Beige Book: Economy grew in recent weeks

Economic activity increased in recent weeks across the country, according to the Federal Reserve Beige Book. .Though economic activity growth was relatively modest, growth expectations increased across sectors, with businesses optimistic that demand will increase in coming months. "Consumer spending was generally stable," according to the Dec. 3 report. "Many consumer-oriented businesses across districts noted further increases in price sensitivity among consumers, as well as several reports of increased sensitivity to quality.".Employment was stagnant or increased minimally across the country. Hiring activity was limited as worker turnover remained rare and few firms reported having hiring plans. Wage growth slowed to a modest rate across districts, as did expectations for wage growth in the coming months.. "The level of layoffs was also reportedly low," according to the Federal Reserve. "Contacts indicated they expected employment to remain steady or rise slightly over the next year, but many were cautious in their optimism about any pickup in hiring activity." .Employers in the Chicago region continued having challenges finding higher-skilled workers, especially in the administrative and skilled trades fields. There were reports of softening in the manufacturing labor market. .Some contacts in the Minneapolis region reported that staffing levels were dropping due to attrition which they, in some instances, substituted for layoffs. Contacts in larger markets reported a drop in turnover and improved labor availability, while rural businesses struggled to find workers. .Financial conditions loosened in the Chicago region as bond prices dropped and equity values increased. Volatility declined. Business loan demand increased, sparked by growth in industrial and commercial volume. Business loan rates and terms were stable, while loan quality was flat, according to the report. .Banking conditions improved in the St. Louis region amid an increase in demand for new loans. The share of contacts seeing higher delinquency rates stabilized after increasing over the past few quarters. ."Contacts noted that business customers have missed payments due to short-term cash flow issues, but they are being resolved well before reaching the point of default," according to the Federal Reserve. "Banking contacts reported substantial access to credit outside the banking sector — for households through 'buy-now-pay-later' programs and for businesses through private equity, which has been increasing competition for loans." .Farm conditions varied by region. Farm income expectations in the Chicago region remained lower than 2023, as corn and soybean prices were under year-ago levels. Growing conditions this year were strong for corn and soybeans, according to the report, with record corn yields and soybean yields higher than the last two years. .The ag sector continued to show stress in the St. Louis and Minneapolis regions amid low commodity prices and lower-than-anticipated yields. In a recent survey, 85 percent of respondents in the Minneapolis region reported that third-quarter farm income had fallen from the previous year. Strong harvests didn't offset low commodity prices and relatively high operating costs. .Agriculture conditions were also subdued in the Kansas City region, as contacts cited falling farm equipment values as a growing concern. Corn and soybean yields were higher than the five-year average in all states except Oklahoma, but profit opportunities remained narrow. ."Many district contacts cited notable declines in farm equipment values as a growing concern and continued to note that lower liquidity for crop producers and high interest rates could weigh further on farm finances in the coming months," according to the report..The commercial real estate sector was relatively weak, with some contacts reporting that financing remained available. Smaller businesses In the Minneapolis region were keeping their space and increasing lease activity. .Capital spending and purchases of raw materials were either flat or declining in most regions. Farm equipment sales hindered investment activity, with several contacts concerned about future equipment prices based on continued weakness in the broader farm economy..Input prices nationwide increased at a faster rate than selling prices, causing profit margins to dwindle. Businesses again cited rising insurance prices as a significant cost pressure. Businesses in several districts cited president-Elect Donald Trump's pledge to enact tariffs against several countries, if implemented, as an inflationary risk. .Retailers in the Chicago district planned to build up inventories in anticipation of higher tariffs, with one construction input supplier already doing so. Residential real estate activity decreased as higher mortgage rates limited demand. .Contacts in the Kansas City region expected substantial growth in demand over the coming months, supporting their plans to increase hiring and capital expenditures. Consumer spending remained at its strongest pace in at least a year, but contacts were reportedly more sensitive to prices and quality..Consumer- and business-focused contacts had more challenges passing costs to consumers, according to the report. Consumer spending fell slightly in the St. Louis region as contacts expected slight growth in employment, especially in industrial production. Regional businesses cited uncertainty over future policies as limiting investments, while businesses were increasing inventories to prepare for potential import tariffs.