Current Release

November 2025

Summary of Economic Activity

Economic activity in the Seventh District rose slightly over the reporting period, though contacts expected a slight decline in activity over the next year. Employment, consumer spending, business spending, construction and real estate, and manufacturing all increased slightly. Prices rose moderately, wages were up modestly, and financial conditions loosened some. Prospects for 2025 farm income rose slightly.

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 softer labor market conditions, including low turnover, reduced absenteeism, and easier hiring. A few manufacturers said they were hiring just to cover attrition. A retail industry analyst expected that hiring for the holiday season would be weaker than last year and that companies might compensate with more hours for existing employees. There were a few reports of new hiring in manufacturing and construction, and a contact at an employment placement agency saw a small increase in demand. Wages and benefits costs were up modestly overall. Many contacts reported notably higher health insurance quotes as policies came up for renewal.

Prices

Prices rose moderately in October and early November and contacts expected a similar pace of growth over the next 12 months. Producer prices grew moderately. Contacts reported a moderate increase in nonlabor costs, emphasizing higher prices for energy and raw materials. Manufacturing contacts attributed some increases in raw materials prices to tariffs. Overall, consumer prices rose moderately. One retail industry analyst said that while some price increases from tariffs had already materialized, they expected peak tariff impact to be in the first half of 2026.

Consumer Spending

Overall, consumer spending increased slightly over the reporting period. Non-auto consumer spending increased slightly. Contacts noted that segments and retail corridors that cater to higher-earning consumers continued to experience robust growth. Categories such as computers, appliances, and personal services such as salons and spas reported gains. Some value-oriented categories, including discount stores, also reported robust growth. In contrast, contacts in the apparel and grocery segments reported weaker demand. Overall, spending on leisure and hospitality grew, but the pace of growth slowed further with softer spending on hotels and airline travel. In the restaurant space, demand increased for fast casual and fast food but decreased for family dining. The owner of a family restaurant in central Indiana shared that soft sales were forcing them to absorb higher food costs. Light vehicle sales declined, especially for EVs following the end of federal tax credits.

Business Spending

Business spending increased slightly in October and early November. Capital expenditures edged up and contacts expected an increase in spending in the coming year. One contact at an economic development agency indicated that businesses were increasing capital expenditures, particularly in automation, often without a corresponding increase in labor. One banking contact noted that while capital expenditures were up, companies remained cautious and often opted to replace parts instead of purchasing new equipment. Demand for truck transportation decreased slightly as freight rates remained low. Retail inventories were a little low, though new vehicle inventory rose slightly. Manufacturing inventories were a little high.

Construction and Real Estate

Construction and real estate demand increased slightly on balance over the reporting period. Residential construction was unchanged. While demand for large renovation projects decreased, contacts noted increased demand for smaller renovation projects. Residential real estate activity rose slightly, spurred by lower mortgage rates, and showings were up modestly. Indianapolis-area contacts reported that starter homes had captured market share from other segments of the new home market. Prices and rents were unchanged. Nonresidential construction increased slightly. Contacts in the office and industrial segments indicated that demand for renovations and expansions of existing space was up. However, demand for large projects remained subdued except for data centers. Commercial real estate activity was unchanged, as were prices, rents, and vacancy rates. Demand for warehouse space was solid and contacts noted that smaller firms looking for smaller spaces were struggling to find good options.

Manufacturing

Manufacturing demand increased slightly in October and early November. Fabricated metals orders rose modestly, driven in part by growth in the automotive and defense sectors. Machinery sales increased slightly, and one contact expected a slight increase in demand over the next year. Auto production was flat. An industry analyst noted that the fire at an aluminum plant in New York and disruptions for semiconductors from China were crimping production at several plants in the District. Heavy truck production fell slightly amid soft freight volumes. Several manufacturers noted that changing tariff policies were making it difficult to plan for the future.

Banking and Finance

Financial conditions loosened modestly in October and early November. Equity values rose, while bond values and volatility were flat on balance. Business loan volumes increased modestly. One contact reported greater demand from industrial and manufacturing clients and another noted that growth was from large companies. Business loan quality declined slightly, rates fell modestly, and terms tightened slightly. In the consumer sector, loan demand decreased slightly, with one contact noting a decline for RV lending. Loan quality decreased slightly, rates fell modestly, and terms were unchanged.

Agriculture

Net farm income prospects for the District increased slightly during the reporting period as crop prices increased. Corn and soybean harvesting went quickly across most of the District, though dry conditions hurt yields in some places. District corn and soybean production was strong despite some disease pressures, and crop quality varied widely. Applying fungicides helped avoid some crop losses but also boosted costs. Soybean prices increased with additional international buyers, including the return of purchases by China. Corn and wheat prices also rose. Cattle prices decreased amid increased volatility in cattle markets, and hog, milk, and egg prices were down as well. Contacts reported highly variable financial performances by farms, with some experiencing steep losses and others making modest profits. Many farmers were delaying capital expenditures due to tight margins. With farmland values holding steady, most farm operations should be able to cover higher expenses for the 2026 growing season.

Community Conditions

Community, nonprofit, and other nonbusiness contacts noted a slight decline in economic activity over the reporting period, highlighting growing concerns about economic conditions, reports of softening in the labor market, and increasing price pressures. Small business contacts noted that businesses in immigrant communities were seeing reductions in foot traffic and increases in worker absences due to local immigration enforcement activities. Social service organizations were weathering the disruption of the government shutdown by seeking new sources of financing and they noted that the ongoing uncertainty makes it difficult to plan for service delivery. Workforce development contacts noted a softening in the recruitment and hiring of low-wage workers and lower demand in sectors affected by tariffs.