revenue growth and were expected to be relatively unaf-
fected by tariffs.

New York
Economic activity contracted modestly as heightened uncertainty weighed on businesses and con-
sumers. Employment was steady to up slightly. Price increases picked up to the higher end of the
moderate range. Businesses expressed significant concern about tariffs. Outlooks darkened, with
many businesses anticipating declining activity and rising prices.

Philadelphia
Business activity declined modestly during the current Beige Book period after a slight decrease in
the last period. Nonmanufacturing activity fell moderately. Employment declined slightly; wages
and prices again grew modestly. Generally, sentiment fell, and firms grew less optimistic about
future growth amid rising economic uncertainty.

Cleveland
Reports suggested that Fourth District business activity continued to be flat in recent weeks, and
contacts expected activity to remain flat in the months ahead. Consumer spending declined,
though some auto dealers noted customers pulling forward purchases ahead of potential tariffs.
Employment levels increased slightly, and wage pressures remained moderate.
 National Summary 3

Richmond
The regional economy grew slightly in recent weeks despite some pockets of weakness tied to fed-
eral staffing and contract spending. Consumer spending was flat. Residential and commercial real
estate activity picked up slightly. Non-financial service providers reported a modest decline in
demand and hesitation from customers to make investment decisions. Employment was little
changed and price growth remained moderate amid upward price pressures from tariffs.

Atlanta
The Sixth District economy grew slightly. Employment was flat. Wages, nonlabor costs, and firms’
prices increased modestly. Retail sales fell slightly, and travel and tourism declined modestly.
Home sales rose modestly. Commercial real estate conditions softened. Transportation activity
grew slowly. Loan growth was moderate. Manufacturing declined. Energy activity rose slowly.

Chicago
Economic activity was little changed. Consumer spending increased modestly; employment and
construction and real estate activity were up slightly; manufacturing was flat; business spending
declined slightly; and nonbusiness contacts saw a slight decline in activity. Prices increased mod-
estly, wages rose slightly, and financial conditions tightened. Prospects for 2025 farm income
were unchanged.

St. Louis
Economic activity has remained unchanged, but the outlook has slightly deteriorated. Heavy rains
negatively impacted neighborhoods, farms, and businesses. Contacts expressed a lot of uncer-
tainty and an elevated effort in estimating the impact of tariffs and ways to reduce cost increases
and supply disruptions.

Minneapolis
District economic activity was lower. Employment declined and labor demand continued to soften.
Wage growth was modest, and price increases were moderate. Consumer spending was lower with
some exceptions. Manufacturing experienced modest improvements. Construction activity fell
overall. Commercial real estate was mostly unchanged, and home sales declined. Agricultural con-
ditions remained weak.

Kansas City
Economic activity in the Tenth District grew slightly, but expectations about business activity and
consumer spending weakened considerably. Amid shifting conditions, businesses indicated they
were most likely to adjust pricing to adapt. Expectations of price growth rose at a robust rate,
most pronounced in goods sectors. Employment levels were stable but hiring stalled.
4 The Beige Book

Dallas
Growth in the Eleventh District economy slowed to a slight pace. Nonfinancial services activity
stalled. Retail sales dipped while manufacturing and oil field activity rose modestly. Lending
growth moderated. Commercial real estate activity was steady, while housing demand remained
tepid. Employment increased, and input cost pressures accelerated. Outlooks deteriorated as
heightened uncertainty surrounding domestic and trade policy hindered firms’ ability to plan.

San Francisco
Economic activity slowed slightly. Employment fell slightly. Wages grew slightly, and prices rose
modestly. Demand for business and consumer services and for retail goods weakened. Activity in
manufacturing and residential and commercial real estate markets softened slightly. Lending
activity and conditions in agriculture were stable. The economic outlook worsened materially.
 5

Federal Reserve Bank of

Boston

Summary of Economic Activity

Economic activity increased slightly, about the same as in the previous report. Concerns over the
impact of tariffs intensified but mainly affected the outlook. Prices rose modestly in recent weeks
on average, despite larger increases in selected input prices. Employment edged up, but many
firms planned to pause or limit hiring going forward because of policy uncertainty. IT services firms
reported strong revenue growth. Revenues, led by moderate growth in auto sales, increased
slightly for retailers but were flat for manufacturers. In the tourism sector, overall revenues rose
slightly, but tourism from Canada slowed considerably. Commercial real estate activity picked up
slightly in recent weeks. Home sales softened a bit from one year earlier, partly reflecting bad
weather. The outlook became considerably more uncertain and more pessimistic, as contacts
emphasized risks of rising inflation and weakening demand linked to tariffs and other federal
policies.

Labor Markets
Employment increased slightly, and wages rose at a modest pace. Headcounts increased mod-
estly for IT services firms, which mostly sought to fill technical support and software development
roles. Among manufacturers, hiring activity was mixed, and employment increased slightly on
average. Retail and tourism employment was roughly unchanged, although contacts reported
increased ease of hiring and slower attrition. In contrast, immigrant labor supply, specifically of
health care workers, declined noticeably on Cape Cod. Wages increased modestly on average.
Concerning the outlook, a few firms expected to engage in moderate hiring activity in the coming
months but most planned to limit or even pause hiring because of elevated uncertainty and/or
weak demand. No significant layoffs were planned.

Prices
Prices rose modestly on average, but contacts said that prices could start to rise more rapidly in
the coming months. IT services prices rose at a slight pace over the quarter, and hotel room rates
in the Greater Boston area increased modestly on a year-over-year basis. Retail prices were
roughly flat in recent months, including those of autos. On a year-over-year basis, wholesale sea-
food prices declined moderately, while prices of certain metals imported from China increased
6 The Beige Book

sharply. Prices for energy and production tools increased moderately over the quarter. Manufac-
turers posted only slight output price increases in the most recent quarter. Looking ahead, retail
and manufacturing contacts alike cautioned that cost increases linked to tariffs, although still to
be determined, could result in significant passthrough to their output prices. Expected pass-
through rates were substantial, with half of manufacturers projecting a complete passthrough,
mostly without lags. One manufacturer shortened the duration of its price quotes to 30 days in
anticipation of the need to adjust prices rapidly.

Retail and Tourism

First District retail and tourism contacts reported mixed results in recent months, with revenues
increasing slightly on balance. Excluding automobiles, retail sales weakened moderately in the
first quarter of 2025 compared with the fourth quarter of 2024, falling short of expectations. Auto
dealers in New Hampshire reported moderate sales increases throughout March and early April,
and winter sales of snowmobiles and plows in the state were quite strong. Cape Cod restaurant
owners experienced a first-quarter slowdown, and hotel bookings on the Cape for summer were
running somewhat below recent years. Airline passenger traffic through Boston increased moder-
ately year-over-year. Hotel occupancy in greater Boston increased modestly, boosted by two inter-
national sporting events. However, travel from Canada declined noticeably, and contacts feared
that summer travel from Europe and China could suffer as well because of negative reactions to
U.S. tariff policies. More broadly, tourism contacts expressed concerns that declining consumer
confidence could hurt leisure spending. The retail outlook also turned decidedly more pessimistic,
though the outlook for convention activity remained solid.

Manufacturing and Related Services

Relative to the previous quarter, manufacturing sales were flat on average, although reports varied
across contacts and even within firms across business lines. A frozen food manufacturer experi-
enced healthy growth in retail sales despite the growing weakness in food services demand. A
materials producer reported a pronounced drop in sales over the quarter to automotive industry
clients but said that demand from other sources increased modestly from a year earlier. Capital
spending stayed within firms’ forecasts, increasing modestly from a year earlier. Projects included
a new production facility and upgrades to automation and productivity. Several contacts expressed
concerns that tariffs might require them to raise output prices and/or absorb cost increases. Con-
sequently, the outlook turned more pessimistic and uncertain, with some firms marking down their
revenue growth forecasts and others perceiving greater downside risks for the economy in general.
 Federal Reserve Bank of Boston 7

IT and Software Services

IT contacts in the First District reported strong revenue growth, driven in part by acquisition
activity, although one firm said that real transactions volume was about level with a year earlier. IT
contacts expected no direct impacts from tariffs and cautioned that it was too early to tell how tar-
iffs would affect their clients. Capital spending continued to drift downward. Contacts expected
demand for their services to stay strong or improve further in the second quarter, based on the
strength of recent bookings and confidence in their business models. One firm forecasted growing
demand for its automation products. However, one contact expressed increased pessimism for the
economy as a whole, and another pointed to downside risks to client demand associated with
cuts to federal research funding.

Commercial Real Estate

Commercial real estate activity in the First District picked up slightly on balance, but contacts
emphasized that uncertainty had put a damper on decision-making. Vacancy rates and rents were
largely unchanged, and office leasing activity increased a bit. Life sciences buildings in greater
Boston, already facing high vacancy rates, saw demand slow further from expected cuts to
research funding and an ongoing pullback of private equity. Several office buildings in Boston and
Providence were reportedly headed for auctions as their debt matured. At the same time, financing
flowed more freely to certain (non-office) properties, owing to an increased interest from private
debt funds. The outlook was marked by uncertainty, stemming mostly from tariffs, and became
slightly more pessimistic. Contacts were concerned that tariffs could blunt construction activity,
raise energy costs, and dampen demand for warehouse space, adding that just the uncertainty
surrounding tariffs was having a chilling effect on economic activity. One contact noted, however,
that the onshoring of manufacturing could yield offsetting benefits. Most respondents expected
demand for multifamily housing and grocery-anchored retail to remain strong but held mixed opin-
ions regarding the outlook for office and industrial properties.

Residential Real Estate

Across the First District, home sales declined slightly in February and March compared with twelve
months earlier. Those results contrasted with strong year-over-year sales increases recorded for
January, as several contacts perceived that inclement weather held back activity relative to sea-
sonal norms. On the brighter side, pending sales rose by moderate to large margins from one year
earlier in Massachusetts, New Hampshire, and Maine, and inventories increased considerably in
most reporting states, except for Massachusetts where inventories declined moderately. Home
prices increased at a moderate pace from one year earlier, less rapidly than in the previous report,
with Massachusetts’ home prices declining slightly in recent months. Contacts were hopeful that
8 The Beige Book

spring would bring a robust seasonal upswing in sales but cautioned that inventories remained a
limiting factor.

