Economy improved in recent weeks

Economic activity improved across the United States in recent weeks, with most regions reporting a cautious but optimistic outlook, according to the Federal Reserve Beige Book..Activity was described as increasing at a “slight to modest” pace in eight districts, while three saw no change and one reported a modest decline. This marks a notable improvement from recent reporting cycles, which had been dominated by flat conditions.Regional reports reflected broader trends. In the Chicago-based Seventh District, economic activity was little changed, with gains in consumer spending and construction offset by a decline in manufacturing. The St. Louis District reported modest growth, assisted by the end of a government shutdown and strong late-holiday sales. Economic activity in the Minneapolis District was flat, according to the Beige Book, with a slight decline in employment and contracting manufacturing, though winter tourism benefited from harsh weather. In the Kansas City District, activity rose due to gains in services and manufacturing orders, while energy activity declined amid low oil prices, while agricultural conditions were mixed.According to the summary of conditions across all districts, consumer spending increased in most regions, driven largely by holiday shopping. Higher-income consumers continued to spend on luxury goods, travel, tourism and experiential activities, while lower- and moderate-income households became more price sensitive and hesitant to make purchases deemed nonessential. Auto sales were flat to down across most districts.Ag conditions were strained in the St. Louis and Minneapolis regions, according to the report. In St. Louis, supply for row crops continued to exceed demand. Farmers struggled to market 2025 harvests. In the Minneapolis region, low crop prices continued to pressure farm income despite gains in soybean prices. Strong cattle prices benefited ranchers, while oil and gas exploration was unchanged. Ag conditions were mixed in the Kansas City region as crop producers faced limited profits amid low soybean prices, according to the Beige Book. Stable corn and wheat prices reportedly provided relief. “Strong cattle prices supported ranchers, though beef processors faced compressed margins,” the report stated. Manufacturing conditions remained mixed across the country, with five districts reporting growth and six reporting contraction. Nonfinancial services demand was generally steady to slightly stronger. Banking conditions were described as stable, supported by increased demand for credit cards, home equity loans and commercial lending. In contrast, residential real estate sales, construction and lending softened in most districts. Agricultural conditions were largely unchanged. Net farm income in the Chicago region last year was in line with 2024, supported by a late-year surge in corn and soybean prices along with livestock profitability. Labor markets were unchanged. Eight districts reported no change in employment levels, with hiring focused on replacing departing workers rather than creating new positions. Several districts noted increased reliance on temporary workers as firms sought flexibility amid uncertainty. Employers continued facing challenges finding skilled workers, particularly in engineering, health care and the trades, while job switching slowed. Wage growth was described as moderate and closer to historical norms.Price pressures were elevated nationwide, with tariffs cited as a significant factor. More firms started to pass along higher costs as inventories purchased before tariffs were depleted. Energy and insurance costs continued to limit margins, though some industries, including retail and restaurants, were reluctant to raise prices due to customer sensitivity. Businesses expect price growth to moderate but remain elevated, according to the report.