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National Summary
Overall Economic Activity
Economic activity changed little on balance since the previous report, with three Districts reporting slight to modest growth in activity, five reporting no change, and four noting a slight softening. Overall consumer spending, particularly on retail goods, inched down in recent weeks, although auto sales were boosted in some Districts by strong demand for electric vehicles ahead of the expiration of a federal tax credit at the end of September. Demand for leisure and hospitality services by international travelers fell further over the reporting period, while demand by domestic consumers was largely unchanged. Nevertheless, spending by higher-income individuals on luxury travel and accommodation was reportedly strong. Several reports highlighted that lower- and middle-income households continued to seek discounts and promotions in the face of rising prices and elevated economic uncertainty. Manufacturing activity varied by District, and most reports noted challenging conditions due to higher tariffs and waning overall demand. Activity in agriculture, energy, and transportation was generally down among reporting Districts. Conditions in the financial services sector and other interest rate-sensitive sectors, such as residential and commercial real estate, were mixed; some reports noted improved business lending in recent weeks due to lower interest rates, while other reports continued to highlight muted activity. The outlook for future economic growth varied by District and sector. Sentiment reportedly improved in a few Districts, with some contacts expecting an uptick in demand over the next 6 to 12 months. However, many others continued to expect elevated uncertainty to weigh down activity. One District report highlighted the downside risk to growth from a prolonged government shutdown.
Labor Markets
Employment levels were largely stable in recent weeks, and demand for labor was generally muted across Districts and sectors. In most Districts, more employers reported lowering head counts through layoffs and attrition, with contacts citing weaker demand, elevated economic uncertainty, and, in some cases, increased investment in artificial intelligence technologies. Employers that reported hiring generally noted improved labor availability, and some favored hiring temporary and part-time workers over offering full-time employment opportunities. Nevertheless, labor supply in the hospitality, agriculture, construction, and manufacturing sectors was reportedly strained in several Districts due to recent changes to immigration policies. Wages grew across all reporting Districts, generally at a modest to moderate pace, and labor cost pressures intensified in recent weeks due to outsized increases in employer-sponsored health insurance expenses.
Prices
Prices rose further during the reporting period. Several District reports indicated that input costs increased at a faster pace due to higher import costs and the higher cost of services such as insurance, health care, and technology solutions. Tariff-induced input cost increases were reported across many Districts, but the extent of those higher costs passing through to final prices varied. Some firms facing tariff-induced cost pressures kept their selling prices largely unchanged to preserve market share and in response to pushback from price-sensitive clients. However, there were also reports of firms in manufacturing and retail trades fully passing higher import costs along to their customers. Waning demand in some markets reportedly pushed prices down for some materials, such as steel in the Sixth District and lumber in the Twelfth District.
Highlights by Federal Reserve District
Boston
Economic activity expanded slightly, with modest growth in consumer spending. Employment was flat, as both hiring and layoffs increased modestly. Prices increased at a moderate pace, although certain cost pressures intensified. Home sales were flat from a year earlier. The outlook was neutral to cautiously optimistic, but contacts saw mostly downside risks.
New York
Economic activity continued to decline slightly. Employment held steady, and wage growth remained modest. The pace of price increases remained elevated but was little changed. Manufacturing activity held steady after a summer uptick. Consumer spending increased modestly, buoyed by mid- to upper-income households. Businesses did not expect activity to increase much in the months ahead.
Philadelphia
Business activity increased slightly in the current Beige Book period. Employment levels increased slightly, and wages again rose at modest pre-pandemic rates. Prices continued to rise moderately. Activity increased slightly for nonmanufacturers and moderately for manufacturers. Generally, firms expect modest growth over the next six months, but heightened economic uncertainty remains.
Cleveland
Fourth District business activity was flat in recent weeks, but contacts expected activity to increase modestly in months ahead. Commercial construction and financial services contacts noted an uptick in demand because of lower interest rates. Contacts said that cost growth remained robust, while their selling prices increased modestly.
Richmond
The regional economy grew modestly in recent weeks. Consumer spending continued to grow modestly and import activity rose. Manufacturing activity declined slightly and growth in the remaining industries was largely flat. Employment levels were largely unchanged and wage growth remained moderate. Price growth remained moderate, overall, despite some pickup in price growth in the manufacturing sector.
Atlanta
The Sixth District economy was unchanged. Employment levels were steady, and wages grew modestly. Prices increased moderately. Consumer spending fell, and leisure travel softened. Home sales declined, and commercial real estate was unchanged. Transportation declined. Manufacturing grew slightly. Energy grew moderately, and agriculture was healthy.
Chicago
Economic activity in the Seventh District was flat. Consumer spending increased modestly; construction and real estate activity increased slightly; employment was flat; nonbusiness contacts saw no change in activity; business spending declined slightly; and manufacturing activity declined modestly. Prices rose moderately, wages were up modestly, and financial conditions loosened slightly. Prospects for 2025 farm income were unchanged.
St. Louis
Economic activity and employment levels have remained unchanged since our previous report. Contacts continue to report that immigration policies have been resulting in labor shortages. Prices have increased moderately, with contacts reporting that inflation is eroding consumer purchasing power. Banking activity has remained unchanged since our previous report, with overall credit conditions remaining strong. Agriculture conditions are strained and have further deteriorated. The outlook remains slightly pessimistic.
Minneapolis
District economic activity contracted slightly. Labor demand softened, according to firms and job seekers, though wage growth remained moderate. Price increases remained modest, but input price pressures increased. Manufacturing and commercial real estate were flat, but most other sectors contracted. Agricultural contacts were concerned about China's elimination of soybean purchases.
