Economic activity was stagnant in recent weeks amid uncertainty in international trade policy, according to the Federal Reserve Beige Book. .Ag conditions were stable in multiple districts. The ag economy remained weak in the Minneapolis region as regional grain producers continued to struggle amid low commodity prices. Regional cattle operations were in stronger shape. In the Chicago region, ag contacts were concerned over potentially losing export markets but expected that more purchases of agricultural products could allow some countries to reduce their trade deficits with the United States. Corn, soybean and wheat prices fell. “Fieldwork was underway to prepare for planting, though abundant moisture slowed preparations in the eastern part of the district,” according to the Federal Reserve. “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.” Ag conditions remained relatively poor in the Kansas City region amid lackluster crop prices. “Soybean, wheat and cotton prices were nearly unchanged from the prior month and stayed below average breakeven levels,” according to the Federal Reserve. “Corn prices also remained weak despite increasing slightly following recent reports of higher-than-anticipated export activity.” President Donald Trump announced a 10 percent tariff on all countries earlier this month. He then paused the tariffs for 90 days on most countries but hiked tariffs for China. The administration has since signaled tariffs on China are likely to come down. The economic outlook worsened in the St. Louis region as heavy rain impacted neighborhoods, farms and businesses, according to the Federal Reserve. “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,” according to the Beige Book. Consumer spending increased in the Chicago region. Financial conditions tightened amid elevated market volatility as bond and equity values fell. Business loan demand increased. Economic activity fell in the Minneapolis region amid declining employment and softening labor demand. Commercial real estate was unchanged, while home sales fell. Economic activity increased in the Kansas City region, even as expectations for consumer spending and business activity weakened. “Amid shifting conditions, businesses indicated they were most likely to adjust pricing to adapt,” according to the Federal Reserve. “Expectations of price growth rose at a robust rate, most pronounced in goods sectors. Employment levels were stable but hiring stalled.” Employment was unchanged to up slightly in most districts, according to the Federal Reserve. Hiring was slower for consumer-facing companies than for business-to-business firms. Prices increased in most districts. Manufacturing and construction companies in the Minneapolis region reported increasing raw materials prices in recent weeks to prepare for tariffs on steel and aluminum. While some contacts used metal inputs to place surcharges on products, others increased the prices of other outputs to compensate. Most districts reported “moderate to robust sales of vehicles and of some nondurables” before tariff-related price jumps, according to the Federal Reserve. Home sales increased as many areas reported low inventories. Commercial real estate activity expanded as multifamily boosted the industrial and office sectors. One St. Louis-area retailer predicted tariffs would increase prices 5 percent. Bankers in the St. Louis region said consumer past-due accounts continued to increase, but the exposure stayed at 60 days or less. Bankers also reported an increase in small business bankruptcies and past-dues. One contact in M&A described activity as 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.