For more information about District economic conditions visit: [Link]

[Link].
 9

Federal Reserve Bank of

New York

Summary of Economic Activity

Economic activity in the Second District contracted modestly as heightened uncertainty weighed
on businesses and consumers. Still, employment in the region was steady to up slightly and
wages grew moderately. Price increases picked up to the higher end of the moderate range. Manu-
facturing activity declined modestly. Consumer spending was up modestly in March, though there
were signs of a pullback in early April. Housing markets picked up slightly. Many businesses
expressed significant concerns that tariffs would reduce supply availability, push up input prices,
decrease demand, squeeze profit margins, and hold back investment. Outlooks darkened, with
many businesses anticipating declining activity and rising prices in the months ahead.

Labor Markets
On balance, employment in the region was steady to up slightly. Businesses in personal services,
information, transportation, and wholesale saw an increase in headcounts, while retailers, leisure
and hospitality establishments, and business services firms reported declines.

Demand for workers held steady, though some employers reported pausing hiring amid heightened
uncertainty. A New York City area recruiter noted that despite some hesitation, demand for
workers in the financial services industry was steady. Contacts at employment agencies in the
region reported that labor demand and labor supply remained roughly in balance, though it has
generally become easier to find workers. Still, some businesses with more specialized needs con-
tinued to struggle to find workers with the right skills. Though there were no mentions of major lay-
offs, there were scattered signs of headcount reductions at smaller companies.

Wage growth remained moderate. A New Jersey salon reported that training costs were high
because workers did not have the proper vocational training, while a New York contact indicated
minimum wage increases were hindering hiring of new workers.

Prices
Both selling price and input price increases picked up to the higher end of the moderate range.
Food and insurance costs rose noticeably, and price increases for some wholesale and construc-
10 The Beige Book

tion materials—such as steel, aluminum, and imported doors—accelerated. Some manufacturers

and distributors have begun adding surcharges to account for tariffs on shipments already en
route. Still, a regional coffee roaster noted some easing in the price of commodity coffee. Firms
dependent on imports expressed concerns about compressed margins and their ability to pass on
cost increases to consumers. Contacts anticipated strong increases in input prices in the coming
months and expected selling price increases to remain moderate.

Consumer Spending
Consumer spending was up modestly in March, though there were signs of a pullback in early
April. Department store contacts reported a small pickup in March on the heels of weak sales
amid poor weather in the previous reporting period, but saw signs of weakening consumption in
April. A variety of smaller retailers in all corners of District—including food stores, restaurants,
and home furnishings stores—reported recent declines in sales, and a diner in upstate New York
noted customers were spending less on higher-priced menu items. By contrast, auto dealers in
upstate New York reported strong sales in March as customers looked to purchase vehicles
before tariffs pushed prices up further. Used car sales were steady, though dealers anticipated a
pickup in demand as tariffs raise the prices of new cars.

Manufacturing and Distribution

Manufacturing activity declined modestly, with new orders and shipments edging lower. A regional
furniture manufacturer reported a significant reduction in orders, in part due to federal government
spending freezes, and a handful of manufacturers reported sharp declines in sales to Canada. By
contrast, activity among wholesale and distribution-related firms increased slightly. A shipping
industry contact indicated that there was strong demand since the last report, with a significant
pulling forward of imports in anticipation of tariffs and other policy changes. Delivery times were
unchanged, and supply availability declined slightly but it is expected to worsen considerably in the
coming months. Some manufacturers paused capital equipment purchases amid economic uncer-
tainty. Manufacturers turned pessimistic about the outlook.

Services
Activity in the service sector declined moderately. There were particularly sharp declines reported
by firms in the leisure and hospitality, business services, and information sectors, while contacts
from the education and health and personal services sectors reported more modest declines. A
mid-sized IT service firm noted the loss of several contracts with Canadian companies. The out-
look for service sector firms worsened noticeably, with contacts anticipating a sharp decline in
activity in the coming months. Service sector firms reported a major pullback in planned
investment.
 Federal Reserve Bank of New York 11

Tourism activity in New York City was steady, with solid ticket sales at Broadway theatres. Hotel
rates and occupancy rose slightly compared to the same time last year. However, a New York City
hotel owner reported a falloff in international reservations, and contacts in upstate New York near
the border saw declining visits from Canadians. Looking ahead, a tourism industry expert antici-
pated further declines in international visitors.

Real Estate and Construction

The housing market picked up slightly as the spring selling season got underway. Supply remained
the limiting factor, with ongoing exceptionally low inventory in upstate New York and the New York
City suburbs, particularly Long Island. There was a small increase in new listings in recent
months, and some new construction added to inventory in upstate New York. Demand remained
solid and picked up for the spring selling season, pushing prices higher, and bidding wars con-
tinued. New York City’s housing market remained solid, despite some pullback from high-income
buyers rattled by financial market volatility. Yet, a New York City real estate contact expressed con-
cern that with mortgage rates rising in recent weeks, buyers and sellers may retreat to the
sidelines.

Rents have stabilized at a high level in upstate New York, while rents in New York City continued to
rise. With mortgage rates edging higher and heightened uncertainty, potential buyers have pushed
up demand for rentals.

Commercial real estate markets held steady. Vacancy rates in Manhattan’s office market have
declined, and leasing activity was stronger in March. Still, asking rents continued to decline, as
the ongoing preference for newer, higher-quality property has shifted the balance of space on the
market. Midtown Manhattan has fared better than other business districts, as proximity to transit
remained attractive. Northern New Jersey’s industrial market softened, as some activity stalled
due to the uncertainty about tariffs and consumer demand. Construction activity declined, amid
rising material prices and heightened uncertainty.

Banking and Finance

Activity in the broad finance sector continued to weaken modestly this reporting period. Small-to-
medium-sized banks reported that demand edged down for business loans and commercial mort-
gages, but declined more sharply for consumer loans and residential mortgages, as well as refi-
nances. A senior loan officer at a regional bank in New York noted that uncertainty was tempering
loan demand. Most contacts reported that credit standards had eased, while delinquency rates
improved. Deposit rates continued to decline.
12 The Beige Book

Community Perspectives
Reductions in federal grants and subsidies have led to gaps in services and financial assistance
to community members, with organizations having difficulty obtaining financing to help fill these
gaps. Local food banks that rely on federal funding have reported reductions in personnel and pro-
grams. Contacts at non-profits and other community-based organizations expressed significant
concern about the future of federal funding and services support, creating challenges in staffing,
strategy, and planning.

For more information about District economic conditions visit: [Link]

regional-economy.
 13

Federal Reserve Bank of

Philadelphia

Summary of Economic Activity

Business activity in the Third District declined modestly after falling slightly in the prior period.
Nonmanufacturing activity decreased moderately after a slight decline last period. Nonauto
retailers reported little change to a slight decline, with discounts helping to keep customer traffic
steady. Auto dealers reported a strong increase in sales thanks to a pulling forward of demand to
beat tariff-related price increases. Employment declined slightly, with demand for workers below
year-ago levels. Manufacturing activity continued to grow modestly. Wages and prices also con-
tinued to rise modestly, albeit at slightly lower rates. Firms continued to note that changes in trade
policies pose upside risks to general inflation. Firms expect a modest decline in business activity
over the next six months, with rising economic uncertainty weighing on prospects. Nonmanufac-
turers expected a moderate decline in activity over the next six months, and manufacturers
expected slight growth—both lower than last period’s expectations.

Labor Markets
Employment appeared to decline slightly, following a slight increase in the prior period. Based on
our March survey, full-time employment fell modestly for nonmanufacturing firms, the first decline
since August. The index for part-time employment also fell. However, the index for total manufac-
turing employment moved higher in March. The average workweek index rose for all firms. More
than two-thirds of all firms reported no changes in full-time employment in March, roughly in line
with the prior period.

Overall, our staffing contacts reported demand for workers was mostly flat from the prior period
but was below year-ago levels. One staffing contact highlighted a recent decline in overtime being
offered as well as instances of employers telling temporary workers not to come in for a few days
because of a lack of work, something the contact had not heard since before the pandemic. Con-
tacts reported a slight increase in labor supply but noted a decline in already employed persons
looking for a new job.

Business contacts continued to report low employee turnover and little issue hiring workers. One
contact remarked the firm had recently received applications from several overqualified candi-
dates. Another contact reported that clients were viewing federal government layoffs as an oppor-
14 The Beige Book

tunity to hire highly qualified workers who would not otherwise be available. However, reports of
fewer hours, hiring freezes, and layoffs were more common than in recent periods.

Wage inflation continued to ease further on balance, but firms still reported modest increases.
Across industries, contacts reported little upward wage pressure, with wage increases typical of
their long-run average.

Prices
On balance, firms’ prices again rose modestly during the period. In our monthly surveys, the diffu-
sion index for prices paid rose and was above its nonrecession average for both nonmanufacturers
and manufacturers. The diffusion index for prices received rose for nonmanufacturing firms, while
the index ticked down for manufacturing firms but remained elevated.

One contact reported canceling upcoming price increases, fearing a drop in customer demand.
Meanwhile, another contact reported that a significant number of restaurants chose not to partici-
pate in an annual local restaurant week promotion because they couldn’t afford to discount their
menu items.

Most contacts expected tariffs to increase costs and prices moving forward, and only a few
reported an impact this period. The indexes for future prices paid and future prices received con-
tinued to suggest that manufacturing firms expect price increases over the next six months. Both
indexes moved lower but remained above their historical nonrecession averages.

Manufacturing
Manufacturing activity continued to grow modestly during the period. However, the indexes for new
orders and shipments suggested less widespread growth compared with the prior period.

Manufacturers expected slight growth in activity over the next six months, a slowdown from the
prior period. The indexes for future general activity, new orders, shipments, and employment all
suggested less optimism than in the prior period. In March, the share of firms expecting higher
capital expenditures in 2025 compared with 2024 slightly exceeded the share of firms expecting
lower capital expenditures. However, the share of firms expecting higher capital expenditures in
2025 was down significantly from when the identical question was asked in October.

Trade and Services

On balance, firms across a broad spectrum of nonmanufacturing industries reported a moderate
decrease in activity following a slight decline last period. The index for general activity, which
 Federal Reserve Bank of Philadelphia 15

turned negative in February, weakened further in March. The indexes for new orders and sales/
revenues also remained negative, with the new orders index falling sharply in March.

