Beige Book: Economic activity up slightly across Midwest

Economic activity expanded slightly across the Seventh through Tenth Federal Districts from April to mid-May, according to the Federal Reserve's Beige Book. This echoed national trends, although conditions varied across the country..Retail spending was flat to up slightly, reflecting lower discretionary spending and heightened price sensitivity among consumers. Travel and tourism were up across the nation as business and leisure travel increased, but hospitality sector respondents were cool on their expectations for the summer season..Housing demand rose moderately and single-family construction was up, but the commercial real estate sector continued to soften amid supply concerns, tight credit conditions, and elevated borrowing costs. The energy sector was largely stable while agriculture experienced mixed reports..Employment rose at a slight pace overall, with two thirds of the districts reporting small gains and the remaining third saw no change. Employee turnover had largely gone down, and hiring plans were mixed amid continued economic uncertainty. Several districts reported that wage growth was at pre-pandemic historical averages or was normalizing toward those rates..In the Seventh District, economic activity increased slightly. Employment and construction and real estate activity increased modestly, mostly in single-family units. CRE activity decreased slightly. Prices and wages rose moderately, while financial conditions tightened a bit..Both business and consumer spending rose slightly. Several manufacturers reported that high borrowing costs led them to delay planned expansions or to purchase used equipment rather than new. Discount store sales were also up. Contacts noted flat durable goods spending overall, with activity being dampened by high interest rates..Income expectations for Seventh District farmers increased slightly, as prices increased for several agricultural products. Widespread precipitation reduced the intensity of drought in Iowa, but also delayed corn and soybean planting after an early start. Corn, soybean, and wheat prices moved higher. Most livestock prices were up, though egg prices were down..Economic activity across the Eighth District continued to increase slightly since the previous report. The outlook among contacts was slightly pessimistic, which is weaker than the previous report but better than one year ago. The labor market continues to be tight, with businesses still struggling to find employees. Wages have increased slightly, with growth starting to level off to pre-pandemic rates. Prices increased moderately, and residential and commercial real estate activity slowed..Agriculture conditions in the Eighth District have declined slightly, with most contacts describing conditions as falling below expectations. District contacts were mixed on inventory, sales, and capital expenditures and noted increased labor costs as an additional stressor. Elevated rainfall and extreme weather events such as tornadoes continued to disrupt the planting progress for soy, cotton, and corn, while rice-planting progress remained similar to one year ago..In the Minneapolis district, economic activity grew slightly. Employment grew but labor demand softened. Wage pressures were present but eased, while prices ticked up. Consumer spending rose but contacts were cautious, and manufacturing rose slightly. Commercial and residential construction improved slightly, and home sales grew strongly. .Lenders in the district reported decreased farm incomes in the first three months of 2024 relative to a year earlier, with expectations for further declines in the second quarter. However, contacts in the industry reported that some moderation in input costs was expected to benefit producer margins. Recent precipitation alleviated drought conditions in much of the region, and crop planting and progress was generally near average for early spring..The Tenth District economy expanded at a moderate pace. Household spending rose moderately, driven by increases in hotel stays, outings to restaurants, and auto maintenance. Job gains were modest, yet contacts indicated their employment outlooks were less vulnerable to a deterioration in conditions compared to six months ago. Prices grew slightly with broad reports that strategies regarding price changes were shifting..Conditions in the Tenth District agricultural economy softened through early May and farm finances tightened slightly. Corn, soybean, and wheat prices increased slightly since April, but remained weak, keeping profit opportunities narrow. Winter wheat conditions in Colorado and Kansas were particularly poor and raised concerns about reduced revenues while growing conditions in Oklahoma and Nebraska were comparatively better. Corn and soybean planting was delayed in some areas of the region, which also raised concerns about future crop conditions. In the livestock sector, cattle prices remained strong and supported profit opportunities for cow/calf producers. District contacts mentioned that financial stress has remained modest, but concerns about further deterioration were growing.