Current Release

August 2025

Summary of Economic Activity

Economic activity in the Seventh District increased modestly over the reporting period, and contacts expected a slight increase in activity over the next year. Consumer spending increased moderately; manufacturing activity increased modestly; employment and business spending increased slightly; nonbusiness contacts saw no change in activity; and construction and real estate activity declined slightly. Prices rose moderately, wages rose modestly, and financial conditions loosened slightly. Prospects for 2025 farm income were unchanged.

Labor Markets

Employment rose slightly over the reporting period, while contacts expected a modest pace of growth over the next 12 months. Reports on current labor market conditions were mixed. Several contacts in manufacturing, construction, and marketing were still having trouble hiring skilled workers. One contact reported that increased fear of immigration enforcement was reducing worker attendance in the nursing and hospitality industries. In contrast, there were also reports across several industries of further softening in the labor market. For example, a contact in financial services was not hiring to replace workers and another in the sector noted low attrition. Some other contacts said it was easier to hire, and one from an employment placement agency reported a decline in demand from auto and furniture manufacturers. Wages and benefits costs were up modestly overall.

Prices

Prices rose moderately in July and early August, and contacts expected a similar pace of growth over the next 12 months. Nonlabor input costs rose moderately, with contacts highlighting higher costs for energy and raw materials like chemicals, aluminum, and steel. Manufacturers attributed higher raw materials prices to tariffs and several said that they had passed on those increases to customers. In contrast, a roofing manufacturer had not passed on higher costs from increased tariffs on Chinese-made nails and fasteners. In addition, several contacts in the construction industry noted lower input prices in recent weeks. Overall, producer and consumer prices rose moderately. One retail industry analyst said that while higher tariffs had pushed up costs for items like apparel and electronics, some retailers may not start passing along tariff price increases to consumers until the new year.

Consumer Spending

Consumer spending increased moderately over the reporting period. Nonauto retail sales increased overall, with growth in jewelry, landscaping, and computers and softening in mattresses and consumer electronics other than computers. Contacts noted that summer promotional periods were longer than usual this year. Spending on leisure and hospitality categories rose moderately, most noticeably for hotels and restaurants. Sales of light vehicles increased moderately, boosted by elevated EV sales in advance of tax incentives phasing out.

Business Spending

Business spending increased slightly in July and early August. Capital expenditures moved up from a low level and expectations for the coming year were for a further slight pickup in spending. Demand for truck transportation was flat and freight rates declined slightly. Manufacturing inventories were a little high. Retail inventories decreased from somewhat low levels, and contacts said that retailers had taken an even more cautious approach to orders and inventory accumulation for the coming months. Auto inventories declined slightly.

Construction and Real Estate

Construction and real estate activity decreased slightly overall. Residential construction edged down. There was stronger demand for home upgrades and renovations than for new single-family construction. Separately, some multifamily construction had fallen behind scheduled timelines due to permit delays and rezoning. Residential real estate demand decreased slightly, while prices and rents edged up. Contacts noted that absorption of newly finished multifamily rental properties slowed and that rents in the subsector had fallen. Nonresidential construction increased slightly. Building of projects that receive tax abatements or other government subsidies remained strong and demand for data centers continued to be robust. Contacts noted that contractors were more frequently pre-ordering materials to avoid cost fluctuations. Commercial real estate demand was unchanged. Rents increased while vacancy rates were flat. Demand was strong for new, top quality office space and warehouse space.

Manufacturing

Manufacturing activity increased modestly in July and early August. Steel production increased slightly, with one contact highlighting greater demand from the energy sector. Demand for fabricated metals rose, in part due to an increase in orders from the energy and construction industries. Machinery sales picked up modestly, with one contact reporting growth in orders from the aerospace and oil sectors. One heavy machinery contact noted higher-than-expected sales over the summer but worried that some of the boost was from customers buying ahead to avoid tariffs. Auto production increased slightly, while heavy truck production was flat.

Banking and Finance

Financial conditions loosened slightly in July and early August. Bond values rose a bit, equity values were up modestly, and volatility edged down. Business loan demand increased slightly on net. One contact noted an increase in mergers and acquisitions activity after several months of little movement and attributed the boost to investors’ reduced sensitivity to policy uncertainty. In contrast, other contacts said policy uncertainty continued to make clients hesitate on taking out new loans. Business loan quality declined slightly and rates fell modestly. Terms remained flat. In the consumer sector, loan demand increased slightly with one contact noting increased activity in mortgage lending. Loan quality deteriorated slightly, rates were flat, and terms tightened slightly.

Agriculture

District farm income prospects were little changed over the reporting period as outlooks for lower crop revenues were offset by stronger expectations for livestock earnings. Crops were in good shape across most of the District. Corn prices fell on forecasts for record corn yields and production. Soybean prices increased after a downward revision in estimates of the number of soybean acres planted, though there, too, forecasts were for record per acre yields. Nonetheless, contacts expressed concern about crop disease with the potential to damage enough plants to curtail harvests. Uncertainty over the international trade situation continued to raise concerns about soybean exports. Dairy prices were mixed, egg prices declined, hog prices were flat, but cattle prices increased to historic highs. Farm machinery sales were described as “lackluster.” Increases in fertilizer prices due to higher tariffs raised farmers’ concerns over financing costs for their 2026 operations.

Community Conditions

Community, nonprofit, and other nonbusiness contacts saw little change in activity over the reporting period and many expressed uncertainty about the state of the economy as major changes in federal policy continue to take effect. One state government contact saw a decline in overall tax revenues, but an increase in sales tax revenues. Small business contacts reported that in response to higher tariffs, owners were pivoting to find new suppliers and identifying other ways to contain costs. Leaders of nonprofit and social service organizations continued to experience uncertainty regarding program funding pending federal appropriations decisions. In the meantime, they were hopeful for sustained local support heading into the back-to-school season, which carries additional costs for low-income families.