Retailers (nonauto) reported little change to a slight decline in sales during the period, following
little to no change last period. One contact indicated more aggressive price promotions contrib-
uted to an uptick in store visits, but customers mostly limited their purchases to discounted
items. Contacts described consumers as pinched and noted less frequent visits to businesses
such as coffee shops, breweries, and restaurants.

Auto dealers reported a strong increase in sales after a slight increase last period. Multiple con-
tacts highlighted that sales hit record highs in March. However, all our auto industry contacts
attributed this boost to a pulling forward of vehicle purchases to get ahead of potential tariffs and
do not expect the strength in demand to continue.

Tourism activity rose slightly after increasing moderately last period. Contacts reported a signifi-
cant drop in visits and future bookings from international tourists but noted that domestic travel
remained strong during the period. Contacts also highlighted a drag in activity stemming from can-
cellations for government-related travel and conferences.

The share of nonmanufacturers expecting growth over the next six months fell sharply and turned
negative, with the index falling to its lowest level since April 2020.

Real Estate and Construction

Brokers again reported a slight decline in existing home sales. Contacts continued to stress that
the lack of housing inventory was the biggest constraint on sales growth and that a lack of afford-
ability dampened activity further.

Homebuilders reported a moderate decline in activity during the period, slowing from a slight
decline last period. In addition to an overall slowing in sales and prospective buyer traffic, con-
tacts reported a drop in average sales prices, with customers opting for smaller homes or less
expensive townhomes. One contact noted a backlog of sales will put a floor on activity this year,
but multiple contacts cited the stock market volatility in early April and recent drops in consumer
confidence as headwinds for future sales.

In nonresidential markets, leasing activity and transaction volumes appeared to hold steady in the
retail, commercial, and industrial segments. However, demand for logistics-related industrial space
is showing signs of slowing slightly, according to contacts.
16 The Beige Book

Commercial real estate contacts continued to report a slight decrease in construction activity this
period. A few contacts noted projects in early development phases have been paused to work out
possible tariff-related cost changes. Another contact reported a delay in federal funding impeded
previously planned municipal projects.

Credit Conditions
The volume of bank lending (excluding credit cards) held steady during the current period (not sea-
sonally adjusted)—an improvement over last period’s slight decline but weaker than the slight
growth in the same period a year ago.

District banks reported a moderate decline in commercial and industrial loans and modest drops
in auto loans and other consumer loans. Meanwhile, mortgage lending grew moderately, home
equity lines grew modestly, and commercial real estate loans ticked up. Credit card volumes
declined moderately, in line with the decline in the same period a year ago.

Banking contacts reported little change in overall asset quality despite a slight increase in past
due payments and delinquency rates. Multiple contacts also noted a slower loan pipeline due to
potential policy and price variability that has caused businesses to delay investment decisions.

For more information about District economic conditions visit: [Link]

regional-economy.
 17

Federal Reserve Bank of

Cleveland

Summary of Economic Activity

On balance, contact reports were consistent with flat business activity in the Fourth District in
recent weeks, suggesting a weaker-than-usual spring. Contacts generally expected activity to
remain flat in the months ahead. Consumer spending was down; however, some auto dealers
reported an increase in sales as customers sought to purchase cars ahead of potential tariffs.
Demand for manufactured goods continued to soften, a situation which contacts attributed to
uncertainty regarding tariffs. Construction contacts noted an uptick in demand but expected
demand to diminish in the coming months given potential materials cost increases due to tariffs.
On balance, employment levels increased slightly, and wage pressures remained moderate.
Although contact reports suggested moderate growth in nonlabor input costs, reported price
increases continued to be modest.

Labor Markets
Employment levels generally increased slightly in recent weeks, according to contact reports. Con-
tacts in the manufacturing, construction, and retail sectors reported hiring additional staff to
accommodate business expansion and increased demand. A few contacts noted that their firms
took advantage of the cooler labor market to hire for roles in which candidates were previously
scarce. By contrast, several contacts reported that softer demand caused them to reduce head-
counts, while others put hiring efforts on pause because of an uncertain market outlook. On bal-
ance, firms expected employment to continue to see slight growth.

Contacts reported that wage pressures were moderate over the last two months. Across indus-
tries, firms continued to implement cost-of-living and merit-based wage increases for existing
employees. New employees in some key positions earned higher starting salaries, though contact
accounts suggested that labor market pressures were broadly softening, allowing firms to main-
tain flat starting wages for many roles.

Prices
On balance, contacts indicated that nonlabor input costs rose at a moderate pace in recent
weeks. Contacts from multiple sectors noted that some of their suppliers increased prices in
18 The Beige Book

anticipation of import tariffs, and many firms whose suppliers had yet to raise prices said that
they expected increases in the near term. Manufacturers and construction contacts reported
higher costs for steel and other materials, while multiple retailers reported higher costs to import
both intermediate and finished goods. Contacts generally expected costs to grow at a strong pace
in the coming months.

Contacts suggested that selling prices again grew at a modest pace on balance, though most con-
tinued to report holding prices steady in recent weeks. Many firms that raised prices reported
doing so to keep pace with rising employee compensation or materials costs, while a smaller
share mentioned normal annual increases. Overall, retail contacts indicated that they were
increasing prices moderately, and one retailer added that its firm was testing the effects of price
increases to offset anticipated import tariffs.

Consumer Spending
Consumer spending declined moderately, and contacts expected this decline to continue—albeit
at a slow pace—over the coming months. Several food and hospitality contacts tied decreased
foot traffic to economic and political uncertainty, and they expected consumers to pull back on
spending or trade down to more affordable options. Conversely, some auto dealers reported that
the threat of tariffs drove customers to purchase automobiles prior to potential price increases.
Several retailers had difficulty forecasting the impacts of policy and economic uncertainty on con-
sumer demand, and they worried that consumer spending would pull back further.

Manufacturing
Contact reports suggested a moderate decline in demand for manufactured goods, and the largest
share of firms expected demand to be stable at the current low level in the coming months. Con-
tacts across industry segments cited uncertainty about import tariffs and other government poli-
cies as the primary reasons for softer orders, and some producers were concerned that their
firms’ exports could be subject to reciprocal tariffs; one contact added that some foreign cus-
tomers had already begun to cancel existing orders. Still, a small number of manufacturers
expected demand for their products to increase if firms seek domestic sources of inputs previ-
ously sourced from abroad or as trade policy comes into better focus.

Real Estate and Construction

Demand for homes increased moderately in recent weeks as the spring selling season began to
heat up. One homebuilder saw somewhat lower mortgage rates attracting buyers to the market,
and another attributed higher contract volume to new-home buyers getting ahead of potential
materials cost increases related to tariffs. One industry contact saw falling demand for new builds
 Federal Reserve Bank of Cleveland 19

but rising demand for remodels and additions. Contacts expected a slowdown in demand over the
coming months due to increasing construction costs associated with tariffs and uncertainty in the
broader economy.

On the nonresidential side, contacts reported that demand for new projects declined slightly. Sev-
eral commercial builders said that tariff policies and an uncertain economic environment were
keeping firms from moving forward with projects. On balance, contacts expected activity to slow
further in the coming months. Many anticipated that policy uncertainty would continue to dampen
demand for commercial buildings.

Financial Services
Overall, bankers reported that loan demand increased slightly over the last several weeks. A
couple of bankers attributed this increase to improved optimism among some of their clients
related to a more “pro-business” administration. Another banker said that loan demand was
stronger for commercial real estate and commercial and industrial loans than in previous years.
However, several other bankers noted that clients held off on large purchases due to increased
economic uncertainty. Looking ahead, some bankers anticipated a decline in loan demand due to
uncertainty surrounding interest rates, government spending, and trade policy. Bankers predomi-
nantly reported that core deposits increased at their institutions, a situation which one attributed
to clients withdrawing money from the stock market.

Nonfinancial Services
Demand for professional and business services was robust on balance in recent weeks, according
to contact reports. One law firm saw increased demand from government and nonprofit clients
driven by questions on policy changes. Meanwhile, another law firm specializing in mergers and
acquisitions reported stable demand as its clients awaited policy clarity, but it expected demand
to rise as tariff policies become clearer. Contacts generally expected professional and business
services demand to grow slightly in the coming months. By contrast, freight contacts reported a
slight decline in demand, a circumstance which several contacts attributed to economic policy
uncertainty. Freight contacts expected modest growth in the coming months.

Community Conditions
In a semiannual survey of nonprofit organizations, respondents who assist jobseekers reported a
decline in job availability over the past six months. Some respondents indicated that employers
were less willing to train individuals and were conducting more interviews before hiring. A majority
of respondents said that price increases continued to impact the financial well-being of low- and
moderate-income households, leading more households to rely on credit cards to purchase basic
20 The Beige Book

necessities. Several contacts expressed concern about their organizations’ funding due to a
decline in individual donations and uncertainty regarding federal funding.

For more information about District economic conditions visit: [Link]

region/regional-analysis.
 21

Federal Reserve Bank of

Richmond

Summary of Economic Activity

On balance, the Fifth District economy grew mildly in recent weeks. Reports on consumer
spending were mixed with some businesses seeing sales pick up as weather improved but others
seeing sales decline due to declining consumer confidence and job security fears from federal
workers. Residential and commercial real estate activity increased slightly this cycle. Manufac-
turers and financial services providers reported steady demand. Nonfinancial services, on the
other hand, reported a modest decline in demand due to heightened uncertainty impacting their
clients’ ability to make decisions. Employment levels were little changed, overall. Price growth
picked up slightly as some firms increased prices due to tariffs, but year-over-year price growth
remained within a moderate range.

Labor Markets
Employment in the Fifth District, on net, was unchanged in the most recent period. However, many
federal government workers were laid off or put on administrative leave in recent weeks. These
cuts to the federal workforce have impacted businesses throughout the entire district. In addition,
federal contractors have laid off workers in response to spending cuts. For example, a research
organization headquartered outside the DC-region laid off workers due to contracts being can-
celled. Similarly, a Northern Virginia consultancy reduced headcount by 25 percent due to losing
half their contracts. Non-government employers generally reported a slight improvement in labor
availability and moderating wage pressure, though firms in manufacturing and skilled trades con-
tinue to report that the availability of workers with the right skills constrains growth, particularly in
smaller towns.