Kansas City
Economic activity in the Tenth District fell slightly over the past month. Employment levels declined slightly, and bankers noted consumer loan portfolios deteriorated moderately. Though activity fell recently, expectations for sales and employment in 2026 were broadly optimistic. Expectations for the pace of price growth in 2026 were similarly above 2025 levels.
Dallas
Economic activity was flat. Service sector activity contracted mildly. Retail sales fell, while the pace of manufacturing output growth moderated. Loan demand grew, but the housing market remained weak, and drilling and well completion activity was flat. Employment dipped, and wage growth was modest. Price pressures were subdued in services but remained elevated in the manufacturing sector. Outlooks deteriorated with slowing demand, policy uncertainty, and inflation highlighted as the top concerns for businesses.
San Francisco
Economic activity edged down slightly. Employment levels were little changed. Wages grew slightly, and prices rose modestly. Activity in retail trade, agriculture, and residential real estate decreased somewhat while commercial real estate activity was unchanged. Manufacturing and lending activity remained stable. Conditions in consumer and business services were mixed.
A closer look at the Regions
Federal Reserve Bank of Boston
Summary of Economic Activity
Economic activity ticked up overall, led by modest increases in consumer spending and manufacturing sales. Commercial real estate activity increased slightly, beating expectations. Software and IT services firms reported small increases in revenues and strong demand. Home sales were flat, while housing inventory increased notably. Employment was unchanged, but layoffs became more common, and wage increases remained modest. Prices rose at a moderate pace, as contacts mentioned tariff-related and other cost pressures. The outlook among business contacts brightened somewhat overall, with most now either neutral or cautiously optimistic. Non-business contacts, in contrast, expressed growing concerns about the economic security of lower-income households.
Labor Markets
Employment was flat overall, as both hiring and layoffs increased modestly. Manufacturing employment was unchanged on balance, as some firms added workers to meet demand, some kept head counts steady because of uncertainty, and one shed workers to offset tariff-related cost increases. Cuts to federal grant funding contributed to layoffs in the education and health-care sectors. Employment in IT services increased modestly, with hiring in sales and technical positions. Retail and tourism employment was unchanged, as contacts noted modest improvements in worker availability but worried about next summer's labor supply given expected reductions in seasonal visas. Contacts in Maine and Vermont said labor market slack in those states increased, even though certain hiring challenges persisted. Wages rose at a modest pace on average, and some contacts described wage pressures as more muted compared with a year earlier. Manufacturing wages were mixed, but up modestly on average. Salaries at IT firms were unchanged, with moderate annual increases expected at the turn of the year. With isolated exceptions, hiring plans remained limited, owing to rising cost pressures and elevated uncertainty. No major layoffs were expected in the near term, but the longer-term outlook was less secure.
Prices
Prices rose moderately on average, as certain cost pressures increased. Construction costs, energy prices, and wholesale food prices all increased by at least moderate margins, and liability insurance rates rose sharply. Restaurants' profitability declined in response to rising costs, as menu prices were mostly unchanged. Average hotel prices declined modestly in August from a year earlier, and prices for IT services rose moderately over the same period. Manufacturers' output prices increased modestly on average, with contacts noting increases in the prices of copper and certain tools. Smaller manufacturers passed through a larger share of tariff-induced cost increases to customers. Most contacts expected to face at least modest further cost pressures moving forward, and some were concerned about a possible acceleration of prices in 2026.
Retail and Tourism
First District retail and tourism contacts reported modest increases in activity on balance. Tourism contacts noted a widening gap in demand between luxury and budget-friendly accommodations, where overall growth was fueled almost entirely by the former. Hotel occupancy rates for greater Boston and Cape Cod increased slightly in August from a year earlier. Retailers and restaurants across Cape Cod, coastal New Hampshire, and Maine reported that summer spending totals rose moderately from the previous year owing to an increase in the number of day trips. The number of Canadian travelers to New England remained down sharply from the previous year, and certain parts of Cape Cod and Maine experienced weaker summer tourism activity (from the previous year) as a result. Nonetheless, tourism-related spending increased modestly overall, as domestic and other international travel compensated for the decline in Canadian visitors. Auto sales in New Hampshire increased modestly from last month, driven by the rush to purchase electric vehicles before the expiration of tax credits. The outlook shifted from pessimistic to neutral among retail and tourism contacts, although contacts said that considerable uncertainty remained.
Manufacturing and Related Services
Manufacturing sales rose modestly since the last report, on average. One firm's revenues declined slightly from a year earlier but nonetheless exceeded projections made at the start of 2025. Various contacts reported increased demand coming from medical, retail, wholesale, and/or restaurant market segments. Capital expenditures were unchanged. Uncertainty remained elevated, presenting challenges for some in making pricing, production, and/or advertising plans. Contacts were mostly optimistic about their prospects through the end of the year, but the outlook for 2026 was slightly weaker on balance, with headwinds related to tariffs, inflation, and uncertainty.
Software and IT Services
Demand for software and IT services remained strong among First District contacts; revenues rose slightly from last quarter on average, and one contact reported very strong revenue growth from a year earlier. Contacts attributed the strong demand to the increasingly essential nature of the services they provide, as well as to spillover IT investments related to AI adoption. Firms' prices increased moderately from the previous year on average, and costs were stable, resulting in higher profit margins. Capital and technology spending was unchanged. Contacts were quite optimistic, expecting further healthy revenue growth in the coming months.
