Economic activity has increased in recent weeks amid mixed economic signals, according to the Federal Reserve Beige Book. .Agricultural conditions were uneven. Farm income is expected to be similar this year in the Chicago region on an annualized basis. Agricultural conditions remained weak in the Minneapolis region. “Some contacts expressed concern about the possibility of widespread drought conditions persisting into the growing season,” the Federal Reserve said of the Minneapolis region. Ag contacts in the Chicago region were concerned about potential labor shortages for meatpacking, livestock and fruit and vegetable operations amid promises from the Trump administration to more strictly enforce immigration laws. Corn, soybean and wheat prices increased in recent weeks, leading farmers to sell stored crops at a higher price than during the harvest. Shipping challenges that farmers faced late last year were essentially resolved. Egg prices reached record highs as avian influenza continued to cause the number of laying hens to decline.“While input costs were stable for most products, prices for some fertilizers rose,” according to the report. “Contacts noted an acceleration in the use of precision farming technologies, which can lower input costs and improve yields.”Agricultural conditions improved in the Kansas City region improved but remained “relatively weak,” according to the Federal Reserve. Crop prices increased in January, but regional profit opportunities were still limited. “Strong cattle prices continued to support profits among producers, however, low cattle inventories have been a challenge for beef processors,” according to the Federal Reserve. Agricultural conditions worsened in the St. Louis area in recent weeks and remained “historically weak” amid tariffs and uncertainty surrounding the Farm Bill safety nets and other policy uncertainties, according to the Federal Reserve. Financial conditions “were little changed” in the Chicago region in recent weeks, according to the Federal Reserve. Bond and equity values along with business loan demand increased. Business loan quality decreased, with one contact citing deteriorating asset quality for auto suppliers. Banking conditions were steady in the St. Louis region, with greater optimism due to expected regulatory shifts and net interest margin improvements. Loan demand was flat, despite growth expectations. Regional businesses still expect loan demand will increase. Construction declined for both residential and nonresidential units. “Some contacts in the sector also expressed nervousness around the impact of potential tariffs on the price of lumber and other materials,” according to the Federal Reserve. Construction companies in the St. Louis region reported 15 to 20 percent increases in materials costs in the first quarter of this year. Regional businesses were reportedly delaying investments due to the threat of tariffs. “Firms in multiple districts noted difficulty passing input costs on to customers,” according to the report. “However, contacts in most districts expected potential tariffs on inputs would lead them to raise prices, with isolated reports of firms raising prices preemptively.”Consumer spending fell, with reports of strong demand for essential goods and less willingness for customers to spend on discretionary items. “Unusual weather conditions in some regions over recent weeks weakened demand for leisure and hospitality services,” according to the Federal Reserve.Consumer spending was stagnant in the Minneapolis region with increases in travel and tourism. Commercial real estate conditions were unchanged, and home sales grew. Consumer spending decreased in the Kansas City region, while prices increased. Businesses in the St. Louis region reported profit reductions from higher labor and non-labor expenses. Wages increased between 3 and 4 percent last year, according to the Federal Reserve. Businesses are expecting wages to rise at a slightly lower pace this year.Prices increased in most districts, but several saw price upticks compared to the previous reporting period. Input price pressures outpaced sales price pressure, especially in manufacturing and construction. In the Minneapolis region, 30 percent of firms reported increasing prices compared with the previous month, only half of the 60 percent who had no change. “A larger share reported increases in input prices,” according to the Federal Reserve. “Businesses continued to report significant pressures in insurance costs.” Employment increased across districts, as multiple reported job gains in health care and finance. Contacts said increasing uncertainty over immigration was impacting labor demand. Wages increased “at a modest-to-moderate pace,” according to the Federal Reserve, which was a little lower than the previous report. Several districts reported easing wage pressures.
