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Fourth District Beige Book

The Beige Book—officially known as the Summary of Commentary on Current Economic Conditions by Federal Reserve District—is produced eight times each year prior to Federal Open Market Committee (FOMC) meetings. The information in the Beige Book is gathered primarily through interviews with business people in each District, as well as from Federal Reserve Bank and Branch directors. The publication’s original purpose was to supplement official statistics with more current anecdotal accounts of the economic environment in order to assist policymakers during FOMC deliberations.

Summary of Economic Activity

Business activity in the Fourth District grew modestly during the survey period, with a majority of firms reporting stable customer demand. Demand was strong in banking, manufacturing, and nonfinancial services, whereas retail demand improved slightly, and housing demand softened. On balance, employers increased staff levels moderately to meet demand, though wage pressures were strong and widespread. Contacts in every industry noted that increased competition for labor was requiring them to boost compensation to retain workers. Nonlabor input costs rose strongly in all industries, led by metals, fuel, and transportation costs. Some contacts noticed that import tariffs were boosting prices further down the supply chain. Selling prices rose with less intensity than they did for input costs.

Employment and Wages

On balance, contacts reported moderate increases to their staff levels. Hiring activity was very strong in professional and business services, in which three-quarters of contacts reported adding workers. Skilled services aside, employers in many sectors gave mixed reports. Retail contacts noted that the increase in temporary employment for the holiday shopping season this year was comparable to holiday season increases in recent years. Many manufacturers increased headcounts to keep up with demand, but there was an uptick in reports of firms' reducing headcounts. Finally, transportation firms pared their workforces because of lower seasonal demand and to gain efficiencies. Staff levels at construction firms were stable.

Wage pressures were widespread. In every industry, contacts noted that increased competition for labor was requiring their firms to boost compensation in a variety of ways to retain workers. A number of manufacturers noted they increased wages between 0.5 percentage points and 1.0 percentage points over the rate of inflation. One construction contact reported that starting salaries for new graduates was significantly higher this year than it was last year. One transportation employer remarked that his firm preferred to use recruitment and retention bonuses rather than wage increases. One clothing retailer noted that his firm felt pressure to raise its wages as other large retailers boosted their pay


Nonlabor input costs rose strongly in all industries. Higher metals prices because of import tariffs continue to be a pain point for manufacturers and construction firms, although an increasing number of contacts in these industries have been reporting stable prices in recent survey rounds. There were a number of reports of tariffs leading to higher prices further down the supply chain. One transportation contact reported that domestically produced maintenance parts were becoming more expensive because some components are imported from China. One retailer noted that her suppliers were increasing their prices because of the tariffs. In addition to higher metals prices, contacts noted fuel, transportation, food, and polyresin cost increases.

Final selling prices rose with slightly less intensity than they did for input costs. The majority of manufacturers held their prices, unlike during the previous five survey rounds, when a majority had raised selling prices. The manufacturers that raised their prices did not, for the most part, report getting pushback from their customers. Some nonresidential builders were able to raise prices enough to increase their margins. One homebuilder noted, however, that his firm held its sticker prices but lowered effective prices by offering incentives on almost every deal. Nearly all nondurable-goods retailers held their prices, while auto dealers all reported higher prices. The majority of transportation firms found success raising their prices. One contact said he managed to raise his fees by 4 percent to 6 percent. Another transportation contact said he noticed that while shippers can secure higher rates, shipping customers were being more selective about nonprice factors, such as service and how the shipper handles its loads.

Consumer Spending

Consumer demand improved slightly. Auto sales edged higher thanks to increased sales of used cars. Demand for new cars fell, however, as higher metals prices and rising interest rates eroded affordability. Auto dealers reported that trucks, SUVs, and crossovers continued to gain market share of passenger vehicles. Demand for nondurable goods ticked higher. Retailers with broad footprints noted that sales within the Fourth District were roughly in line with national sales. Inventories were at desired levels, but profit margins for nondurable goods narrowed modestly.


Business conditions in manufacturing remained solid, although producers struggled with capacity constraints and input price increases. Demand was strong, but some contacts indicated that this demand was due to inventory stockpiling as fixed-price contracts approached renewal and as price increases were imminent. Import tariffs have had mixed effects: some manufacturers reported higher demand as import competition subsided, but others reported that tariffs led to input cost increases and supply chain gaps. The competition for skilled labor remained stiff, and two contacts reported off-schedule capital investments in labor-saving technologies to be able to keep up with strong demand without the need for additional personnel.

Real Estate and Construction

Homebuilders reported that demand fell moderately and that they expect housing demand to soften in the near future. Homebuilders note that decreasing home affordability, because of rising construction costs and rising interest rates, drove this decrease in demand. Lower-priced homes continued to outsell higher-priced homes. Real estate agents reported stable housing inventories.

Business conditions improved modestly for nonresidential construction firms. Both private- and public-sector demand improved recently, with particular strength coming from industrial and education customers. Backlogs remained strong and trended upward. Real estate developers were split about their characterizations of market conditions. Developers that experienced weaker market conditions cited closures of retail stores as leading to weaker demand. However, other developers noted stable or even slightly better demand because of strong business confidence.

Financial Services

Banking conditions were strong and steady. Demand for credit remained robust and came from both commercial and consumer segments. However, mortgage demand showed some signs of slowing and was held down by lack of housing inventory and by worries about rising interest rates. Most contacts reported that core deposits rose in response to higher interest rates, although some seasonal factors were at play as the holiday season approached. One contact noted that commercial deposits declined because clients invested cash in operations or equity markets rather than holding reserves.

Nonfinancial Services

Nonfinancial services firms reported strong growth in business activity. Contacts cited strong business confidence, driven by continued US economic growth, as underpinning their clients’ willingness to spend on business advisory services. Contacts were split evenly between those that expected business conditions to improve in the near future and those that expected them to be stable. In the transportation sector, demand increased from an already high level. One railroad contact remarked that demand for her firm's intermodal services was strong and that this was a sign that capacity was a constraint for trucking companies. There was some concern that seasonal patterns may be unusual this year as firms try to import goods before additional tariffs on Chinese goods take effect on January 1. Expectations for near-term business conditions in the transportation sector were stable.