Commercial Real Estate
Commercial real estate activity was up slightly net of seasonal factors. Contacts were encouraged by the seasonal uptick in leasing activity after Labor Day, as some were not sure it would materialize, and the Boston market was buoyed by some large office deals. Nonetheless, office rents were flat, while operating costs continued to rise. The retail sector experienced stable leasing activity, with modest rent growth and low vacancies. Industrial leasing and sales activity were stable. Apartment rents rose only slightly, representing a slowdown from earlier in the year. Construction costs continued to face upward pressure from tariffs and labor shortages, and construction activity remained limited. The outlook was cautiously optimistic on balance, representing an improvement from the summer. Contacts expected that more widespread return-to-office policies would boost office leasing going forward, and the recent reduction in the federal funds rate lifted sentiment somewhat. Still, pessimism lingered concerning rents.
Residential Real Estate
Closed sales of single-family homes were flat or down slightly overall (as of August), despite rising by modest to large margins in the northern New England states, all compared with the previous August. Condo sales increased slightly across the First District on average, but results varied widely across states. House prices rose moderately on average from a year earlier, representing somewhat slower growth than in the previous report, and condo prices fell modestly in some areas. Inventories increased sharply from the previous August, extending a trend that began earlier in the year. According to a Massachusetts contact, buyers became increasingly selective and patient, especially in the condo market. Contacts were hopeful that mortgage rates might fall in the coming months, potentially improving affordability and sales.
Community Perspectives
Contacts expressed increased anxiety and uncertainty regarding the economic situation of low- and moderate-income households in the First District. The prevalence of economic precarity increased in many communities, as evidenced by greater food pantry use and increased difficulty paying rent, utilities, and other bills. Consumers increasingly used savings to cover basic needs and took steps to reduce spending where possible. Planned cuts to SNAP and Medicaid, as well as further increases in consumer prices linked to tariffs, posed additional risks to low- and moderate-income households going forward. New England continued to face workforce housing shortages, and rising construction costs pushed against further development of such housing.
Federal Reserve Bank of New York
Summary of Economic Activity
Economic activity in the Second District continued to decline slightly. On balance, employment held steady during the reporting period, and wage growth remained modest. The pace of price increases remained elevated but was little changed, with selling prices rising moderately and input prices rising strongly. Manufacturing activity was little changed after a summer uptick. Consumer spending increased modestly, in part due to the resilience of mid- to upper-income households. Housing markets remained solid. Overall loan demand declined. Businesses did not expect much of an increase in activity in the months ahead.
Labor Markets
On balance, employment remained steady during the reporting period. Firms in wholesale, finance, business services, and personal services reported slight-to-modest upticks in head counts, while education and health care, retail, construction, and transportation firms reported fairly significant declines.
Labor supply continued to exceed labor demand. Contacts reported that it has been consistently easier to find workers, continuing a trend that has been in place all year. Attrition remained exceptionally low, creating less need to hire for replacement. Labor demand varied by industry, with solid demand for workers in finance and accounting alongside still-soft demand for tech workers. Several businesses in construction and leisure and hospitality reported some difficulty finding workers due to shifts in immigration policy. A large retailer reported that instead of making workforce adjustments through hiring and firing, they were repositioning longer-tenured workers to increase productivity. While some firms were strategically downsizing, there remained no signs of major layoffs.
Wage growth remained modest on balance. Firms in construction, leisure and hospitality, wholesale, and education saw strong growth in wages, while wage growth slowed to a slight pace in finance. Contacts anticipated acceleration in wage growth in the coming months.
Prices
The pace of price increases was mostly unchanged; selling prices continued to rise moderately while input prices again rose strongly. Many businesses continued to strategize around how to structure prices in consideration of new tariffs. One major retailer reported adjusting price increases based on the demand elasticity for each item, and many reported working with vendors to find alternative inputs to mitigate the impact of tariffs on their costs. A Long Island area importer and wholesaler of auto parts noted that tariffs on goods imported from India presented particularly steep challenges to their business, while a coffee roaster and supplier noted that tariffs on imports from Brazil threatened their ability to remain profitable. A specialty appliance manufacturer from upstate New York hiked their prices for the second time this year to account for the impact of tariffs on their costs. An upstate brewing company reported that elevated ingredient and packaging material costs were getting passed along to the consumer. A pharmaceutical company reported that foreign manufacturers were absorbing tariff costs to maintain market share and production levels. Some restaurants noted escalating costs for food—particularly beef—and imported wine were hurting their businesses. A New York City-based specialty contractor reported that congestion pricing was pushing up the cost of doing business considerably. Looking ahead, firms expect significant pricing pressures to persist.
Consumer Spending
Consumer spending increased modestly throughout much of the District. A department store reported that store sales had continued to strengthen and were outperforming the same stores last year, due in part to resilience among mid- to upper-income consumers. Apparel has been selling well, and sales of cosmetics and fragrances remained strong. Still, a food store from Long Island reported that sales were muted amid elevated costs for produce and meat. Auto dealers in upstate New York reported that sales edged up slightly as conditions continued to normalize after tariff-related volatility earlier in the year. Despite some softening in used car sales and concerns about affordability, dealers were optimistic in the face of solid demand and healthy inventory levels.
Manufacturing and Distribution
Manufacturing activity was little changed after a summer uptick. New orders were down, and shipments were mostly unchanged. Some manufacturers of electrical equipment, machinery, and instruments noted improving sales in the reporting period. Still, uncertainty relating to tariffs continued to weigh on manufacturers who faced elevated input prices and some difficulty procuring equipment and materials. An upstate manufacturer of kegs temporarily ceased production due to high steel prices. Some manufacturing contacts reported that overseas demand for U.S.-manufactured goods had dropped due to shifting international trade dynamics. Supply availability worsened, though delivery times were little changed. Inventories continued to shrink. Capital spending plans were soft. Activity declined among wholesale and distribution firms. Manufacturers expect conditions to improve in the months ahead.