Prices
Price growth edged slightly higher in recent weeks but on a year-over-year basis growth remained
moderate. Several firms said that they recently raised their prices because their costs had
increased as a result of tariffs. Many firms said that they were receiving letters from suppliers and
sending letters to their customers warning that prices could increase in the near future due to tar-
iffs. Several businesses said that until they had a better idea of how tariffs might impact them,
they were minimizing new investments and planning for various cost scenarios.
22 The Beige Book

Manufacturing
Manufacturing activity in the Fifth District was unchanged in the recent reporting period. Several
contacts had a positive first quarter but expected activity to be negatively impacted in coming
months due to increased uncertainty and tariffs. A sheet metal fabricator wasn’t sure about future
orders due to steel tariffs leading to price increases. Several contacts put investments on hold
due to increased uncertainty. A military equipment manufacturer reported conditions being “too
chaotic” to make any decisions on future investments. A wall panel manufacturer has no long-term
investment plans due to increased market uncertainty. A coffee roaster, whose beans can only be
sourced internationally, reported historic cost increases which resulted in historic price increases
for their customers.

Ports and Transportation

Overall cargo volumes in the Fifth District decreased modestly since the last reporting period, with
some variance between ports. Cargo volumes briefly returned to normal in February as labor
agreements were resolved but have been more volatile in recent weeks due to tariff announce-
ments and enactments. For example, steep declines were reported for farm and construction
equipment after steel and aluminum tariffs set in. In contrast, imports for autos and some retail
goods increased as orders were placed to get ahead of potential tariffs. Loaded exports were
down significantly with one port noting an “unexpected and disappointing” 25 percent decline
month over month. Port contacts were particularly concerned about the proposed port call tax on
Chinese vessels which, by their estimates, could quadruple cargo handling costs. Some ports
received multi-million-dollar tariff bills on Chinese cranes that were already ordered and enroute as
tariffs were enacted and are now subject to the tariff. Rail saw record volumes this period with
high storage levels; contacts attributed the extra cargo to tariff front-loading and extended gate
hours to accommodate the extra freight. Trucking volumes were relatively flat but respondents
expected overall freight volumes from China specifically to dip in the coming months.

Retail, Travel, and Tourism

Consumer spending was flat, on balance, but individual reports were mixed. Some retail busi-
nesses said that sales were up compared to January and February, but both of those months were
soft due to adverse weather conditions. Other retailers and restaurants in Virginia and Maryland
said that sales were down and attributed some of the decline to consumer sentiment and the fact
that their client base included federal workers and contractors who were pulling back on discre-
tionary spending in case they lose their job. Travel and tourism contacts also gave mixed reports
with some seeing a bounce back in March as weather was more favorable and others reporting
declines in both leisure and business travel.
 Federal Reserve Bank of Richmond 23

Real Estate and Construction

Residential real estate activity had a slight uptick from last cycle. Home inventory levels have
begun to increase, and buyer traffic declined. Homebuilders across the district are worried about
the impacts that tariffs will have on raw material pricing. A Virginia builder noted concerns that an
increase in building supply costs will create greater housing affordability problems. This was
echoed by a broker who stated, “It seems like there is no longer a first-time homebuyer market
while million-dollar homes continue to sell.” Simultaneously, buyers were still obtaining mortgages
and receiving incentives in new construction close-outs.

Commercial real estate had a slight increase despite some uncertainty and hesitation. A
North Carolina broker stated, “we are in a time of price discovery.” Multifamily construction con-
tinued where projects had already started but few new projects were being green lit. Demand for
retail and restaurant space remained strong despite some major retailers closing locations. Office
space saw a slight decrease in vacancies as companies brought more workers back into the
office. Another broker in Virginia noted that as federal layoffs continue in D.C., government con-
tractors are moving from space in northern Virginia to occupy the open space in federally owned
buildings. Construction continued to slow, in conjunction with fears that public sector projects will
not have federal funds as expected.

Banking and Finance

Financial institutions reported loan demand to be steady, but commercial real estate loan demand
continued to drop slightly. One lender attributed this slowing of demand to long-term higher
interest rates, a tightening of credit standards, and economic uncertainty. A few institutions
observed that consumer auto and mortgage loan borrowing continued to soften. Several institu-
tions also noted that they were seeing a modest increase in delinquencies in both their commer-
cial and consumer loan portfolios. Deposit levels continued to remain stable, but one institution
noted they were seeing both businesses and consumers withdrawing more funds to manage their
rising costs.

Nonfinancial Services
Nonfinancial service providers reported modest decreases in demand for their services and
expected this trend to continue throughout the year. An architectural firm noted that the year was
off to a strong start, but the threat of tariffs and uncertain economic conditions have impacted
their clients’ ability to make business decisions. A variety of firms, all with ties to some form of
federal government funding, indicated that the uncertainty of these payments caused them to
24 The Beige Book

change their outlook for the year. The reactions to this change included the possibility of reducing
their workforces and/or looking for other revenue streams.

For more information about District economic conditions visit: [Link]

research/data_analysis.
 25

Federal Reserve Bank of

Atlanta

Summary of Economic Activity

The Sixth District economy grew slightly, on balance, over the reporting period. Labor markets were
little changed, but some firms noted plans for slight reductions in headcount amid softening
demand or rising cost pressures. Wages, nonlabor costs, and firms’ prices rose modestly. Con-
sumer spending fell slightly, and travel and tourism activity declined at a modest pace. Home
sales rose modestly, home inventories increased, and affordability declined further. Commercial
real estate conditions weakened. Transportation activity rose slowly, and manufacturing deceler-
ated. Loan growth was flat. Energy activity grew at a slow pace, and agricultural demand declined
somewhat.

Labor Markets
Employment was little changed from the previous report. Many firms reported fairly stable demand
for workers and roughly flat headcounts. However, a small but increasing share of contacts noted
plans for slight reductions in force as a result of softening demand or mounting cost pressures.
Some contacts mentioned concerns about uncertain international trade policy further moderating
demand, which could trigger additional downsizing. While not a majority, several firms have seen a
drop in labor supply amid tightening immigration policy. Concerns about future labor constraints
have grown in several sectors but were especially pronounced in construction and agriculture.

Wages grew modestly since the February report. Most contacts expected 2025 wage increases to
be similar to those seen in 2024. Some pointed to the rising cost of living as putting upward pres-
sure on wages, but the bargaining power continued to shift from employees to employers.

Prices
Prices and nonlabor costs increased modestly. Price increases, both realized and expected, were
largely attributed to the direct and indirect impacts of trade policy. Many firms raised prices amid
higher costs resulting from tariffed inputs, and even some firms not directly impacted cited tariffs
and less foreign competition as a trigger for price increases. Most contacts expect to pass
through the cost of tariffs, even if it means a drop in sales; however, some consumer-facing firms
noted increased price sensitivity among customers has led them to be strategic with targeted
26 The Beige Book

pricing. Inflationary trends prevailed across sectors, signaling that the effects of trade policy are
spreading and are no longer limited to the goods space.

Consumer Spending
Consumer spending declined modestly. Some retailers noted a decrease in foot traffic, and con-
sumers increasingly opted to eat at home instead of at restaurants. Apparel retailers reported
softer demand and expressed concerns about sales falling further amid the added cost of tariffs,
since most apparel is imported. Demand for furniture, which was already weak, continued to fall.
There were also ongoing reports of consumers trading down to value products or bulk purchases.

Travel and tourism activity declined modestly. Hoteliers noted slight decreases in occupancies,
and guests shortened stays and reduced discretionary spending on property. Business travel fell.
Live entertainment venues saw declining ticket sales. Large attractions that normally draw interna-
tional visitors saw a drop in travelers from abroad, particularly Canada, and airports and airlines
reported a notable decline in foreign passengers to the U.S.

Construction and Real Estate

Home sales improved modestly since the previous report, in line with seasonal trends. Existing
home inventories grew moderately, with some markets, like southwest Florida, rising more sharply.
However, most markets continued to see inventory shortages, causing steady upward pressure on
housing prices. This, combined with elevated mortgage rates, has driven home ownership afford-
ability to historic lows. Demand for new homes ticked up though was below expectations, and
homebuilders continued to offer incentives to promote sales. Homebuilders’ optimism waned amid
rising costs, labor and lot shortages, and a shrinking pool of buyers.

Commercial real estate activity weakened. Challenges remained in the multifamily segment,
though demand accelerated somewhat through expanded concessions amid elevated vacancy
rates. Office activity was bifurcated, as newer buildings experienced stronger leasing and sales
rates than older properties requiring upgrades or offering fewer amenities. Demand for industrial
space was sluggish, and warehousing capacity rose as new properties came online. Widespread
uncertainty along with tightened lending standards slowed investment decisions.

Transportation
Transportation activity rose modestly, on balance, over the reporting period. Some ports experi-
enced significant year-over-year increases in container volumes and a rebound in roll-on roll-off
shipments following a decline in February. Intermodal rail shipments increased, and total traffic
improved from year-earlier levels. Demand was mixed for inland barge carriers, with one reporting
 Federal Reserve Bank of Atlanta 27

steep declines in coal exports and other commodities, and another noting stable freight volumes
but an expectation for weakening activity amid growing concerns by exporters over reciprocal tar-
iffs. Freight brokers saw a sharp drop in average loads per day after months of strong demand as
importers pulled inventories forward ahead of new tariffs. Lack of clarity around international trade
policies was noted as the biggest risk to the outlook.

Manufacturing
Manufacturing activity declined slightly since the previous report. A beverage producer noted softer
sales. Contacts in lumber and wood products manufacturing experienced slowing demand amid
ambiguity surrounding tariffs—one firm noted having “zero faith in even a 6-month forecast,” and
that the biggest hurdle to expansion and mergers and acquisitions was not knowing how trade
policy will settle out. Conversely, a steel fabricator reported record backlogs with the most
strength coming from federally funded projects. Several manufacturers reported slowing or
pausing capital expenditures because of economic uncertainty.

