Labor Markets

Employment increased slightly over the reporting period and contacts expected a similar pace of growth over the next 12 months. Contacts largely reported either stable or easing hiring conditions, though a few, primarily in manufacturing, continued to have difficulty hiring. Several contacts across a variety of industries said they were fully staffed or hiring only for replacement, with only a few expecting to increase staffing over the next year. Wages and benefits costs were up slightly overall. Several contacts noted that following a few years of very large gains, annual wage increases for the coming year were close to historical averages.

Prices

Prices rose modestly since the last report, though contacts expected the pace of growth to pick up over the next 12 months. Producer prices increased slightly. Nonlabor input costs rose, with reports of higher prices for raw materials and equipment. Numerous manufacturing contacts said they were facing heightened uncertainty about both input costs and selling prices, and many attributed the uncertainty to changing tariff policies. One machinery manufacturer reported that vendors were changing prices on a daily basis. Consumer prices rose modestly overall. One retail industry analyst expected the price impacts of higher tariffs to largely be felt in the second half of the year and said retailers were expecting to pass about one-third of higher tariff costs on to consumers.

Consumer Spending

Consumer spending increased modestly over the reporting period. Nonauto retail sales were up, led by spending on big-ticket items such as appliances, computers, and other electronics. Contacts attributed the growth to consumers pulling ahead spending in anticipation of higher tariffs later in the year. Leisure and hospitality spending softened overall, with restaurants posting higher sales but spending on hotels, air travel, and tourist attractions weakening. Some contacts noted that visits from Canadians were down moderately year-to-date. Light vehicle sales increased moderately, with sales accelerating near the end of March as consumers pulled ahead purchases to avoid higher tariffs. Dealers expected strong demand to continue until existing inventories run down and tariffs start to affect pricing.

Business Spending

Business spending declined slightly since last report. Capital expenditures fell slightly and expectations for spending over the coming year also declined. Multiple contacts reported hesitancy to make capital purchases due to uncertainty over the economic outlook. Demand for truck transportation was flat, though freight rates decreased slightly. Retail inventories ticked up from a high level. Inventories of new vehicles were elevated as dealers reported adding to their stocks ahead of potential tariff increases. Manufacturing inventories were comfortable overall, and reports of materials shortages remained low.

Construction and Real Estate

Construction and real estate activity increased slightly over the reporting period. Residential construction was flat. Residential real estate activity moved up slightly, led by greater demand for townhomes and starter homes. Prices increased slightly as well, but rents were unchanged. Nonresidential construction was up a little, though contacts expressed concern that tariff-induced price increases on items such as large appliances, glass, and windows would slow activity. Commercial real estate demand was unchanged.

Manufacturing

Manufacturing activity was flat on balance in the district. Steel orders increased slightly, with one contact reporting an increase in demand from the energy sector. Fabricated metals sales rose modestly, in part due to more orders from the defense industry. A couple of contacts in fabricated metals expressed concern that prices for nickel would spike because a large share is imported from Canada. Machinery sales declined moderately, with higher demand from the aerospace industry more than offset by lower demand from the automotive industry. Auto and heavy truck production declined slightly.

Banking and Finance

Financial conditions tightened modestly over the reporting period. Market volatility was elevated, and bond and equity values fell significantly. Business loan demand increased modestly overall. However, one banking contact noted that many clients had put major decisions on pause due to uncertainty about the state of the economy and another noted that capital expenditures had slowed. One contact in M&A said activity was at a “standstill.” Business loan quality and rates decreased slightly, and terms remained flat. In the consumer sector, loan demand increased slightly, and quality edged down. Consumer loan rates and terms were flat.

Agriculture

Farm income expectations for 2025 were largely unchanged, though there was greater uncertainty due to trade policy announcements. Contacts expressed concerns about potentially losing export markets but also mentioned that greater purchases of agricultural products could be a way for some countries to lower trade deficits with the US. Corn, soybean, and wheat prices decreased. Fieldwork was underway to prepare for planting, though abundant moisture slowed preparations in the eastern part of the district. Contacts expected slightly more corn acres to be planted instead of soybeans given relatively favorable price movements for corn and a perception of greater export exposure for soybeans. While input prices for farmers rose some, vendors had cut financing rates to incentivize sales, in some cases down to 0%. Cattle prices increased, while egg, dairy and hog prices decreased. Contacts reported that livestock operations were in better financial shape than crop operations. There were limited sales of new farm machinery.

Community Conditions

Community, nonprofit, and other nonbusiness contacts reported a slight decrease in economic activity over the reporting period, and many expressed concerns that changes in federal policies were negatively affecting small businesses and low- and moderate-income communities. State government officials reported little change in activity but increased uncertainty in the economic outlook. Local labor markets were stable overall, though there were reports of layoffs at nonprofit organizations which had been affected by federal funding cuts. Low- and moderate-income consumers continued to face elevated prices, with food pantry leaders noting the particular challenge of sourcing adequate amounts of eggs and chicken, two common sources of protein.