Services
Activity in the service sector continued to decline moderately this period. Firms in the retail, leisure and hospitality, and business services sectors reported moderate declines, and firms in the information sector reported a particularly sharp contraction. A contact from a security services firm in the New York City metro area reported that while business activity had been steady, there were fewer opportunities for government contract bids.
While domestic tourism continued to grow in New York City, a modest decline in international visitors, who tend to spend more than domestic tourists, has taken a toll on attractions and restaurants. Attendance at Broadway shows remained solid, while activity was flat to down slightly at the city's other cultural attractions. Demand for hotel rooms continued to edge up during the busy September season, nearing levels last seen in 2019, with room rates remaining exceptionally high.
Real Estate and Construction
Housing markets remained solid across the District, though inventory remained at low levels. New listings slowed to a trickle in the New York City area, though new signed contracts edged up. With solid demand and low inventory across the District, prices continued to push upwards. Some contacts from the Rochester area reported that capacity-constrained electricity infrastructure prevented some communities from building new housing developments. Desirable properties continued to sell above asking price and often within days of hitting the market.
Rents continued to rise, and New York City rents were at historic highs. Still, with some easing in mortgage rates, contacts anticipated some reduction in rental demand in the coming months.
Commercial real estate markets continue to improve. New York City's office market remained stronger than many other large cities, although some of this strength was driven by a few large transactions. AI firms were increasingly seeking office space in New York City. Activity in the industrial sector was muted due to uncertainty around interest rates and tariffs. Demand for retail space was bifurcated, with the luxury end of the retail market in Manhattan remaining particularly resilient but other parts of the market were weak. Construction activity continued to decline.
Banking and Finance
Activity in the broad finance sector weakened slightly after a modest improvement during the previous period. Small-to-medium sized banks reported that while demand for consumer loans and commercial mortgages held steady, overall loan demand declined due to sagging demand for business loans. By contrast, bankers reported moderate growth in demand for residential mortgages, with strong lending volumes. Credit standards tightened. Delinquency rates worsened slightly, especially for business loans.
Community Perspectives
Many nonprofits are facing challenges due to unpredictable funding and a reduction in federal benefit programs. A community health-care center reported that financial distress among Medicaid patients has risen, limiting patients' access to care and straining the organization's finances. More generally, rising business costs, including insurance, added to financial pressures for community service providers.
Federal Reserve Bank of Philadelphia
Summary of Economic Activity
Economic activity in the Third District increased slightly after rising modestly in the prior period. Nonmanufacturing activity increased slightly. Non-auto retailers and auto dealers reported a slight decline in activity, noting tepid demand from consumers. Meanwhile, manufacturing activity rose moderately. Employment levels rose slightly during the period, while wage growth remained near its modest pre-pandemic rate. Prices continued to rise moderately. Firms continued to report increased cost pressures from tariffs and other business expenses and to expect to raise prices in the coming months to offset these higher costs. Firms expect a modest increase in activity over the next six months, although contacts across industries warned of additional downside risks of a prolonged government shutdown. Manufacturers were more optimistic than nonmanufacturers about growth over the next six months.
Labor Markets
Employment appeared to increase slightly this period following no change in the last period. Based on our September surveys, full-time employment rose for both manufacturing and nonmanufacturing firms. However, more than two-thirds of all firms reported no change in full-time employment, higher than the historical average. Part-time employment declined for nonmanufacturers.
Overall, our staffing contacts reported demand for workers was mostly flat compared with the prior period, noting that extremely low employee turnover remained a drag on their businesses. One contact highlighted that the demand for workers was focused on short-term project-based roles, rather than permanent positions.
Business contacts echoed reports of low employee turnover and noted little trouble hiring workers. A majority of contacts reported little change in their number of employees; however, a couple of contacts stated their firms are shrinking their workforce or have plans to do so.
Contacts also highlighted potential disruptions in the labor market from immigration policies. One staffing contact reported high demand from companies looking to fill positions that were recently vacated owing to changes in previous employees' visa status. Meanwhile, a contact in the construction industry noted a decline in the availability of foreign-born workers caused delays at one job site and felt that it would create a significant labor shortage if construction demand were to pick up.
Wage inflation continued to ease 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
Firms continued to report moderate price growth this period, although the pace of growth appeared to slow slightly from last period. In our monthly surveys, the diffusion index for prices paid in September declined for nonmanufacturers and manufacturers. The index for prices received also declined for manufacturers but held steady for nonmanufacturers. Despite these declines, the prices paid and prices received indexes remained above their historical averages for all firms.
Most business contacts reported continued cost pressures from tariffs, insurance, health care, and utilities. Multiple contacts noted that some suppliers were citing tariffs when raising prices, even if their goods were not subject to increased levies. Another contact reported a 15 percent increase in a liability insurance policy from a year earlier in addition to a nearly 10 percent rise in health-care costs.
Consumer-facing businesses across sectors reported an inability to pass through all these increased costs, with many instead increasing discounts to sustain demand. Contacts reported more aggressive discounts from retailers, lower hotel room rates, and increased incentives on autos and newly constructed homes.
