Fourth District Beige Book: July 2026

Summary of Economic Activity

On balance, Fourth District contacts reported that business activity increased modestly in recent weeks, and contacts generally anticipated moderate growth in the coming months. Demand for manufactured goods continued to rise, though at a slower pace than in the prior reporting period. Higher fuel costs continued to weigh on retail sales, and, in some cases, filtered through to ad hoc increases in selling prices and employee compensation. Overall, contacts said that their employment levels rose slightly and that wage pressures remained moderate for most roles. Nonlabor costs and selling prices both grew at a robust pace.

Labor Markets

Employment levels rose slightly on balance in recent weeks, though reports varied by sector. Nonfinancial services and construction contacts reported modest and moderate employment growth, respectively. Contacts in most other sectors reported flat staffing levels, while freight contacts reported a modest decline. Contacts who reported hiring generally said they did so to meet higher demand, while those who reported flat or declining staffing levels cited softer demand, a need to protect operating margins, or uncertainty about overall economic conditions. Several contacts were using or planning to use AI or other forms of automation to reduce the need for workers or improve the productivity of existing workers. Overall, contacts anticipated modest employment growth in the coming months.

Wage pressures remained moderate on balance as cost-of-living adjustments and merit increases remained the primary drivers of growth. Still, some contacts continued to report additional pay increases intended to help employees manage higher costs. One manufacturer attributed these wage pressures to higher prices resulting from the conflict in the Middle East, and a realtor offered bonuses and telework to help employees manage higher fuel prices. Several service providers and one manufacturer raised wages to attract or retain specialized professionals and tradespeople amid high competition for specific skill sets.

Prices

Nonlabor input cost growth remained robust in recent weeks. Contacts across industries continued to cite higher fuel costs as the primary driver of input cost pressures. Firms reported direct impacts as costs rose for transportation and petroleum-based products and indirect impacts as higher fuel costs filtered through to items sensitive to shipping costs, including metals and construction materials. Costs continued to rise for electricity, insurance, software, and food, albeit at a slower pace than in recent reporting periods. On balance, contacts expected nonlabor input cost growth to remain robust, with some anticipating relief from falling fuel prices and others expecting the “ripples” of the conflict in the Middle East to remain.

Contacts reported a robust increase in selling prices in recent weeks, a circumstance which several attributed to passing along rising fuel prices and higher costs related to tariffs. However, the extent to which these price increases made up for rising costs varied: Some contacts reported passing along all the cost increases to their customers, some passed on only part of the increases, and some did not pass along any of the increases for fear of losing customers. Other firms attempted to offset higher nonlabor costs through improvements in productivity or reductions in labor costs.

Consumer Spending

Consumer spending declined modestly after a slight decrease in the prior reporting period. Retailers across industry segments attributed the declines to the ongoing impact of high fuel prices. One nonauto retailer said spending by low-income households fell while that of high-income households was unchanged, and another noted that price increases pushed revenue higher even as unit sales fell. Auto dealers generally reported flat or softer sales due to high vehicle prices and interest rates, and one dealer added that demand for service and parts rose as consumers held onto vehicles longer. On balance, retailers expected demand to increase modestly in the coming months.

Manufacturing

On balance, contacts reported that demand for manufactured goods rose moderately after a robust increase in the prior reporting period. Data center development continued to drive demand for metal products and electrical components. In addition, several metal producers reported stronger orders as customers depleted their imported inventories and shifted to domestic sources to avoid tariffs. A small number of contacts reported flat or softer orders because of low consumer spending, while a candy producer reported higher orders as consumers traded down from higher-priced options. Manufacturers generally expected demand to increase moderately in the coming months.

Real Estate and Construction

Residential construction and real estate activity increased at a robust pace in recent weeks. Homebuilders reported higher demand for affordable homes and still-strong demand for luxury homes. However, one contact expressed concern that the overall housing market had softened because of high construction costs and interest rates, leading some homeowners to add on to or remodel their current homes instead of moving. Contacts anticipated strong demand growth in the coming months.

In nonresidential construction and real estate, contacts reported modest demand growth in recent weeks. Demand for industrial space picked up, and one contact noted that mergers and acquisitions were driving sales and leasing activity. By contrast, contacts reported stable or softer demand for commercial real estate. Looking ahead, contacts expected strong demand growth in the coming months. Builders anticipated more bidding opportunities in the near term, an expectation which one contact attributed to decreased uncertainty pending a resolution of the conflict in the Middle East.

Financial Services

Overall, bankers reported that loan demand grew modestly in recent weeks. Commercial bankers noted increases in mergers, acquisitions, and capital expenditures since the last reporting period. One banker mentioned that firms were moving ahead with projects that they could no longer delay. On the consumer side, one banker said that demand for personal loans and credit card utilization increased as clients planned home renovations and travel. Looking ahead, bankers expected loan demand to increase moderately, driven by continued spending by households and businesses and easing cost pressures if the conflict in the Middle East is resolved.

Nonfinancial Services

Demand for nonfinancial services grew moderately after multiple periods of robust growth, though contacts expected a return to robust growth in the coming months. Some contacts reported higher overall demand as clients moved forward with real estate transactions and capital projects, while others gained market share as clients sought lower prices and better service. Freight contacts generally reported robust demand growth, driven by higher manufacturing and construction activity, though one contact cautioned that this increase could reflect a redistribution of market share as select haulers gained customers from shuttered competitors. Freight contacts generally expected a similar pace of growth in the coming months.

Community Conditions

Most community college contacts expected enrollments to grow in fall 2026 compared to fall 2025. Some contacts reported strong demand from both employers and students for short-term credentials, skilled trades, and apprenticeships in IT, health care, and advanced manufacturing, though one noted lower demand for computer science programs. To meet this increased demand, contacts planned to add more short-term training programs, align coursework with employers’ needs, and develop pathways between noncredit programs and traditional degrees. Most contacts said that declines in funding impacted their ability to expand programs, support students, and hire instructors. Regarding staffing, one contact shared that “a lack of qualified instructors for workforce training is a major challenge.”