Federal Reserve Beige Book — Executive Summary

Institutional summary of current US economic conditions, momentum, inflection points, and regional dispersion based on the latest Beige Book.

As of 2026-01-25

Federal Reserve Beige Book — Executive Summary

Publication Date — November 2025

Descriptive synthesis of current US economic conditions based on district-level reporting.

National Backdrop

Overall economic activity was largely unchanged since the prior report, with most of the twelve Federal Reserve Districts observing little change, though two noted modest declines and one reported modest growth (1). Consumer spending saw a further decline overall, while higher-end retail segments exhibited resilience (1). Manufacturing activity experienced a slight increase across most Districts, even as tariffs and related uncertainties continued to act as a headwind (1). Revenues within the nonfinancial services sector were generally flat to down, and loan demand was mixed (1). Outlooks largely remained unchanged, with some contacts expressing a heightened risk of slower activity in the coming months (1).

Labour Market Conditions

Employment levels declined slightly during the reporting period, with approximately half of Districts noting weaker labor demand (1). Rather than widespread layoffs, more Districts reported employers managing headcounts through hiring freezes, replacement-only hiring, and attrition (1). Employers generally found it easier to secure workers, though specific skilled positions and a reduced availability of immigrant workers continued to present hiring difficulties (1). A few firms observed artificial intelligence replacing entry-level roles or enhancing worker productivity to limit new hiring (1). Wage growth was modest overall, with manufacturing and construction sectors experiencing more moderate pressure due to a tighter labor supply (1). Rising health insurance premiums continued to exert upward pressure on labor costs (1).

Prices & Cost Pressures

Prices rose moderately during the reporting period (1). Input cost pressures were prevalent in manufacturing and retail, frequently attributed to tariff-induced increases (1). Several Districts also reported rising costs for insurance, utilities, technology, and health care (1). The ability to pass through higher input costs to customers varied, influenced by demand conditions, competitive pressures, and consumer price sensitivity (1). Many firms reported experiencing margin compression or financial strain due to tariffs (1). While prices for some materials declined due to sluggish demand or reduced tariffs, contacts generally expect upward cost pressures to persist, though plans for near-term price increases were mixed (1).

Sector Themes

  • Consumer activity: Overall consumer spending declined further, though higher-end retail remained resilient nationally (1). Boston reported flat consumer spending, with an online home furnishings retailer noting a shift to lower-priced items, while New York saw slight declines, particularly among smaller retailers (1). Cleveland observed flat spending with early signs of strain on middle-income consumers and links to federal policies, while St. Louis noted modest declines, with auto sales falling short due to the expiration of EV tax credits and credit-challenged consumers (1). Dallas retail sales fell, affected by the government shutdown and immigration enforcement's impact on Hispanic shoppers (1). San Francisco indicated lower discretionary spending as consumers switched to lower-cost alternatives (1).
  • Manufacturing: Manufacturing activity increased somewhat nationally, despite tariff headwinds (1). Boston manufacturers reported modest sales growth, with some attributing strength to AI infrastructure investments (1). Cleveland's manufacturing demand fell slightly overall, though some producers benefited from AI data center construction (1). Philadelphia manufacturing decreased modestly, largely impacted by tariffs (1). Dallas manufacturing remained resilient, with modest production growth in durable goods and transportation equipment, but tempered by trade policy uncertainty (1).
  • Services: Revenues in the nonfinancial services sector were mostly flat to down nationally (1). New York's service sector activity declined moderately, with steep declines in business services and information sectors (1). Cleveland's professional and business services grew moderately, driven by tax law changes and AI adoption (1). St. Louis nonfinancial services activity was unchanged, with some professional services firms reporting a slight decline in sales (1). Dallas nonfinancial services contracted broadly, with the government shutdown exacerbating concerns for service firms (1).
  • Housing & construction: Residential construction declined in some Districts, while others reported unchanged conditions; home sales varied nationally (1). Boston residential sales increased due to lower mortgage rates, though higher-priced homes saw moderate declines (1). New York housing markets were little changed, with strong high-end demand but eased price increases at the lower end (1). Philadelphia saw existing home sales and new-home construction decline modestly (1). Dallas housing remained under pressure with weak foot traffic, elevated new home inventories, and builders relying on incentives (1). Commercial real estate improved in some Districts like Boston and New York, driven by office demand and investor confidence (1), while St. Louis noted slowdowns due to government shutdown and uncertainty (1).
  • Banking & credit: Loan demand was mixed nationally (1). New York experienced an overall decline in loan demand, though residential mortgages saw a slight increase (1). Philadelphia reported a slight decrease in bank lending, with an ongoing rise in delinquencies among households and small businesses (1). Cleveland saw moderately increased loan demand, driven by declining interest rates, but some delinquencies rose for indirect auto and tariff-affected firms (1). Dallas noted falling loan volume and demand, particularly in consumer and commercial & industrial lending, with overall loan performance deteriorating faster (1). San Francisco's financial sector strengthened marginally, with stable credit and asset quality (1).
  • Agriculture & energy: Conditions in these sectors were largely stable nationally, though low oil prices and some crop prices presented challenges (1). Atlanta's energy industry grew moderately, with strong demand for LNG, solar, and wind, attributed to data center activity (1). Chicago's farm income prospects increased slightly due to rising crop prices, despite declines in cattle, hog, milk, and egg prices (1). St. Louis agriculture remained strained by low Mississippi River water levels increasing barge costs (1). Kansas City oil and gas activity fell slightly as oil prices dropped below profitable levels, and agriculture remained subdued despite some crop price increases (1). Dallas noted flat drilling activity and producer concerns about declining crude oil production in 2026 without price increases (1).