However, most contacts expected further tariff impacts in the months ahead. Contacts reported dwindling inventories of pre-tariff goods and an inability to continue absorbing tariff-related costs. The indexes for future prices paid and future prices received for manufacturers were well above their historical averages in September.
Manufacturing
On balance, current manufacturing activity increased moderately following modest growth last period. The indexes for new orders and shipments rose moderately and were above their historical averages in September.
Total production increased in the third quarter compared with the prior quarter for 46 percent of firms in our September survey, the highest share in over a year. A few firms reported increased activity from an uptick in tariff-related onshoring; however, more than half of the firms in our September survey reported uncertainty as a moderate or significant constraint on capacity utilization.
Manufacturers remained optimistic about growth over the next six months. More than half of the firms expect increases in new orders and shipments.
Trade and Services
On balance, firms across a broad spectrum of nonmanufacturing industries reported a slight increase in activity, down from a moderate increase in the last period. The new orders index was flat in September, dropping from a modest level in August, while the sales/revenues index remained at a modest level.
Retailers (non-auto) reported a slight decrease in sales over the current period, down from a slight increase in the prior period. One retailer noted that a seasonal slowdown in September is normal following high spending by consumers during the summer months; however, the retailer reported that sales slowed much earlier in August this year and remained flat through September.
Auto dealers reported a slight decrease in auto sales, following a slight increase last period. Contacts highlighted that sales would have fallen by more if not for a rush to buy electric vehicles (EVs) before the expiration of a federal EV tax credit at the end of September.
Activity in the tourism sector declined modestly, down from a slight decrease in the last period. The slowdown was widespread across nearly all segments, with only luxury leisure travel experiencing growth, according to contacts. One contact noted a decline in the average distance traveled for leisure trips, with many consumers looking to save by choosing destinations closer to home.
Expectations for growth over the next six months have narrowed among nonmanufacturers since the prior period. The future activity index remained positive in September but is well below its historical average.
Real Estate and Construction
Existing home sales declined slightly after increasing slightly last period, with contacts continuing to describe a lack of inventory and high prices as major headwinds. One realtor highlighted how would-be homeowners who have been priced out of the market are driving historically high demand in the local rental market. New-home builders continued to report a slight uptick in sales this period but noted fewer potential buyers looking at homes.
In nonresidential markets, leasing activity and transaction volumes continued to record slight growth. Nonresidential construction activity continued to record slight declines this period, despite continued growth in activity related to data centers, according to contacts. One contact reported that uncertainty surrounding the status of federal funding continued to slow previously planned projects.
Credit Conditions
The volume of bank lending (excluding credit cards) declined moderately during the period (not seasonally adjusted)—weaker than the modest growth observed during the comparable period in 2024. Bank lending held steady in the prior period.
The moderate decline in lending was largely driven by a continued strong decline in commercial and industrial lending and a modest decline in commercial real estate loans, according to District banks. Meanwhile, consumer lending (excluding auto lending and credit cards) rose strongly, home equity lines increased moderately, auto loans rose modestly, and mortgages ticked up slightly. Credit card volumes decreased modestly, down from a slight increase during the same period one year ago.
Banking contacts reported weaker loan demand, particularly from commercial clients. These contacts attributed the slowdown to businesses' unwillingness to make long-term investment decisions in such an uncertain cost environment. One lender noted that many commercial clients were paying down lines of credit and looking to keep more cash on hand. Most banking contacts continued to report strong credit quality overall, despite a slight rise in delinquencies and defaults.
Federal Reserve Bank of Cleveland
Summary of Economic Activity
Fourth District contact reports suggested flat business activity in recent weeks, but contacts expected activity to increase modestly in the months ahead. Commercial construction and financial services contacts noted an uptick in demand because of lower interest rates. Manufacturers reported modest declines in demand for goods, a situation which they attributed to tariffs and trade-policy uncertainty, and consumer spending declined slightly. On balance, contacts said that their employment levels increased slightly and that wage pressures grew modestly. Nonlabor cost pressures remained robust, and selling prices continued to grow modestly.
Labor Markets
Overall, contact reports suggested a slight increase in employment levels in recent weeks. Many contacts across industries said that they were hiring for open positions and normal turnover. Other contacts were hiring for current or anticipated growth. For instance, one banker reported hiring loan originators in anticipation of lower mortgage rates increasing demand. Overall, retailers held staffing levels steady in recent weeks. As one restaurateur stated, "no growth so no new positions will be added." Across industries, many contacts said that declining business activity led to reduced labor demand, and in some cases, to layoffs. One manufacturer said that they had postponed layoffs while waiting for industrial production to recover but could not delay cuts any longer.
On balance, wage pressures were modest in recent weeks. Contacts across various industries reported implementing wage increases as part of their scheduled annual adjustments, while contacts in banking and professional and business services said that they had raised wages because of persistent competition in the labor market. Still, wage pressures eased for other contacts. Several manufacturers held wages steady because of lack of profitability, and one restaurateur aimed to hire at as close to minimum wage as possible to bring down overall costs.
Prices
Overall, nonlabor input costs rose at a robust pace in recent weeks, continuing the trend seen in the prior three reporting periods. Tariffs were frequently cited as drivers of these cost increases across industries. Many manufacturers reported tariff-related cost increases on raw materials, imported components, and chemical inputs. Retail contacts noted tariff-driven cost increases on vehicles, beef, coffee, and chocolate. Two contacts noted that foreign producers were factoring in tariffs and cutting prices accordingly to retain market share. Beyond tariffs, banking and professional and business services contacts continued to report elevated costs for technology and insurance, and manufacturers reported rising utilities costs. In general, costs were expected to grow at a strong pace in the coming months.