Banking and Finance

Loan growth at Sixth District financial institutions was flat, on net, over the reporting period. While
there was robust growth in the multifamily lending category, consumer loans, excluding autos and
credit cards, contracted sharply. Cash-to-assets ratios saw a moderate decline as cash balances
fell and assets held steady. Deposit balances and borrowings declined proportionately, leaving
loan-to-deposit ratios unchanged. Banks reported no significant increases in delinquencies.

Energy
Energy activity grew slowly. Liquefied natural gas production remained an area of strength in the oil
and gas sector, both domestically to fuel data center expansions and for exports abroad. Utility
company contacts reported growth in the commercial and residential segments but noted that
industrial activity had slowed. Energy contacts expressed concern over tariffs on imported crude
oil and refined petroleum products, as well as equipment and parts used for chemical plant con-
struction. Some firms described uncertainty about economic conditions in the short term, but
most remained upbeat about the long term, given strength in energy and power demand.

Agriculture
Agricultural activity declined slightly. Dairy farmers saw demand soften, partially attributed to
decreased exports of cheese to Mexico. Cattle ranchers continued to note strong beef sales and
higher prices amid limited supply. Demand for chicken was strong. Egg supplies continued to be
limited by cases of Avian Flu. Demand for timber remained low. Contacts reported moderating
28 The Beige Book

demand for fruits and vegetables. Cotton, grain, and other row crop growers continued to struggle.
Farmers were concerned about increasing costs of fertilizer imports given trade policy changes.

For more information about District economic conditions visit: [Link]

economy-matters/regional-economics.
 29

Federal Reserve Bank of

Chicago

Summary of Economic Activity

Economic activity in the Seventh District was little changed on balance over the reporting period
and contacts expected a slight decrease over the next year. Many contacts noted heightened
uncertainty in their outlooks due to uncertainty over the direction of federal trade policy. Consumer
spending increased modestly; employment and construction and real estate activity were up
slightly; manufacturing was flat; business spending declined slightly; and nonbusiness contacts
saw a slight decline in activity. Prices increased modestly, wages rose slightly, and financial condi-
tions tightened. Prospects for 2025 farm income were unchanged.

Labor Markets
Employment increased slightly over the reporting period and contacts expected a similar pace of
growth over the next 12 months. Contacts largely reported either stable or easing hiring condi-
tions, though a few, primarily in manufacturing, continued to have difficulty hiring. Several contacts
across a variety of industries said they were fully staffed or hiring only for replacement, with only a
few expecting to increase staffing over the next year. Wages and benefits costs were up slightly
overall. Several contacts noted that following a few years of very large gains, annual wage
increases for the coming year were close to historical averages.

Prices
Prices rose modestly since the last report, though contacts expected the pace of growth to pick up
over the next 12 months. Producer prices increased slightly. Nonlabor input costs rose, with
reports of higher prices for raw materials and equipment. Numerous manufacturing contacts said
they were facing heightened uncertainty about both input costs and selling prices, and many attrib-
uted the uncertainty to changing tariff policies. One machinery manufacturer reported that vendors
were changing prices on a daily basis. Consumer prices rose modestly overall. One retail industry
analyst expected the price impacts of higher tariffs to largely be felt in the second half of the year
and said retailers were expecting to pass about one-third of higher tariff costs on to consumers.
30 The Beige Book

Consumer Spending
Consumer spending increased modestly over the reporting period. Nonauto retail sales were up,
led by spending on big-ticket items such as appliances, computers, and other electronics. Con-
tacts attributed the growth to consumers pulling ahead spending in anticipation of higher tariffs
later in the year. Leisure and hospitality spending softened overall, with restaurants posting higher
sales but spending on hotels, air travel, and tourist attractions weakening. Some contacts noted
that visits from Canadians were down moderately year-to-date. Light vehicle sales increased mod-
erately, with sales accelerating near the end of March as consumers pulled ahead purchases to
avoid higher tariffs. Dealers expected strong demand to continue until existing inventories run
down and tariffs start to affect pricing.

Business Spending
Business spending declined slightly since last report. Capital expenditures fell slightly and expec-
tations for spending over the coming year also declined. Multiple contacts reported hesitancy to
make capital purchases due to uncertainty over the economic outlook. Demand for truck transpor-
tation was flat, though freight rates decreased slightly. Retail inventories ticked up from a high
level. Inventories of new vehicles were elevated as dealers reported adding to their stocks ahead
of potential tariff increases. Manufacturing inventories were comfortable overall, and reports of
materials shortages remained low.

Construction and Real Estate

Construction and real estate activity increased slightly over the reporting period. Residential con-
struction was flat. Residential real estate activity moved up slightly, led by greater demand for
townhomes and starter homes. Prices increased slightly as well, but rents were unchanged. Non-
residential construction was up a little, though contacts expressed concern that tariff-induced
price increases on items such as large appliances, glass, and windows would slow activity. Com-
mercial real estate demand was unchanged.

Manufacturing
Manufacturing activity was flat on balance in the District. Steel orders increased slightly, with one
contact reporting an increase in demand from the energy sector. Fabricated metals sales rose
modestly, in part due to more orders from the defense industry. A couple of contacts in fabricated
metals expressed concern that prices for nickel would spike because a large share is imported
from Canada. Machinery sales declined moderately, with higher demand from the aerospace
industry more than offset by lower demand from the automotive industry. Auto and heavy truck
production declined slightly.
 Federal Reserve Bank of Chicago 31

Banking and Finance

Financial conditions tightened modestly over the reporting period. Market volatility was elevated
and bond and equity values fell significantly. Business loan demand increased modestly overall.
However, one banking contact noted that many clients had put major decisions on pause due to
uncertainty about the state of the economy and another noted that capital expenditures had
slowed. One contact in M&A said activity was at a “standstill.” Business loan quality and rates
decreased slightly, and terms remained flat. In the consumer sector, loan demand increased
slightly, and quality edged down. Consumer loan rates and terms were flat.

Agriculture
Farm income expectations for 2025 were largely unchanged, though there was greater uncertainty
due to trade policy announcements. Contacts expressed concerns about potentially losing export
markets but also mentioned that greater purchases of agricultural products could be a way for
some countries to lower trade deficits with the US. Corn, soybean, and wheat prices decreased.
Fieldwork was underway to prepare for planting, though abundant moisture slowed preparations in
the eastern part of the District. Contacts expected slightly more corn acres to be planted instead
of soybeans given relatively favorable price movements for corn and a perception of greater export
exposure for soybeans. While input prices for farmers rose some, vendors had cut financing rates
to incentivize sales, in some cases down to 0 percent. Cattle prices increased, while egg, dairy
and hog prices decreased. Contacts reported that livestock operations were in better financial
shape than crop operations. There were limited sales of new farm machinery.

Community Conditions
Community, nonprofit, and other nonbusiness contacts reported a slight decrease in economic
activity over the reporting period, and many expressed concerns that changes in federal policies
were negatively affecting small businesses and low- and moderate-income communities. State gov-
ernment officials reported little change in activity but increased uncertainty in the economic out-
look. Local labor markets were stable overall, though there were reports of layoffs at nonprofit
organizations which had been affected by federal funding cuts. Low- and moderate-income con-
sumers continued to face elevated prices, with food pantry leaders noting the particular challenge
of sourcing adequate amounts of eggs and chicken, two common sources of protein.

For more information about District economic conditions visit: [Link]

32

Federal Reserve Bank of

St. Louis

Summary of Economic Activity

Economic activity has remained unchanged since our previous report. Employment levels were
unchanged and wage growth has been modest, although contacts reported the possibility of a
future reduction in force. While prices continued to increase moderately, contacts indicated that
the increases were starting to accelerate. District businesses were negatively impacted by heavy
rains, delaying the delivery of merchandise, postponing events, and flooding businesses, farms,
and neighborhoods. Contacts expressed a lot of uncertainty and an elevated effort in estimating
the impact of tariffs and ways to reduce cost increases and supply disruptions. They also noted
that they were unwilling to make changes due to elevated uncertainty. The outlook has continued
to decline from neutral to slightly pessimistic.

Labor Markets
Employment has remained unchanged since our previous report. A staffing agency in Kentucky
reported that hiring activity picked up at the end of the first quarter, but several contacts in the
region reported no changes in employment. Retailers felt the hiring market had shifted back in
their favor, with more candidates eager to work. One contact indicated turnover in their call center
had been very low recently. While there have been few reports of layoffs, several contacts indi-
cated the possibility of reducing headcount in the future. A software service company indicated
they created a contingency plan to reduce staff, but they were not actively planning to do so.

Wage growth has been modest. One contact reported that wages were stable, and another
reported they were expecting no wage increases for 2025. In Missouri, small businesses have
expressed confusion about changes in the state’s sick leave policies.

Prices
Prices have increased moderately since our previous report; however, businesses expect costs to
increase due to tariffs and are looking for ways to reduce the impact on their profits. A retailer indi-
cated that price growth accelerated from the previous quarter, particularly food prices, with general
merchandise prices increasing slightly. A pharmacy reported they were starting to see price
increases from manufacturers, but their costs had not been impacted yet as they had built up
 Federal Reserve Bank of St. Louis 33

inventory. A retailer indicated their initial worst-case-scenario estimates of tariffs would result in a
less than two percent cost increase; however, their updated estimates—prior to April 2—indicated
they would face a five percent increase. A manufacturer reported that what initially looked to be a
mild impact had worsened and was forcing them to evaluate sourcing options. Large retailers
announced to their suppliers they would not accept price increases due to tariffs, and an HVAC
supplier reported they would now price their equipment based on shipment dates rather than con-
tract or purchase order dates.

Consumer Spending
Consumer spending reports were mixed. Hospitality contacts reported little change in activity, with
mixed reports on restaurant sales. Hotel bookings have generally remained strong, with some
reports of cancellations due to a pullback in federal spending. Retail sales have been mixed:
Sales of personal care items, cosmetics, and groceries increased while sales of home appliances,
toys, and seasonal items decreased. Retailers catering to higher-income customers reported
sales were flat. Auto dealers reports were mixed. In Arkansas, one dealer continued to report
vehicles sales have been weaker than expected and the outlook had deteriorated; Louisville
dealers reported increased showroom traffic, while noting this would likely fall as soon as the tar-
iffs took effect. Retailer inventories have increased slightly due to a combination of pre-ordering in
advance of tariffs and weaker-than-expected sales.

