Economic Activity
- Economic Growth: The overall growth was modest in July and August across most Districts.
- Consumer Spending:
- Tourism: There was a stronger-than-expected uptick in tourism, likely due to pent-up demand from the pandemic.
- Retail Spending: Retail spending, particularly on non-essential items, continued to decline. This slowdown might be attributed to some consumers having depleted their savings and now relying more on borrowing.
- Auto Sales: While new auto sales increased in many Districts, it was more due to better inventory availability than heightened consumer demand.
- Manufacturing:
- Supply Chain: Supply chain delays have improved, allowing manufacturers to better fulfill orders.
- New Orders: These were either stable or showed a decline across most Districts, leading to shorter backlogs.
- Housing:
- Single-family Housing: The supply remained constrained, which caused a surge in new construction activity.
- Affordable Housing: The construction of affordable housing was impeded by factors like increased financing costs and rising insurance premiums.
- Banking:
- Loan Demand: Experiences varied across Districts. However, there was a general increase in consumer loan balances. Some Districts also saw a rise in delinquencies on consumer credit lines.
- Agriculture: The sector had mixed conditions. However, there were widespread reports of drought and escalating input costs.
- Energy: The energy sector remained mostly static during the last summer months.
Overall, the economic landscape seems to be a mixed bag. While there are indications of recovery in sectors like tourism and manufacturing, others like retail spending and affordable housing construction face challenges. The continued strain on the housing market, combined with increasing reliance on consumer borrowing, suggests some underlying economic vulnerabilities that need to be addressed.
Labor Market
- Job Growth: Overall, job growth was muted across the nation. This suggests that while the economy might be recovering or stabilizing in some aspects, it hasn't translated to a robust increase in employment opportunities.
- Labor Market Imbalance:
- Even with slowed hiring, there was still a mismatch in the labor market. Many Districts reported a shortage of skilled workers and a limited number of job applicants. This imbalance can lead to increased competition among employers to attract and retain skilled talent, potentially pushing wages higher or leading to enhanced job benefits.
- Worker Retention:
- Retention seemed to improve in specific sectors like manufacturing and transportation. This could be due to several factors: better wages, improved working conditions, or the inherent stability of these industries compared to others during the current economic climate.
- Wage Growth Expectations:
- The statement "the second half of the year will be different" implies a belief among businesses that the trajectory of wage growth will change.
- The growth in labor cost pressures was higher than anticipated in the first half of the year. This suggests that businesses might have had to offer higher wages to attract or retain employees.
- However, in a seemingly paradoxical twist, businesses across nearly all Districts anticipate that wage growth will decelerate soon. This could mean that businesses expect the labor market imbalances to correct themselves or that other factors (like technological advancements or offshore outsourcing) will suppress wage growth.
In summary, while there's a subdued job growth, imbalances persist in the labor market, mainly due to the shortage of skilled workers. Wage growth has been higher than expected, possibly because of the labor market pressures. Still, there's a widespread belief among businesses that this trend will not continue in the near term. This suggests a cautious optimism among businesses but also reflects the complexities and uncertainties in the current labor market landscape.
Prices
- Price Growth:
- Overall, the growth rate of prices seemed to have decelerated across most Districts.
- The slowdown in price growth was especially prominent in the manufacturing and consumer-goods sectors. This could be due to various reasons such as improved supply chain efficiencies, lower demand, or other market dynamics.
- Insurance Costs:
- A notable exception to the general trend of decelerating price growth was the significant increase in property insurance costs in several Districts. The reasons could be multifaceted, including increased risks (like natural disasters due to climate change), higher claim frequencies, or adjustments to previous underpricing.
- Input vs. Selling Prices:
- Even though input price growth decelerated, it did so at a slower pace than selling prices. This implies that the costs businesses are incurring (like raw materials, labor, etc.) are not decreasing as fast as the prices they are able to charge customers.
- Businesses seem to be finding it challenging to pass on these cost pressures to consumers. This can be due to a variety of reasons, such as competitive market dynamics, consumer price sensitivity, or economic conditions that constrain consumer spending.
- Profit Margins:
- Given the dynamics between input and selling prices, it's not surprising that profit margins have reportedly shrunk in several Districts. When businesses can't fully pass on increased costs to consumers, their profit margins get squeezed.
In summary, while price growth has slowed down in many areas, businesses are facing challenges, especially concerning rising insurance costs and squeezed profit margins. This situation underscores the intricate balance businesses need to maintain between managing costs and setting consumer prices in a competitive and uncertain economic environment.
Individual Districts
- Boston:
- Modest business expansion.
- Used car scarcity persisted.
- Decline in home sales.
- Reduced concern about an imminent recession.
- New York:
- Steady economic activity.
- Solid labor market with consistent wage growth.
- Manufacturing decline.
- Home sales constrained by low inventory and rising mortgage rates.
- Mild inflationary uptick.
- Philadelphia:
- Slight decline in business activity.
- Consumer spending and nonmanufacturing activities fell.
- Improvements in labor availability and employment.
- Subsiding wage growth and inflation.
- Cleveland:
- Flat economic activity with some industry-specific fluctuations.
- Reduced consumer spending.
- Stabilized freight activity.
- Richmond:
- Slight economic growth.
- Consumer spending in retail, food service, and tourism improved.
- Decrease in manufacturing demand.
- Residential real estate limited by inventory.
- Atlanta:
- Modest economic growth.
- Improved labor markets.
- Robust retail sales.
- Chicago:
- Slight economic increase.
- Moderate employment growth.
- Stagnant construction and real estate.
- St. Louis:
- Steady economic conditions.
- Tight labor markets.
- Struggles with price increases.
- Minneapolis:
- Slight growth in economic activity.
- Consistent employment growth.
- Increases in consumer spending.
- Kansas City:
- Stable economic activity.
- Improvement in manufacturing and services due to better supply chains.
- Dallas:
- Continued modest expansion.
- Mixed sector activity with nonfinancial services growth.
- Elevated price pressures in services.
- San Francisco:
- Slight economic strengthening.
- Improved labor availability.
- Persistent, though slowing, price increases.
- Localized impacts from wildfires and severe weather.