Current Release
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July 2025
Summary of Economic Activity
Economic activity in the Seventh District increased slightly over the reporting period, while contacts expected a slight decline in activity over the next year. Employment increased modestly; consumer spending, business spending, and construction and real estate activity were flat; manufacturing declined slightly; and nonbusiness contacts saw no change in activity. Prices rose moderately, wages rose modestly, and financial conditions loosened slightly. Prospects for 2025 farm income were unchanged.
Labor Markets
Employment rose modestly over the reporting period, and contacts expected a similar pace of growth over the next 12 months. Some manufacturing contacts continued to report difficulty finding skilled workers, and contacts from staffing agencies noted a slight increase in demand for their services from manufacturers. However, several other manufacturers indicated that they were hiring only for replacement, some had cancelled plans to add staff due to low demand, and a few had instituted layoffs. And many contacts said hiring conditions were stable or easing, with one noting that improved labor availability was allowing them to extend operating hours. Wages and benefits costs were up modestly overall.
Prices
Prices rose moderately in late May and June, and contacts expected a similar pace of growth over the next 12 months. Nonlabor input costs were up moderately, with contacts highlighting higher costs for raw materials. Several manufacturers cited increases in costs of materials due to tariffs, including for steel, aluminum, tungsten, and magnets. Overall, producer prices increased moderately while consumer prices rose modestly. One retail industry analyst said that they expected tariffs to be felt broadly at the consumer level in late July and early August although they were not yet materially impacting retail prices.
Consumer Spending
Consumer spending was flat on balance over the reporting period. Nonauto spending increased slightly. Some categories where there was a significant pull-forward of spending ahead of higher tariffs saw sales decline, and others, like appliances and computers, saw slower growth. There were robust overall sales gains at discount stores and warehouse clubs, while spending on apparel and footwear softened noticeably. Leisure and hospitality spending was little changed: while restaurant sales increased slightly, spending on air travel and at hotels decreased slightly. Sales of new light vehicles fell noticeably. Dealers noted that the recent shortfall in sales roughly offset the gains in early spring when customers sought to buy ahead of tariffs.
Business Spending
Business spending was unchanged in late May and June. Capital expenditures were flat, and expectations were for little change in spending over the coming year. Several contacts said that they had paused capital spending due to economic uncertainty. Demand for truck transportation decreased modestly and freight rates declined slightly. Retail inventories were at comfortable levels. Despite earlier concerns about the potential for supply chain overload due to a surge in orders after the 90-day pause on tariff increases was announced, retailers reported relatively few issues with importing goods. New and used vehicle inventories decreased noticeably due to the sales spike ahead of higher tariffs and the recent decline in production; the lower stocks contributed to upward pressure on prices. Manufacturing inventories were slightly elevated. One contact at an economic development agency noted that inquiries for space in the Foreign Trade Zone they manage had risen dramatically.
Construction and Real Estate
Construction and real estate activity was unchanged over the reporting period. Residential construction declined slightly. One contact in the Des Moines area noted that single family starts were down significantly, while construction of townhomes and multifamily units aimed at the rental market was up. Residential real estate activity decreased slightly. Growth was concentrated in the luxury segment where showings and sales were up compared with year-ago levels. Overall, prices rose slightly and rents increased modestly. Nonresidential construction increased slightly. Commercial real estate demand was unchanged as were prices, rents, and vacancy rates. Lower occupancy rates in the industrial and multifamily sectors were counterbalanced by higher occupancy rates in the office and retail sectors.
Manufacturing
Manufacturing demand decreased slightly overall in late May and June. Orders for chemicals and plastics declined a bit. Steel production increased slightly. Fabricated metals demand edged up, in part because of stronger sales to the defense and residential construction industries. Machinery sales increased modestly, with growth in demand from the oil and gas industry more than offsetting lower demand from the automotive sector. Light vehicle production decreased, with some auto manufacturers reporting supply chain disruptions for heavy rare earth elements. Heavy truck production declined slightly.
Banking and Finance
Financial conditions loosened slightly in late May and June. Bond and equity values rose moderately while volatility fell slightly. Business loan demand was up slightly from the prior reporting period, though several contacts noted that demand continued to be at a weak level due to uncertainty. M&A volumes and valuations were lower than last reporting period. Business loan quality decreased slightly, with one contact noting deterioration in the small business space. Business loan rates edged down, and terms tightened slightly. Demand for consumer loans remained flat, though one contact noted a decrease in demand for auto and home insurance. Consumer loan quality, rates, and terms remained flat.
Agriculture
Expectations for 2025 farm income were little changed over the reporting period, with an improved outlook for livestock operations offsetting worse prospects for crop operations. Corn and soybean crops got off to good starts in most of the District, although progress lagged in much of the southern part of the District due to late planting. Costs for agricultural services, such as spraying, were higher, and as a result, contacts expected to use less fertilizer and pesticides during the growing season. Contacts noted that even though trade uncertainty had eased, they continued to be concerned about the potential for losing some export opportunities. Corn and soybean prices fell over the reporting period. Hog, cattle, and milk prices increased, while egg prices decreased again.
Community Conditions
Community, nonprofit, and other nonbusiness contacts reported no change in economic activity over the reporting period, reflecting a “pencils down” response to ongoing tariff and budget negotiations. State government contacts saw declines in income tax withholding and sales tax revenue. Contacts working with small businesses reported hesitancy around investment decisions amid efforts to cut costs to preserve margins. Leaders of nonprofit and social service organizations said they were confused about how to navigate changes to federal funding, in particular for programs related to food, housing, and small business. Organizations serving low-income communities noted that prices of daily necessities had stabilized, while food pantry contacts continued to report unprecedented levels of demand.
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