Fourth District Beige Book: October 2026

Summary of Economic Activity

On balance, business activity in the Fourth District increased modestly in recent weeks, with slight growth expected in the months ahead. Demand for manufactured goods grew moderately, with data center buildouts, power generation, and defense spending remaining the main sources of growth. While higher fuel prices continued to dampen demand, consumer spending was flat following a period of decline. Employment levels increased modestly, and wage pressures remained moderate. Nonlabor cost pressures remained robust for the eleventh consecutive period, driven by higher fuel costs and tariffs, and selling prices increased robustly as firms passed along rising input costs.

Labor Markets

Employment levels increased modestly on net in recent weeks. Many manufacturers added staff to address rising backlogs, launch new products, and prepare for anticipated growth, and several bankers added positions to expand coverage in growing markets. However, talent shortages continued to constrain hiring for skilled trades and technicians. By contrast, some real estate and construction contacts were cautious, and a few reported holding or trimming staffing because higher long-term interest rates had dampened demand. Meanwhile, one large manufacturer was consolidating plants and offshoring higher-level roles to reduce costs. Two banking contacts said that automation and AI had reduced staffing needs by enhancing the productivity of certain roles. Overall, contacts anticipated modest employment growth in the coming months.

Contacts continued to report moderate wage pressure on balance. While most increases came through annual merit cycles, several contacts attributed raises to higher living costs, particularly for gasoline and electricity. In sectors in which labor was harder to find, contacts reported using a variety of strategies to attract and retain workers such as raising starting wages or providing off-cycle pay increases. By contrast, some banking and staffing contacts mentioned that fewer outside job opportunities had reduced turnover and eased wage pressure. Uncertainty about long-term interest rates or weak cash flow led some construction contacts to hold wages steady.

Prices

Nonlabor cost pressures remained robust for the eleventh consecutive reporting period. Higher fuel costs remained the dominant driver, and several contacts noted that these costs were spilling over into freight, packaging, and petroleum-based materials. Multiple manufacturing, construction, and retail contacts said that tariffs added to upward pressure on raw materials costs, and one builder referred to the combination of high fuel costs and tariffs as a “double whammy.” Many services contacts cited sharp increases in health insurance premiums, and banking and professional services contacts noted rising costs for software, AI tools, and computer hardware. Looking ahead, contacts expected nonlabor cost pressures to remain robust.

Overall, contacts reported robust increases in selling prices in recent weeks, driven by rising input costs. Tighter capacity, fewer available drivers, and higher fuel costs allowed freight carriers to raise rates after an extended period of “depressed pricing.” Manufacturers continued to raise prices to cover higher costs associated with tariffs and for raw materials, particularly metals. Some restaurateurs and grocers held prices steady or increased them only selectively because of customer price sensitivity and competitive pressures. Many contacts across sectors noted that their prices are set annually or by contract, and they anticipated raising prices at upcoming renewals.

Consumer Spending

Consumer spending was flat in recent weeks, following four consecutive reporting periods of decline. Retailers across sectors continued to attribute slow activity to high fuel prices. Reports from food and hospitality contacts were mixed. One fast food chain reported growth, and one hotelier noted a rebound in corporate travel; others reported that extreme heat and reduced discretionary spending weighed on sales. Auto dealers reported soft demand, with many citing higher fuel prices and interest rates. Another noted lower maintenance spending as customers spent the “bare minimum to keep the vehicle safe.” Retailers expected slight declines in activity ahead, with affordability remaining the main concern.

Manufacturing

Demand for manufactured goods increased moderately, with momentum concentrated in data center buildouts, power generation, and defense and aerospace. Additionally, contacts mentioned higher orders from truck trailer and light automotive producers and higher international demand for hydrogen vehicle parts. Steel producers reported strong spot market demand as long mill lead times kept customer inventories lean and prices high. A few producers reported softer demand as higher interest rates weighed on housing-related activity and rising fuel costs squeezed margins. Demand was expected to increase moderately in the coming months.

Real Estate and Construction

Residential construction and real estate activity increased modestly in recent weeks, though conditions varied by segment. Sales of existing homes rose. One contact attributed increased sales to pent-up demand but noted that elevated mortgage rates continued to hold back a stronger recovery. By contrast, homebuilders indicated that housing starts remained soft, a situation which they attributed to rising interest rates, higher materials costs, and negative perceptions of the overall economy. Accordingly, contacts expected a moderate demand decline over the coming months.

Nonresidential construction and real estate activity increased moderately in recent weeks. Several contacts noted that previously delayed projects had resumed, and heavy highway and data center projects boosted activity. However, some contacts reported that rising interest rates and uncertainty around tariffs and the Middle East conflict continued to delay decisions about construction investment. One contractor reported that a local moratorium had led to the cancellation of a data center project. On net, contacts anticipated flat conditions in the near term.

Financial Services

Overall, loan demand grew robustly in recent weeks. Some bankers pointed to increased line utilization, growing credit card applications, and commercial projects’ moving forward as reasons for the growth in loan demand. A couple of bankers noted increased activity from market-share gains due to closures and acquisitions of other banks. A few expressed concern about the effects of the ongoing Middle East conflict and rising interest rates on the economic outlook of their clients. In the coming months, bankers expected loan demand to increase only modestly, tempered by a weaker economic outlook and higher interest rates.

Nonfinancial Services

Demand for professional and business services grew robustly in recent weeks, with growth concentrated among accounting and consulting firms. One attorney noted that demand for bankruptcy services increased because of higher interest rates and tariffs. Looking ahead, contacts expected activity to increase modestly, as economic and political uncertainty and higher fuel and goods costs might lead some clients to reduce spending. Freight demand increased modestly in recent weeks. One hauler mentioned that warehousing demand increased for data center and solar panel storage. Haulers expected a slight increase in demand in the coming months.

Community Conditions

In a semiannual survey of nonprofit organizations, 87 percent of respondents, the highest share in the survey's history, reported that their clients’ financial well-being had declined over the past six months, a situation which they attributed to continued price increases. Respondents noted higher numbers of people seeking food, rent, utility, and foreclosure-prevention assistance. One respondent said, “families [are] one setback, such as a car repair, from losing their ability to meet basic needs,” and a financial counseling service provider said that demand was so high that they had to close their waitlist and stop taking on new clients. Additionally, several respondents mentioned an increase in first-time homelessness, specifically among older adults and families with young children.