Manufacturing
Manufacturing activity has been flat on net since our previous report. Survey indicators suggest a
slight increase in manufacturing activity in Missouri and Arkansas, with an increase in employ-
ment, production, and new orders. An Arkansas electrical equipment manufacturer reported they
had a three-year backlog of orders and that demand for their products continued to increase. A
vehicle manufacturer reported that they were running at 60 percent of their capacity. Contacts in
food service, retail, and consumer goods plants in Kentucky reported their schedules had been
softening. Contacts reported concerns about price and supply issues that had led to higher inven-
tories and efforts to domesticate the supply chain. Some contacts also reported they were reluc-
tant to execute previous capital investment plans or create new ones due to ongoing uncertainty. A
bourbon distillery indicated that planning ahead felt almost impossible when trade rules kept
changing.

Nonfinancial Services
Activity in the nonfinancial services sector has been mixed. Transportation and logistics contacts
noted an increase in activity as steel-related customers have increased their production in antici-
pation of tariffs. Transportation firms remain optimistic that demand for materials will continue,
34 The Beige Book

but they are concerned about tight margins. Recent heavy rains resulted in postponed or cancelled
deliveries due to impassable roads and flight cancellations. A contact in auto mechanics reported
strong activity with lead times of over one week to schedule repairs, noting that this uptick in
demand could be related to customer concerns about tariff impacts on parts. A software service
provider reported they had to cut their growth targets and were pressuring their sales team to
“push hard” now, as they expected sales to become increasingly difficult next quarter.

Real Estate and Construction

Residential real estate activity has remained unchanged since our previous report. Active listings
have increased relative to a year ago but sales continue to fall behind. One contact reported
observing a slowdown in home buyer and seller activity around the time of the tariff announce-
ment. A home builder in Little Rock reported their business had slowed considerably and that
houses were staying on the market longer. In contrast, another builder reported that lower mort-
gage rates had started a surge in home building and the increase in activity was evident.

Commercial real estate has improved slightly. Contractors in Kentucky reported the commercial
construction market remained steady. Supply chain disruptions are impacting the lead times for
materials, which have pushed project timelines and increased construction costs. While some con-
struction companies have diversified their supplier network and begun pre-ordering materials,
other businesses halted projects due to substantial increases in costs due to tariffs. A builder in
Arkansas reported their backlog of projects remained stable, with slight increases in commercial
and government-related work. However, they were concerned about future slowdowns due to uncer-
tainty and a decrease in federally funded projects.

Banking and Finance

Banking activity has remained unchanged since our previous report. A Kentucky financial institu-
tion reported facing tightening margins, which had influenced their willingness to lend, while a
banker in Arkansas reported that projections for lending growth continued to be strong. A bank
reported that deposits were up compared with the same time a year ago, but they were starting to
show signs of decline as were new account openings. Bankers reported that consumer past-due
accounts continued to rise; however, the exposure was staying at 60 days or less. Similarly, they
reported observing a slight increase in small business bankruptcies and past dues. Bankers
reported that, despite a few pockets of concern, credit portfolios were strong.

Agriculture and Natural Resources

Agriculture conditions have been unchanged since our previous report. Wet soil conditions com-
bined with significant rainfall has delayed planting, and in some areas, flooding will require
 Federal Reserve Bank of St. Louis 35

replanting of crops. A farmer in Arkansas reported not being able to sleep for three days due to
the disruptions caused by the flooding. While operating incomes for row-crop farms are expected
to be negative in 2025, government supports are expected to offset losses. The outlook for meat
and poultry producers is more favorable due to low feed prices and stable demand, particularly for
home consumption. Contacts reported elevated levels of uncertainty regarding the economic out-
look and trade policy but have not made any significant changes to their operations.

For more information about District economic conditions visit: [Link]

research/regional-economy.
36

Federal Reserve Bank of

Minneapolis

Summary of Economic Activity

Economic activity in the Ninth District edged lower across most sectors since the last report.
Employment decreased and labor demand continued trending down. Wage pressure grew mod-
estly, while prices moved moderately upward. Consumer spending fell slightly with noted excep-
tions, particularly on vehicle sales. Construction activity fell overall, reflecting elevated uncertainty.
Commercial real estate was mostly flat, and sales of residential units edged lower. Manufacturing
activity increased modestly, though sentiment was mixed. Agricultural conditions remained weak.

Labor Markets
Employment was down slightly since the last report, and labor demand cooled notably. More firms
reported a decrease in headcount compared with those reporting an increase. A large staffing firm
with multiple offices in the District reported a drop in clients and job orders on a monthly and year-
over-year basis. A second, large staffing firm reported that “customers have slowed down in
hiring.” Multiple Minnesota contacts said businesses have implemented hiring freezes and tempo-
rary layoffs and have been cutting hours. Still, a Wisconsin workforce contact said, “While senti-
ment has been somewhat negative, we still have plenty of job openings that need to be filled.”
Labor availability continued to improve. A long-term care provider reported “a huge increase” in
applications it normally receives for open jobs, and a health care provider noted it was “flooded
with applications for IT positions.”

Wage pressure grew modestly but softened from levels earlier in the year. A survey found that the
share of contacts reporting wage increases fell noticeably in March for the second consecutive
month. A staffing company reported that year-over-year wage increases for the majority of job
placements were running just over two percent. A central Minnesota contact reported that adver-
tised wages for some entry-level jobs were declining. One workforce contact noted that “employers
appear to have gained more leverage in wage negotiations.”

Prices
Prices increased moderately overall, with greater pressure on wholesale prices. More than a third
of District firms increased the prices they charged to customers in March from a month earlier,
 Federal Reserve Bank of Minneapolis 37

according to a monthly survey, while more than half reported increased input prices. Contacts in
manufacturing and construction reported that they saw raw materials prices increase in anticipa-
tion of tariffs, particularly for steel and aluminum products. “Steel prices are surging faster than
they did during the 2019-2021 period when we experienced record-setting steel prices,” com-
mented a metal fabricator. Some contacts reported placing surcharges on products using metal
inputs, while a few reported increasing prices of other outputs to compensate, and others saw
declining margins. Retail fuel prices increased modestly in most District states since the
last report.

Worker Experience
Reports from labor and workforce development contacts reflected ongoing challenges for workers
and job seekers, topped with added uncertainty from federal policies. Some contacts feared that
tariffs and federal spending cutbacks would hurt a labor market that, while softening, remained in
good shape. In Montana, a building trades labor contact attributed the growing number of “people
on the bench” to the slowdown of federally funded projects. Another labor contact in Michigan’s
Upper Peninsula warned that “the labor market door is about to slam shut . . . and consumer con-
fidence and spending is going to plunge.” Contacts also highlighted particular stress on Indian
Country due to “frozen federal funding,” while immigrant workers in a range of occupations were
feeling uncertain about their future.

Consumer Spending
Consumer spending fell slightly overall. Retail contacts were split on recent sales trends. Recent
credit card transactions in the District showed slower spending compared with a month earlier.
Tourism contacts also reported declines in Canadian travelers and related spending; a North
Dakota retailer saw a “deep impact” starting in mid-February, pushing first-quarter revenues down
seven percent. However, vehicle sales rose across the District, possibly a short-term effect as
people “buy now to save . . . money from the future tariffs,” according to one District dealership.
Numerous contacts noted a more cautious, cost-conscious consumer. Several bankers in Montana
said consumer loan activity was slow because people were nervous to acquire debt. A manufac-
turer of consumer goods said, “It is extremely difficult to predict consumer behavior now and for
the rest of the year.”

Construction and Real Estate

Construction fell since the last report. While some firms reported that activity was picking up with
spring, a larger share reported a decline in activity, most often citing economic uncertainty. A
Minnesota heating and cooling firm said it was “bracing for an unpredictable year.” Numerous con-
tacts, particularly in architecture and engineering, reported delays in projects moving forward. A
38 The Beige Book

Minnesota firm said, “New projects have dried up completely in the first quarter. . . . Uncertainty
and chaos at the federal level has frozen pretty much all activity.” Another said that “clients are
hesitant to proceed with design until some sort of certainty and predictability comes back.” Pre-
liminary data on housing permits suggested relatively stable activity in March.

Commercial real estate was flat overall. Office vacancy remained high, but demand grew among
smaller tenants, leading to modest improvements in space absorption. Industrial, retail, and multi-
family vacancy rates were stable, helped by generally slow activity in new construction in those
sectors. Residential real estate was widely lower; March home sales fell among most markets
with available data.

Manufacturing
District manufacturing activity increased modestly overall since the previous report, though
sentiment was mixed among contacts; some reported negative impacts from tariffs or expected
tariffs. More than half of manufacturers responding to a monthly business conditions survey
reported an increase in orders in March from a month earlier. Some contacts noted a bump in
orders due to customers seeking to build inventories ahead of expected price increases. An index
of regional manufacturing conditions indicated activity increased in Minnesota, North Dakota, and
South Dakota in March from the previous month. Some producers of construction input reported
cancellation of orders amid uncertainty about the outlook.

Agriculture Energy and Natural Resources

District agricultural conditions remained weak heading into planting season. Grain producers con-
tinued to struggle due to low commodity prices, while cattle operations were stronger. Industry
sources were concerned about widespread drought conditions because, as one contact noted,
“liquidity on balance sheets is gone and another bad year would be very difficult to survive for
most farmers.” District oil and gas exploration activity was unchanged since the previous report.
Operations were idled at two District iron ore mines due to overaccumulation of inventory amid
decreased steel demand.

Minority- and Women-Owned Business Enterprises

Activity among minority- and women-owned business enterprises (MWBEs) fell slightly, with expec-
tations of further softening over the coming weeks. Inventory levels rose among most contacts. A
manufacturing company in Minnesota said it was “pre-buying aluminum in anticipation to tariffs.”
The majority of contacts reported higher nonlabor input prices and thinner profit margins. Many
expected their own final prices to increase in the foreseeable future. A retailer in North Dakota
expressed concerns about the effects of tariffs on prices and supply. Job openings trended down,
 Federal Reserve Bank of Minneapolis 39

and headcount remained unchanged on balance. Over half of contacts described the first three
months of 2025 as “worse than expected.” A Minnesota manufacturer said, “We’ve been in busi-
ness 12 years, and [this quarter] was like our first or second year.”