Regional Dispersion

  • Stronger districts:
    • Chicago: Economic activity rose slightly across employment, consumer spending, business spending, construction, real estate, and manufacturing (1).
    • Cleveland: Business activity increased slightly, supported by moderate demand growth in professional and business services and a boost to manufacturing from AI data centers (1).
    • Boston: Economic activity expanded slightly, driven by renewed strength in home sales and modest growth in manufacturing sales, alongside a slight pickup in commercial real estate activity (1).
  • Softer districts:
    • New York: Economic activity declined modestly, with slight employment decreases and moderate declines in the service sector (1).
    • Philadelphia: Economic activity was already trending down before a government shutdown further disrupted most sectors, leading to modest overall declines (1).
    • St. Louis: Economic activity remained unchanged, with contacts reporting a demand slowdown amplified by the government shutdown and a pessimistic outlook (1).
    • Dallas: Economic activity weakened slightly, with declines observed in nonfinancial services, retail, banking, and continued weakness in housing and energy (1).
    • Kansas City: Economic growth slowed slightly, characterized by softer labor conditions and cooling consumer activity (1).
    • Minneapolis: Overall activity was flat, with slight employment decreases and lower consumer spending, particularly among middle-to-lower income customers (1).
  • Common constraints:
    • Tariff-related uncertainty and costs: Frequently cited by manufacturers and retailers across multiple districts as impacting input costs, margins, and investment planning (1).
    • Government shutdown impact: Contributed to disrupted SNAP benefits, increased demand for social services, and negatively affected consumer spending and business activity in several regions (1).
    • Softening consumer demand and price sensitivity: Noted across most districts, particularly affecting lower- and middle-income households and leading to margin pressures for firms (1).
  • Outliers:
    • AI impact on labor: Several firms across different districts explicitly noted AI replacing entry-level positions or increasing productivity to reduce new hiring (1).
    • Data center construction boom: Identified as a primary driver of demand for manufacturing, energy, and commercial construction in Cleveland and Atlanta (1).
    • EV sales decline: A notable factor in declining new vehicle sales in New York, Cleveland, St. Louis, and Atlanta, following the expiration of federal tax credits (1).

Signals to Watch

  • Growth risks: Observed signs include continued demand slowdowns amplified by the government shutdown (St. Louis) (1), persistent tariff-related uncertainty impacting manufacturing outlooks (Dallas) (1), and a generalized expectation of slower sales for firms in Kansas City in 2026 (1).
  • Labour inflections: The shift from layoffs to hiring freezes, replacement-only hiring, and attrition (National Summary) (1) is notable. AI is increasingly cited as replacing entry-level roles or curbing new hiring (Boston, Cleveland, New York, Dallas, San Francisco) (1). There are increased reports of layoffs as a sign of a "normal staffing cycle" (Philadelphia, Kansas City) (1).
  • Inflation persistence: Widespread input cost pressures, particularly from tariffs in manufacturing and retail, are observed as sticky components (1). Rising costs for insurance, utilities, technology, and health care are noted across multiple districts (1). Many firms anticipate upward cost pressures to persist, despite mixed plans for near-term price increases (1).
  • Capital investment: Businesses are increasing capital expenditures, especially in automation, often without a corresponding increase in labor (Chicago) (1). Some firms in Kansas City are "dusting off" expansion and equipment upgrade plans that were previously paused (1). However, project delays due to low oil prices and policy uncertainty are noted in the energy sector (Dallas) (1).
  • Financial stress: Rising food insecurity and increased demand for food assistance, linked to government shutdown and SNAP benefit disruptions, are widespread (New York, Atlanta, Kansas City, San Francisco, Dallas) (1). Increasing reliance on debt to cover household expenses and rising delinquencies, particularly among low- and moderate-income households and small businesses, are reported (Atlanta, St. Louis, Richmond, Dallas) (1). Tightening credit standards by lenders are also a consistent theme (Philadelphia, St. Louis, Atlanta) (1).