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Fourth District Beige Book

Summary of Economic Activity

Business activity in the Fourth District continued to increase at a modest pace in recent weeks. While demand was generally positive, crosscurrents under the surface were buffeting firms within and across sectors. For example, some consumer-facing contacts reported that spending picked up as concerns over the latest COVID-19 wave subsided, while others noted that spending slowed as consumers became more concerned about rising prices. Meanwhile, lenders reported that higher interest rates pulled forward demand for new mortgage originations while simultaneously curbing refinance activity. For both service providers and goods producers, labor constraints and supply disruptions still hampered their ability to meet strong demand. The war in Ukraine had not yet had a meaningfully adverse impact on current demand for goods or services or on firms’ near-term expectations for demand. However, contacts suggested that the war had added another layer of complexity to supply chain challenges and heightened uncertainty for demand in the longer term. In addition, the conflict put further upward pressure on input costs, particularly for energy, metals, and agricultural commodities.

Labor Markets

Employment continued to increase moderately in recent weeks, even as firms struggled to find and retain qualified employees. Nearly half of contacts indicated that they had increased staffing over the prior two months, with an almost equal share reporting that staffing levels were unchanged. While a few firms reported more success in hiring, many were operating with more vacancies than they would like. Several contacts that were able to add staff suggested that they were hiring workers who were leaving other jobs to seek better opportunities rather than workers who were new to the labor force or returning to it. Looking forward, firms plan to add more workers in the near term; but with limited improvement in worker availability, many contacts have pushed back their timelines for meaningful relief from labor shortages.

Wages continued to rise across a wide array of industries and occupations, but the share of contacts reporting such increases has declined from around 70 percent toward the end of 2021 to less than 60 percent in recent weeks. With firms still competing for many currently employed workers, many firms expected pay rates to rise further in 2022. However, some firms said that prior pay hikes had not led to improvements in hiring or retention rates, and they could not afford to increase pay further.


After declining during the prior two reporting periods, the percentage of firms reporting higher input costs increased. Several contacts in manufacturing and construction cited the war in Ukraine as a factor in this reversal of trend. For goods producers, the war had pushed costs higher for a variety of inputs, most notably metals and energy. Moreover, many noted that fuel surcharges had increased, as well. These fuel surcharges were also cited by retailers and restaurateurs, who suggested that their vendors were passing through these cost increases. Outside of the effects of the war, firms said that previously existing supply chain constraints kept upward pressure on a broad array of inputs. Looking forward, more than 80 percent of contacts expected nonlabor input costs to continue rising in the months ahead.

Selling prices continued to increase as firms sought to keep up with rising costs. Firms that sell to other firms reported using more surcharges and flexible contract language to keep up with volatility in costs, with little pushback from their customers. Similarly, goods retailers indicated that they were pushing through price increases to cover the higher costs of inputs and transportation. At the same time, some restaurants said that higher menu prices had led to fewer customers and lower sales.

Consumer Spending

Reports suggested that consumer spending improved somewhat following weaker activity in the previous reporting period. Restaurateurs and hoteliers reported a pickup in activity in recent weeks as weather conditions improved and COVID-19 cases dropped, though some hospitality contacts said that inflationary pressures were causing some customers to hold back on spending. General merchandisers and apparel retailers said that demand for goods remained strong, though one general merchandiser said that sales softened in recent weeks. Auto dealers reported limited sales despite generally elevated demand as tight inventories and higher prices deterred buyers. Contacts were generally optimistic that nonauto consumer spending on goods and services would pick up in the coming weeks, though two contacts said that the ongoing conflict in Ukraine clouded their outlook on consumer demand. Auto dealers suggested that sales will remain weak until inventory levels recover.


Demand for manufactured goods increased strongly across a wide range of end-user markets. However, supply chains continued to be disrupted both domestically and abroad, with COVID-related shutdowns in China and the war in Ukraine adding additional new challenges. Worker shortages continued to restrict output growth. Manufacturers struggling to keep up with demand reported some success in doing so by using labor-saving technologies. Finished goods inventories fell modestly because extended lead times for inputs resulted in an excess of unfinished goods. Looking forward, most respondents expected demand to increase in coming months, though their optimism was tempered by continued difficulty sourcing inputs, fears over a recession in Europe, and general concern about rising inflation.

Real Estate and Construction

Demand for residential construction and real estate remained robust despite increasing interest rates. Even so, supply chain disruptions continue to hinder new home construction. One general contractor indicated that he has had no issue selling homes, though completing projects has remained a challenge. Going forward, contacts were optimistic that demand would remain strong in the near term, though the longer-term outlook is clouded by elevated prices and rising interest rates. 

Nonresidential construction and real estate activity continued to increase. Contacts reported that leasing activity for industrial, retail, and apartment spaces remained strong. There has also been a recent uptick in leasing activity for office spaces. Leasing demand is expected to remain strong going forward, with continual improvements anticipated for office spaces. Nonresidential construction contacts reported strong demand for new construction, though they noted significant challenges around increasing costs and materials shortages (which in many cases have delayed project starts). Overall, contacts were optimistic that demand would remain strong, though they noted increased uncertainty because of the war in Ukraine that is expected to further exacerbate supply shortages and cost increases.

Financial Services

Loan demand increased moderately during the reporting period. Contacts reported increased business lending, especially for commercial and industrial loans, and many bankers reported strong loan pipelines. On the household side, some bankers noted a mixed effect of higher mortgage interest rates as demand for new originations increased while refinancing activity dropped. Demand for auto loans was slightly down because of limited vehicle inventories. Lenders said that delinquency rates for commercial and consumer loans remained low and that core deposits increased. Looking ahead, bankers expected business loan volumes to increase further as clients make capital investments, but they expected mortgage refinancing activity to slow further as interest rates rise.

Professional and Business Services

Activity for professional and business services remained strong. Software solutions and digital authentication firms reported that demand for their services remained elevated. Going forward, contacts were optimistic that current demand would persist. Wealth management and consulting firms were particularly optimistic, noting recent increases in early-stage business consultations.


Demand for freight services declined modestly from high levels. The softer demand stemmed from continued supply chain disruptions, especially at ports, and growing uncertainty surrounding the conflict in Ukraine. Many respondents reported being at capacity. Worker availability improved somewhat, but many contacts said that staffing was still below desired staffing levels. Looking forward, contacts expected conditions to improve modestly in coming months despite difficulties passing through rising fuel costs, continued difficulty filling driver positions, and the threat of a recession in Europe.