For more information about District economic conditions visit: [Link]

region-and-community.
40

Federal Reserve Bank of

Kansas City

Summary of Economic Activity

Economic activity in the Tenth District grew slightly, but expectations about business activity and
consumer spending weakened considerably compared to the last report. Moreover, businesses’
commentary about economic conditions shifted rapidly in recent weeks, as uncertainty rose
quickly, concerns about tariffs weighed on decision making, and businesses sought to adapt their
plans. The majority of contacts indicated the most likely change to their business plans this year
would be to the prices charged for their finished products. Expectations for price growth rose at a
robust rate accordingly, though diminished demand at consumer services firms softened current
and expected price pressures somewhat. Services firms highlighted changes in hiring plans or
headcount as other likely steps to adapt to changing conditions, but employment was generally
steady across the District over the past month. Several actions by businesses to improve liquidity
and cash positions were highlighted in recent weeks, including seeking larger credit lines, selling
inventory at discounts and selling long-term assets.

Labor Markets
Employment levels remained steady across the Tenth District. Job growth was subdued as hiring
freezes reportedly became a more common occurrence. One contact stated, “this is not the time
to commit to adding labor,” citing heightened uncertainty. More generally, when asked what
changes in business plans to adapt to current conditions were most likely, services firms identi-
fied constraining hiring plans or reducing headcounts as likely, but not the primary steps they will
take. Manufacturing firms indicated any changes to their workforce would be more of a last resort.
Slowing labor demand reportedly led to weakness in the junior labor market for new grads and new
entrants.

Prices
Prices increased moderately in recent weeks on average, but expectations of price growth over the
next six months broadly rose at a robust rate. The majority of contacts indicated the most likely
change to their business plans to adapt to changes in economic conditions this year would be
“prices charged for finished products.” Manufacturing and retail sectors (i.e., goods sectors)
emphasized their current pricing does not yet fully incorporate the cost pressures associated with
tariffs, implemented or expected. Contacts indicated passing rising costs to customers will occur
 Federal Reserve Bank of Kansas City 41

over the next several months and anticipated goods prices will rise broadly as many suppliers are
spreading cost increases across their entire product portfolios. The acceleration of price pres-
sures in goods sectors (current and expected) stands in contrast to reported deceleration in con-
sumer service price growth. Travel and lodging prices reportedly softened, and housing prices were
stable or even declined in certain parts of the District.

Consumer Spending
Consumer spending grew slightly over the last month, but with mixed activity across categories.
Auto sales rose at a robust rate as aggressive pricing intended to garner cash flow and clear
inventory facilitated a recent pickup in sales, which was not expected to persist. Household pur-
chases of other durable goods also rose, but growth in spending on services was reportedly much
weaker. Recent consumer spending on travel was down modestly, and contacts described future
expectations as “a cliff,” with a substantial decline in travel bookings through the summer. Health-
care contacts reported a moderate decline in the use of preventative care and non-essential ser-
vices. Businesses’ expectations for growth in consumer spending weakened further in recent
weeks, with projected growth in household spending roughly flat on average.

Community Conditions
Food banks and pantries across the Tenth District said they were contending with the combination
of rising demand, funding cuts, and substantial uncertainty about funding over the coming year.
Most pantries mentioned they expanded services over the last year, but they still struggled to
meet demand for food assistance. Funding cuts from the USDA were highlighted as particularly
impactful regarding services for seniors. Specifically, one pantry reported cutting back the amount
of food they can give from three to five days of shelf stable food to two days of food every 30 days
due to funding cuts. Pantries also expressed heightened funding uncertainty across government,
corporations, and individuals and uncertainty about food price pressures.

Manufacturing and Other Business Activity

Manufacturing activity in the Tenth District declined modestly, though the pace of contraction
slowed. Many firms began reassessing product lines, with some deciding to scale back production
of lower-margin, highly competitive goods that lacked proprietary advantages. While some manu-
facturing businesses reported interest in procuring domestically sourced materials and compo-
nents, they indicated that interest has not translated into new contracts due to costs and capacity
constraints. Business leaders indicated recent strategy discussions shifted away from capital
investments aimed at innovation and efficiency toward a focus almost entirely on mitigating tariff-
related risks. An aerospace firm shared that the level of competitiveness for key materials
including metals have pushed lead times to between 50 to 100 weeks. Although manufacturing
42 The Beige Book

firms remained generally optimistic about the broader economy, their confidence was tempered by
growing concerns about the stability of economic conditions.

Real Estate and Construction

The delivery of newly constructed multifamily housing units remained elevated, but contacts noted
the absorption of new units slowed significantly. With more available units coming online, rent
growth stagnated and even declined in certain parts of the District. Sales and transaction activity
were rising early in the year, but contacts noted the number of deals that fell apart ticked up in
recent weeks and many more deals faced significant or indeterminate delays in closing. A few
commercial real estate investors indicated replacement costs are expected to rise, which they
anticipated may lead to another increase in insurance premiums next year. These future premium
price increases reportedly weighed on the viability of certain projects and transactions, but they
were noted as tertiary concerns.

Community and Regional Banking

Loan demand was mostly unchanged on average, though several bankers noted demand for resi-
dential mortgage loans was trending up. Some bankers indicated several businesses sought
increased funding capacity to shore up their available liquidity. Many contacts reported a modest
tightening of credit standards for commercial real estate and commercial and industrial loans due
to changes in the economic outlook. Loan quality remained stable except for agriculture lending,
where conditions weakened. Most respondents indicated they anticipate some deterioration in
credit performance over the next six months due to heightened uncertainty weighing on the overall
economic outlook.

Energy
Tenth District oil and gas activity grew modestly. Just over half of contacts reported steady activity,
and about a quarter of firms—mostly smaller operators—reported growth. Despite some
increases in drilling, firms’ revenues, profits, and capital expenditures continued to decline on net.
Most oil and gas operators expect activity to remain steady in the near-term, while nearly a third
expect a pickup in activity. However, some contacts expect recent trade policy changes will
dampen activity or revenues over the next year and many anticipate higher costs for key inputs like
steel. Additionally, firms’ long-term price expectations are still below the price needed to support a
substantial increase in drilling. Accordingly, contacts noted future production growth could remain
subdued for the foreseeable future.
 Federal Reserve Bank of Kansas City 43

Agriculture
Economic conditions in the Tenth District farm economy weakened early in April. Prices for several
key commodities declined alongside increased uncertainty surrounding export prospects. Profit
opportunities for crop producers remained limited. In the latest survey of agricultural credit condi-
tions, lenders reported gradual deterioration in farm loan repayment rates and notable increases
in carryover debt and loan restructuring compared to a year ago. Credit conditions weakened com-
paratively more in portions of the District most heavily concentrated in crop production while
strong cattle prices supported farm finances in other areas. Production costs, elevated living
expenses, and further declines in working capital were cited as key concerns, with some contacts
noting that more highly leveraged borrowers were selling longer-term assets to improve liquidity.

For more information about District economic conditions visit: [Link]

research/regional-research.
44

Federal Reserve Bank of

Dallas

Summary of Economic Activity

Growth in the Eleventh District economy slowed to a slight pace over the reporting period. Nonfi-
nancial services activity was flat, but manufacturing output rose modestly. Retail sales dipped,
and loan demand increased slightly. Commercial real estate activity was stable, while housing
demand remained tepid. Oilfield activity rose modestly. Employment and wages grew, while input
cost pressures accelerated largely due to the expected pass through of higher tariff costs. Out-
looks worsened with weakening demand, policy uncertainty, and inflation cited as primary con-
cerns going forward. Numerous contacts voiced concern that heightened uncertainty stemming
from on-again, off-again tariffs was making it increasingly challenging to plan. Stricter immigration
policy, federal government layoffs, and a cutback in spending were also cited as headwinds
for growth.

Labor Markets
Employment rose modestly over the reporting period. Several contacts noted a wait-and-see pos-
ture on hiring amid elevated domestic and trade policy uncertainty, while some firms, including air-
lines, cited layoffs. Energy executives said layoffs are expected this year, and that the pace may
increase if oil prices remain close to or fall below $60. Wage pressures were stable during the
reporting period. One manufacturer noted cutting wages due to cash flow issues. Firms expect
wage growth to slow to 3.4 percent over the next 12 months, down from 3.8 percent over the past
12 months.

Prices
Prices continued to increase at a moderate pace. Firms broadly expressed trepidation about the
effect of tariffs on demand and costs, with some contacts indicating they will not be able to pass
on the increases to clients. Several manufacturers cited higher raw material prices. The impact of
tariffs on steel and machinery prices was a drag on the energy sector, particularly for firms with
ongoing construction projects for whom the materials were a sizable share of costs. A few con-
struction and real estate contacts said that tariffs had given their suppliers an excuse to raise
prices, and some retailers cited being notified by their vendors of forthcoming tariff surcharges.
 Federal Reserve Bank of Dallas 45

Manufacturers and retailers expect selling price increases to accelerate over the next 12 months,
while service sector executives expect price growth to remain moderate.

Manufacturing
Manufacturing output rebounded in March after weakening in February. The pickup in production
spanned both durable and nondurable goods, with strength seen in transportation equipment,
machinery, computer products, and food manufacturing. Utilization rates at Gulf Coast refineries
remained at healthy levels despite seasonal softness. While manufacturing activity picked up, out-
looks worsened. Manufacturers widely voiced concern that tariffs were becoming an increasing
source of uncertainty, dampening demand, pushing up prices, and delaying and complicating busi-
ness planning.

Retail Sales
Retail sales dipped during the reporting period. Declining growth in sales of nondurable consumer
products outweighed growth in durable goods. Among durables, auto vehicle sales strengthened in
anticipation of the announced tariffs. Overall retail outlooks weakened, as the potential impact of
tariffs on pricing and demand weighed on sentiment.

Nonfinancial Services
Activity in nonfinancial services stalled out following moderate growth in the previous reporting
period. Revenue rose in some sectors, however, with increases seen in transportation, health, and
professional and business services. Demand for staffing services was flat to slightly up. Airlines
noted that passenger demand had softened, with some of the weakness attributable to a marked
decline in federal government travel. Port traffic remained strong as companies accelerated their
inventory purchases ahead of tariffs. Growth paused in the leisure and hospitality sector, which
was attributed to uncertainty causing consumers to be more cautious with their discretionary
spending. Outlooks deteriorated overall, with numerous contacts stating that heightened uncer-
tainty surrounding domestic and trade policy was hindering their ability to plan with confidence.