Contacts generally indicated that selling prices rose modestly in recent weeks, maintaining the pace of growth seen since early 2025. Across industries, contacts continued implementing price increases to cover elevated input costs, with several manufacturers and wholesalers introducing surcharges to cover additional costs related to tariffs. However, pricing power was constrained for other contacts who faced declining demand and heightened price sensitivity. In response, many retail contacts noted offering discounts or raising prices only on select items, while some manufacturers said that they held prices steady despite increased costs to try to gain market share.
Consumer Spending
Consumer spending declined slightly in recent weeks, and contacts expected demand to be flat in the coming months. Several retail stores reported a drop in unit sales, and a large retailer reported lower in-store and online traffic. Similarly, a food and hospitality contact said that customers were "more value aware," and another large retailer reported that tariff concerns continued to drag down customer sentiment. One tourism contact, who reported a year-over-year decline in activity, said that visits by Canadians fell by 50 percent. Auto dealers generally reported that sales were flat to down, except for used car sales, which one dealership expected to remain strong in the coming months.
Manufacturing
On balance, contacts reported that demand for manufactured goods declined modestly in recent weeks after changing little during the prior reporting period. Several manufacturers continued to attribute flat or weaker orders to import tariffs and persistent uncertainty about trade policy. Firms selling into industrial and agricultural equipment production reported particularly weak demand, and one contact added that orders from these producers were below their previous expectation by roughly 25 percent. By contrast, some firms selling into the fossil fuel industry and electricity generation reported higher orders related to data center construction and operation. Manufacturers generally expected demand to increase moderately in the coming months.
Real Estate and Construction
Residential construction and real estate contacts reported declining demand in recent weeks. One real estate broker noted that current homeowners remained reluctant to sell and lose their lower mortgage interest rates. By contrast, one homebuilder reported that demand for new homes continued to be strong. On balance, contacts anticipated flat demand in the coming months.
Contacts in the commercial construction and real estate industry saw a modest increase in demand over the last two months. Reports from real estate developers and a commercial builder indicated that firms undertook more capital spending as they adapted to tariffs and as short-term interest rates declined. Notably, one contact said that some multinational manufacturers were expanding their domestic capacity, spurring new construction activity. However, other commercial real estate contacts reported softening demand for consumer-facing properties, including hotels, restaurants, and apartments. On balance, contacts expected moderate growth in demand over the near term.
Financial Services
Overall, bankers indicated that loan demand increased moderately in recent weeks, as both households and businesses were encouraged by lower interest rates. One commercial banker also reported that loan demand increased as their clients gained clarity around tariff impacts. Looking ahead, bankers expected a sharp increase in loan demand driven by anticipated cuts to interest rates over the remainder of the year. However, some bankers cited persistent inflation and small upticks in unemployment as sources of economic uncertainty keeping loan demand weak. Bankers also indicated that both core deposits and overall delinquency rates were flat.
Nonfinancial Services
Professional and business services firms reported moderate demand growth in recent weeks and expected a similar pace of growth over the coming months. Both a software and an accounting firm attributed increased demand to changes in the administration's rules and tax laws. While demand for one firm's legal services remained steady, the firm's retail clients were being cautious about new capital investments and acquisitions. On balance, freight contacts reported flat demand and expected modest growth over the coming months, and one contact noted higher shipments of goods warehoused during the pre-tariff import surge. An airport reported declines in passenger and cargo volumes.
Community Conditions
In a semiannual survey of nonprofits, a growing share of respondents indicated that funding for their respective organizations decreased over the past six months. One revealed that their organization had to dip into its reserve fund to cover operating expenses for the first time in more than ten years. Another respondent said that the nonprofit sector was not filling open positions because of uncertainty around federal grants. Respondents who assist jobseekers observed that their clients were more likely than before to receive offers for part-time positions with little or no benefits and that formerly incarcerated jobseekers were having a harder time securing employment.
Federal Reserve Bank of Richmond
Summary of Economic Activity
The Fifth District economy continued to grow modestly this cycle. Consumer spending at retail and restaurants grew modestly while reports on travel spending were mixed. Consumers were looking for value and comparative price shopping. Manufacturing activity declined slightly amid customer uncertainty and price sensitivity leading some to adjust product offerings to reduce prices. Additionally, ports volumes increased slightly, reflecting early retail ordering for holiday inventories. Activity in the remaining sectors was generally flat. Employment was unchanged, on balance, with firms both growing and cutting labor based on demand. Wage growth remained moderate. Price growth picked up somewhat in manufacturing, with firms citing tariffs, but overall year-over-year price growth remained within a moderate range.
Labor Markets
Employment in the Fifth District, on balance, was unchanged in the most recent period. A few firms grew their total head count through acquisitions and expansions into new locations. Several other firms, on the other hand, reported reducing their head count to right-size labor with slowing demand. A couple of firms expected cuts to come. For example, a South Carolina home builder reported a decline in demand due to increased prices, which they said would result in imminent layoffs. Additionally, a small jewelry store is contemplating closing due to economic uncertainty and declining demand. Labor availability continued to be a significant challenge for skilled trades. In response, a concrete manufacturer launched their first social media recruitment campaign, hoping to attract a larger pool of applicants. Wage growth remained moderate.
Prices
On balance, year-over-year price growth remained moderate this cycle. According to our most recent surveys, service sector firms reported virtually no change in price growth while manufacturers saw a slight increase in prices received. Firms in both sectors continued to cite tariffs adding to their input costs, some of which have yet to be passed along to customers. A couple of firms said they expected to raise prices once they worked through their pre-tariff inventory.