Construction and Real Estate

Housing demand remained tepid. The spring selling season was characterized as modest and
choppy, with a slight pickup in sales seen toward the end of the reporting period. Incentives for
new homes, including price discounts, remained prevalent. However, there were scattered reports
of builders being less aggressive on mortgage rate buy downs due to high costs. Home invento-
ries rose, and prices were flat to down. Outlooks were cautious, weighed down by sluggish
46 The Beige Book

demand, high mortgage rates, and concerns regarding the impact of immigration and trade policy
on consumer sentiment, labor supply, and construction costs.

Commercial real estate activity was stable during the reporting period. Apartment demand
remained solid, though rent growth continued to be lackluster. Office absorption was positive in
some major markets, though vacancies remained elevated. Industrial demand stayed positive but
there was apprehension about the impact of shifting trade policies on leasing activity and invest-
ment sales.

Financial Services
Loan volume and loan demand growth decelerated sharply in March. Credit tightening continued,
but loan pricing declined. Loan nonperformance increased. In addition, bankers reported that busi-
ness activity contracted after expanding over the last three months, and their outlooks retreated
to cautiously optimistic. While respondents expect an improvement in loan demand and business
activity six months from now, the sentiment is less broad-based, and it is tempered by expecta-
tions of a continued increase in loan nonperformance.

Energy
Activity in the oil and gas sector increased modestly over the reporting period. While drilling and
completion activity is expected to remain steady over the next few months, contacts were worried
that lower oil prices, eroding global growth outlooks, and tariffs would dampen activity later this
year and lower spending plans for 2026. Outlooks worsened, and contacts expressed concern
that heightened uncertainty surrounding tax, trade, and regulatory policy was making planning diffi-
cult and would likely hinder investment decisions.

Agriculture
Drought conditions persisted in parts of the district, though widespread rainfall was received late
in the reporting period and provided much-needed moisture. Some extreme weather was seen,
from wind and dust storms in the Texas panhandle to flooding along the coast. Grain prices moved
down. Cattle and beef prices continued to trend up over most of the reporting period, with beef
prices rising to new highs, though cattle prices faltered somewhat in early April. Drought condi-
tions are a hurdle for ranchers looking to expand their herds. Looking ahead, contacts expressed
some concern for agricultural exports due to tariff impacts.
 Federal Reserve Bank of Dallas 47

Community Perspectives
Demand for social services remained elevated. Contacts said many private companies were under
a hiring freeze, and the jobs posted online were not being filled. Nonprofit organizations, particu-
larly those heavily reliant on federal funding, reported trimming budgets, implementing hiring
freezes, laying off workers, and downsizing programming. There was a report of a housing services
nonprofit possibly shutting down operations in mid-2025 due to funding disruptions. One contact
noted that landlords were less willing to rent apartments to tenants reliant on federal funds due to
the current policy climate and funding freezes. Some social service organizations said they have
observed a slowdown in applications for new benefits and trepidation among clients seeking ser-
vices in light of recent immigration policies. Research universities were also facing significant
uncertainty due to the funding cuts from the National Institute of Health and National Science
Foundation.

For more information about District economic conditions visit: [Link]

research/texas.
48

Federal Reserve Bank of

San Francisco

Summary of Economic Activity

Economic activity in the Twelfth District slowed slightly during the mid-February through March
reporting period. The step-down in economic activity was broad based, reported across many
industries and different geographies. Employment levels fell somewhat, and employers across
industries and geographies reported recent and planned layoffs. Wages grew slightly. Overall
prices rose modestly, and price pressures intensified for a wide range of imported goods and
materials. Demand for retail and services weakened as both households and firms were more cau-
tious with their spending amidst elevated economic uncertainty. Manufacturing activity decreased
slightly, while conditions in the agriculture and resource-related sectors were largely unchanged.
Activity in residential and commercial real estate markets softened slightly on net, and lending
activity was stable. Demand for community support services remained high. Overall sentiment and
the economic outlook worsened materially relative to the prior reporting period, and several con-
tacts expected a notable downturn in labor market conditions over the coming months.

Labor Markets
Employment levels fell slightly in recent weeks, and the labor market outlook generally deterio-
rated. Contacts across industries and geographies reported recent and planned layoffs, with some
citing lower demand from both private- and public-sector customers and others seeking cost effi-
ciencies. Employers who sought to hire found it generally easier to attract qualified applicants,
though engineers and workers in the skilled trades were notable exceptions. A large hospitality
services provider plans to hire significantly fewer seasonal workers this year due to lower expected
demand as well as to pause hiring work visa holders amidst policy uncertainty.

Wages continued to grow at a slight pace, in line with prior reporting periods. Contacts described
the current labor market to be generally favorable to employers, with fewer opportunities for pro-
spective employees to negotiate starting pay. Nevertheless, recent increases in state and local
minimum wage mandates continued to put upward pressure on wages for some positions in the
service sector, especially in California.
 Federal Reserve Bank of San Francisco 49

Prices
Overall price levels rose modestly in recent weeks, at a slightly faster pace than in the previous
report. Contacts reported higher price pressures for a wide range of imported goods and raw
materials, including aluminum, steel, lumber, electrical components, apparel, footwear, as well as
various wholesale and retail food items. Cost of some services remained elevated, particularly for
insurance, health care, and utilities. Some leisure and hospitality businesses facing softening
demand lowered their prices to retain and attract customers. Several contacts received price
increase notices from suppliers, citing recently implemented and anticipated increases in tariff
rates. Contacts generally expected inflationary pressures to intensify over the coming months.
Most contacts reported that they plan to pass increased input costs on to customers, but some
expected to absorb cost increases to preserve market share.

Community Conditions
Community support services providers reported deteriorating conditions. Demand for housing and
food assistance services remained high. Organizations providing workforce and economic develop-
ment services focused on sectors experiencing strong demand including health care, skilled
trades, and technical manufacturing. Funding fell from public and private sector sources because
of recent changes to federal policy as well as reduced discretionary and philanthropic spending by
private businesses. Funding shortfalls led some nonprofits to cut services and program offerings
and to lay off workers. Contacts in the Los Angeles region noted that demand for community ser-
vices and support related to wildfire recovery efforts remained high.

Retail Trade and Services

Retail sales fell modestly in recent weeks. Several contacts reported a notable drop in discre-
tionary spending for big-ticket items such as cars and large appliances, home improvement prod-
ucts, and nonessential groceries. Demand for essential goods remained steady. Reports indicated
that many households were cautious with their spending decisions in anticipation of a downturn in
labor market conditions. Retailers generally expected sales to soften further over the
coming months.

Demand for consumer and business services weakened moderately. Consumer demand for air
travel, hotels, and entertainment events slowed—an atypical trend for the early spring growth
period. In addition, several contacts reported weak booking volumes for the summer. Restaurant
sales varied by segment, with fast-food franchises faring better than full-service establishments.
Some retailers and hospitality providers in Northern Washington and Southern California reported
a material drop in cross-border tourism with Canada and Mexico. Several reports from the busi-
ness and professional services sectors highlighted slower demand, including for group travel,
50 The Beige Book

security, catering, and janitorial services. One business service provider in Southern California
noted that ongoing economic uncertainty resulted in spending cuts and austerity measures from
their corporate clients.

Manufacturing
Conditions in the manufacturing sector weakened slightly in recent weeks. Demand softened for
some manufactured products such as utility infrastructure components, office furniture, lumber
products, and packaging machinery, as customers were feeling more price sensitive and uncertain
about economic conditions. In contrast, demand was solid for equipment repair parts. Firms
reportedly paused or reduced capital investment plans, citing economic uncertainty and lower
demand for their products. However, one manufacturer of packaging machinery kept existing
investment plans in place based on higher order pipelines. Materials were largely available with
typical lead times. Some manufacturers held inventories at elevated levels to weather rising input
cost and availability issues.

Agriculture and Resource-Related Industries

Conditions in the agriculture and resource-related sectors remained mostly unchanged. Retail
demand for agricultural products was solid overall. Contacts raised concerns that changes in trade
policy could reduce demand for agricultural exports, particularly fruits and nuts. Crop yields were
solid, and early indications for this growing season were good. Labor availability was largely suffi-
cient to meet demand, though contacts worried about future availability constraints from changes
in immigration policy. Production costs remained elevated due to weather-related disruptions and
high input costs. At the same time, prices that growers received for many agricultural commodi-
ties, such as corn, wheat, and hay, were reportedly low. Contacts held back on planned capital
investments, citing high costs and uncertainty about future prices.

Real Estate and Construction

Slow activity in residential real estate continued. Prices of single-family homes remained high.
Nevertheless, demand was reportedly solid in some parts of the Mountain West. Multifamily rents
rose in line with inflation. Construction of new residential properties slowed overall. Developers
cited higher costs for construction materials as well as uncertainty about economic conditions,
including future demand from consumers facing higher home prices and mortgage rates.

Conditions in commercial real estate weakened somewhat. Leasing activity for warehousing, retail,
and wholesale space fell as tenants paused expansion plans. Office leasing strengthened slightly.
Some landlords reported an increase in rent payment issues as tenants struggled with rising
costs. Plans for new construction projects were held back because of tighter availability of mate-
 Federal Reserve Bank of San Francisco 51

rials, increases in costs of some inputs such as steel and lumber, and elevated financing costs.
Contractor quotes also rose, reportedly driven by existing and anticipated tariffs. Construction
activity remained solid for public projects such as infrastructure.

Financial Institutions
Lending activity was steady. Reports indicated that business clients continued to place most plans
for new borrowing and investment on hold in response to ongoing economic uncertainty. Demand
for consumer loans, including mortgages, remained generally subdued due to elevated interest
rates. Competition for deposits eased of late, and deposit flows were steady. Credit and asset
quality were reportedly high despite some uptick in consumer loan delinquencies.

For more information about District economic conditions visit: [Link]

research-and-insights/publications/san-francisco-fed-twelfth-district-beige-book/.
[Link]
0425