Manufacturing
Manufacturing activity in the Fifth District declined slightly in the recent reporting period. Contacts reported increased customer price sensitivity. In response, a fuse box manufacturer reconfigured their products to cut costs and lower their prices. An engine-parts manufacturer noted that customers had shifted to cheaper parts or were using existing parts for longer periods. An office equipment manufacturer observed an uptick in customers refinancing their equipment rather than purchasing new ones. Several firms highlighted the negative impact of the housing market on their business, particularly those in the construction and furniture industries. A furniture manufacturer reported increased operational challenges due to decreased demand coupled with tariffs increasing their prices.
Ports and Transportation
Overall volumes at Fifth District maritime ports increased slightly this cycle reflecting a pull forward in retail holiday ordering after some tariffs were delayed. Auto imports remained steady month over month with no uptick in requests for auto storage space as the inventory was moving through the market. Increased carrier capacity to the East Coast and historically low demand has put downward pressure on spot rates, which continued to decrease this cycle. Volumes for freight moving over the road had an unseasonal decline in August, continuing the downward trend that began in the spring. One contact noted a continued deterioration of business levels and pricing offered by competitors in a "race to the bottom until it breaks." Another contact shared that fuel surcharges have helped their daily revenues, but acknowledged that it ultimately "takes a bite out of the household budget" and the firm would rather see fuel prices go down and for cargo volumes to increase.
Retail, Travel, and Tourism
On balance, consumer spending increased modestly in recent weeks. Some small higher-end retailers reported solid growth in sales. Restaurants in the luxury and quick service categories also reported solid revenue growth. In contrast, casual sit-down restaurants reported a softening in sales. A retailer in North Carolina noted that customers were clearly looking for value and comparative price shopping in their stores. Companies tied to new home construction reported soft activity, however a replacement window company reported strong sales, which was attributed to homeowners opting to renovate rather than sell their homes. A furniture store saw less traffic and fewer sales and was concerned that recently announced tariffs would further reduce demand in the near future. Reports from tourism and travel businesses were mixed. Hotels in some parts of the Fifth District saw increased occupancy and revenues and attributed the growth to leisure and sports-related travel. Several hotels in the greater Washington, D.C. area, on the other hand, reported lower occupancy rates as business travel for conferences and worker trainings declined.
Real Estate and Construction
Residential real estate activity was relatively flat, even as inventories improved and prices began to stabilize. A real estate agent from North Carolina reported that "45 percent of listings experienced price reductions due to initial overpricing." In addition, a Virginia agent observed that "pricing is finally feeling right after five years of strong growth." Buyers continue to meet qualification criteria, particularly with added incentives lowering rates for new construction. However, as a Maryland developer pointed out, affordability remains a significant issue. Builders noted that they are completing existing projects and beginning to pull back on new starts as uncertainty and tariff fears continue.
Commercial real estate activity experienced a slight uptick, though a Virginia broker described the situation as "murky." Agents throughout the District stated that retail space and medical offices were performing well, whereas big box and office spaces encountered difficulties. As flight to quality persisted, brokers across the District were concerned about Class B offices and lower-tier properties challenges, potentially leading to receivership. A Maryland broker remarked: "these buildings, in their current condition, won't sell for yesterday's prices." A South Carolina broker echoed concerns, highlighting that the high cost of upfitting is prohibitive and that "the math doesn't work."
Banking and Finance
Financial institutions continued to report stable demand for most loan types, with some institutions noting a modest increase in demand within their commercial loan portfolio. However, one banker did note there is still a "sideline mentality" with many borrowers that are still awaiting more certainty in the overall economy and rates. Deposit levels continued to be stable, but some competition for balances is beginning to creep back into the marketplace. A few institutions observed a modest increase in loan delinquencies, mainly within their consumer loan portfolios, including mortgages and home equity loans.
Nonfinancial Services
Nonfinancial service providers continued to report stable demand for their services, but uncertainty continued to be a common thread throughout most of their comments. For example, a design firm described their customers as being cautious with any future growth plans. Several staffing firms reported that demand for their services had decreased and that their pool of potential applicants grew. A variety of firms, and their clients, continued to delay plans for expansion until more certainty was found within the economy.
Federal Reserve Bank of Atlanta
Summary of Economic Activity
Economic activity in the Sixth District was little changed. Employment levels were flat, and wages rose modestly. Prices increased at a moderate pace. Consumer spending fell somewhat, and leisure travel continued to soften. Activity in residential real estate declined, though commercial real estate was generally unchanged. Transportation declined modestly, but manufacturing picked up slightly. Loan growth was flat across the District. Energy activity expanded moderately, and agriculture conditions were mostly healthy.
Labor Markets
Employment levels in the District were generally flat over the reporting period. Several firms described what one dubbed a "hiring chill," suggesting welcomed attrition and fewer head count additions in areas of growth. Turnover was low, with many describing the level as the lowest in their firm's history, and applicants for open positions were plentiful except for very specific, mostly technical, roles. Recently, however, head count reductions were cited more frequently, and some firms expect further cuts based on early Generative AI implementation results, particularly if demand slows further. Impacts from changes to immigration policy and enforcement were more material than previously reported but were concentrated in certain geographies like south Georgia and sectors such as agriculture and hospitality. Uncertainty around both labor supply and consumer demand continued to weigh on firms' hiring plans.
Wage growth was modest, in the one-to-three percent range, and wage pressures continued to ease.
Prices
Prices rose moderately. Firms noted a wide range of tariff impacts on operating costs and pricing responses, as well as approaches to managing those impacts, such as absorbing cost increases, negotiating with suppliers, and passing through to customers. Contacts warned that price pass-through resulting from tariffs has just begun and expect to see prices rise into 2026. Some auto manufacturers reported feeling the pinch from tariffs on new car sales but were absorbing these increases to prevent further declines in demand. Some firms, however, reported little to no tariff impacts thus far. A few service-oriented firms noted an ability to increase prices without pushback from customers. Steel prices flattened amid slower demand, but some producers held prices steady to preserve strong margins. Internal cost pressures continued to mount, and firms noted there was little room to cut costs further. The accelerated depreciation schedule from the One Big Beautiful Bill Act will help to offset cost pressures going forward according to several contacts.
Consumer Spending
Retail sales declined slightly over the reporting period. Some transportation carriers for major retailers reported these stores had lower same-store sales as compared with year-earlier levels, and that sales growth for the full-year 2025 would be flat. Some retailers were cautiously optimistic about the upcoming holiday sales season, but a few expect holiday sales to be "meh," and noted that tariffs may soon cause prices to rise, resulting in further softening of demand. At restaurants, diners continued to pull back by skipping desserts and/or alcoholic beverages. Automobile dealers experienced a robust surge in new electric vehicle (EV) sales ahead of the expiration of the EV tax credit.
Leisure travel activity declined slightly since the previous report. The volume of international visitors remained muted and domestic travel booking windows shortened. Hotel occupancy levels continued to trend downward, on net. Business and group travel were flat. Cruising remained the strongest segment, with ports reporting solid passenger volumes. Hospitality contacts remained guardedly optimistic about the 2025 holiday travel season.
Construction and Real Estate
Home sales throughout the District declined moderately. Realtors reported increased buyer hesitation as economic uncertainty weighed on buyers' decisions to purchase a home. Some contacts noted a deterioration in the credit profiles of potential buyers, making it difficult for many to qualify for a mortgage. Although balanced in most of the region, inventory levels remained elevated in many markets in Florida. Home prices remained near historic highs, but price appreciation moderated. Cost inflation on new home construction stayed relatively low amid declining sales. Muted demand for new starter homes persisted, while the luxury new home market remained resilient. Homebuilders reported an elevated level of speculative inventory.
Commercial real estate activity was little changed since the previous report, on net, amid uneven market dynamics. Despite increasing in-office requirements by employers, office vacancy rates increased somewhat as new supply outpaced demand. Industrial vacancy rates increased slightly even as inventory contracted due to demolished properties making way for higher-tech buildouts. While still elevated, multifamily vacancies stabilized, and rents moderated. In the retail sector, however, vacancy rates declined and demand for space was strong.
Transportation
Transportation activity declined modestly. Trucking firms reported persistent weakness in shipments of consumer goods, and some noted a recent acceleration in the pace of declines. Trucking capacity remained elevated. Declining short-line railroad activity was higher than forecasts—down by high single digits. Class I railroads saw notable increases in intermodal freight volumes, but year-over-year declines in total carloads. Ports continued to experience robust container volumes and steady breakbulk activity; however, auto shipments performed below expectations.
Manufacturing
District manufacturing rose slightly, on net, since the previous report. A couple of cosmetics producers reported solid demand and market share gains. Concrete manufacturers saw improved backlogs. Chemical manufacturers noted that demand for compounds used in chicken feed rose, but sales of paper and pulp were flat, and orders for components used in tires were described as lackluster. Producers of packaged snack products reported considerably lower sales volumes amid softer consumer demand and some moderate producer-driven price increases. Concerns over tariffs and rising costs remained prevalent among manufacturers.
Banking and Finance
Overall loan growth in the Sixth District was flat since the previous report. Loan demand from both corporate borrowers and consumers was muted amid persistent economic uncertainty. Overall consumer lending contracted further, even with a small uptick in HELOC applications. While banks reported healthy credit quality, delinquencies ticked up. Multiple bank mergers were announced, affecting the banking landscape across the southeast.
Energy
Most energy industry segments grew at a moderate pace over the reporting period. Crude oil production in the Gulf of Mexico remained strong, despite reports of continued softening demand for various refined products. Liquefied natural gas demand rose globally and U.S. exports remained robust. Electricity demand was solid, particularly in the commercial and industrial sectors. Carbon capture and storage projects advanced over the reporting period, while solar development projects slowed down.
Agriculture
While contacts noted that overall demand for agricultural products was healthy, trade policy volatility weighed on agricultural exports. Overseas sales of domestic rice declined as buyers sourced from other countries at lower prices. Crops such as soybean, wheat, and corn remained depressed while Chinese markets turned to Brazil for these commodities. However, domestic demand for beef, poultry, peanuts, and tobacco was strong. Dairy farmers noted flat year-over-year sales, though demand from food services providers (e.g. cruise lines, resorts, and restaurants) was "on fire," and retail dairy sales were stable.
Federal Reserve Bank of Chicago
Summary of Economic Activity
Economic activity in the Seventh District was little changed over the reporting period, and contacts expected a slight decrease in activity over the next year. Consumer spending increased modestly; construction and real estate activity increased slightly; employment was flat; nonbusiness contacts saw no change in activity; business spending declined slightly; and manufacturing activity declined modestly. Prices rose moderately, wages were up modestly, and financial conditions loosened slightly. Prospects for 2025 farm income were unchanged.
Labor Markets
Employment was flat over the reporting period, though contacts expected a slight pickup over the next 12 months. Reports on labor market conditions continued to be mixed.
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