Federal Reserve Beige Book Highlights Housing Markets Continued to Weaken

The Federal Reserve released its Biege Book Wednesday prepared at the Federal Reserve Bank of Cleveland based on information collected on or before January 9, 2023.  The report was consistent with what we have seeing with economic data released, not a lot has changed over the past month, the economy is weakening. It was reported housing markets continued to weaken, clearly higher interest rates have further dented home sales and household finances. Notably many retailers noted increased difficulty in passing through cost increases, suggesting greater price sensitivity on the part of consumers.

This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.


  • Overall economic activity was relatively unchanged since the previous report
  • Consumer spending increased slightly
  • Many Districts reported that supply chain disruptions had eased
  • Housing markets continued to weaken
  • Selling prices increased at a modest or moderate pace in most Districts
  • Many said that the pace of increases had slowed from that of recent reporting periods
  • Many retailers noted increased difficulty in passing through cost increases, suggesting greater price sensitivity on the part of consumers
  • On balance, contacts across Districts said they expected future inflation to moderate further in the year ahead.

Overall Economic Activity

  • Overall economic activity was relatively unchanged since the previous report. Five Districts reported slight or modest increases in overall activity, six noted no change or slight declines, and one cited a significant decline. On balance, contacts generally expected little growth in the months ahead.
  • Consumer spending increased slightly, with some retailers reporting more robust sales over the holidays. Other retailers noted that high inflation continued to reduce consumers’ purchasing power, particularly among low- and moderate-income households. Auto sales were flat on average, but some dealers noted that increased vehicle availability had boosted sales. Tourism contacts reported moderate to robust activity augmented by strong holiday travel.
  • Manufacturers indicated that activity declined modestly on average, and, in many Districts, reported that supply chain disruptions had eased. Housing markets continued to weaken, with sales and construction declining across Districts. Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market.
  • Nonfinancial services firms experienced stable demand on balance. Most bankers reported that residential mortgage demand remained weak, and some said higher borrowing costs had begun to dampen commercial lending. Energy activity continued to increase moderately, and agriculture conditions were generally unchanged or improving.

Labor Markets

  • Employment continued to grow at a modest to moderate pace for most Districts. Only one District reported a slight decline in employment, and one other reported no change in employment levels. While some Districts noted that labor availability had increased, firms continued to report difficulty in filling open positions.
  • Many firms hesitated to lay off employees even as demand for their goods and services slowed and planned to reduce headcount through attrition if needed.
  • With persistently tight labor markets, wage pressures remained elevated across Districts, though five Reserve Banks reported that these pressures had eased somewhat. Some employers noted they have continued to offer bonuses and enhanced benefits to attract and retain workers.


  • Selling prices increased at a modest or moderate pace in most Districts, though many said that the pace of increases had slowed from that of recent reporting periods. Manufacturers in many Districts reported continued easing in freight costs and prices for commodities, including steel and lumber, though some said input costs remained elevated. Many retailers noted increased difficulty in passing through cost increases, suggesting greater price sensitivity on the part of consumers. In addition, some retailers offered more discounts and promotions than they had a year ago in order to move merchandise and clear out excess inventories. On balance, contacts across Districts said they expected future price growth to moderate further in the year ahead.

Highlights by Federal Reserve District

Business activity was roughly flat, and employment increased moderately amid seasonal hiring. Prices increased modestly as nonlabor cost pressures eased. Wage growth was above average despite easier hiring conditions. Tourism activity posted strong gains, while home sales continued to fall. The outlook was mostly stable but worsened slightly amid real estate contacts.

New York
Economic activity contracted, led by an especially sharp decline in the manufacturing sector. Job growth slowed and labor shortages eased somewhat, but hiring plans remained fairly solid. Wage growth remained modest, while the pace of input and selling price increases slowed. Housing markets continued to cool, and loan demand fell.

Business activity appeared to decline slightly during the current Beige Book period after holding steady for six months. Wage and price inflation continued to subside but still grew at a moderate pace. Employment continued to rise slightly, although hiring plans grew more cautious. Current sentiment fell, but expectations improved.

The District’s economy slowed slightly as 2022 drew to a close amid high interest rates and elevated costs and selling prices. However, the share of contacts reporting higher costs or selling prices declined noticeably from the middle of 2022. Looking ahead, firms expect softer conditions to persist in the near term but still plan to add workers to meet existing and expected demand for their goods and services.

The regional economy continued to grow at a slight pace, due in large part to moderate growth in consumer spending as manufacturing, transportation, real estate, and lending activity slowed. Employment rose more modestly this period compared to recent months and some firms noted hitting limits on wage increases. Price growth remained elevated in recent weeks.

Economic activity grew at a gradual pace. Labor market tightness eased, but wage pressures persisted. Most nonlabor costs moderated. Retailers reported healthy holiday sales. Auto sales rose. Leisure travel was robust. Housing demand fell. Transportation conditions weakened. Overall loan growth was steady, but deposit growth slowed. Agriculture remained mixed.

Economic activity decreased slightly. Employment increased moderately; consumer and business spending were unchanged; nonbusiness contacts saw little change in activity; manufacturing decreased modestly; and construction and real estate decreased moderately. Prices and wages rose moderately, while financial conditions tightened some. Agriculture incomes were strong in 2022.

St. Louis
Economic conditions have remained unchanged since our previous report. Labor shortages remained a key issue, though more contacts reported a slightly easier time hiring and retaining workers. The rate of input price increases slowed, and contacts reported improvements in shipping costs and delivery times. Consumer spending and travel were both mixed during the holiday season.

Economic activity in the region expanded slightly in recent weeks. Employment grew modestly, with labor demand softening but still healthy. Wage and price pressures remained high but lessened slightly. Holiday shopping was good overall but stymied somewhat by severe winter weather. Construction and real estate sectors continued to struggle. Inflation and high labor costs were hurting minority- and women-owned firms.

Kansas City
Economic activity in the Tenth District continued to decline slightly through the end of 2022. Though labor demand cooled further, contacts reported ongoing tightness and persistent wage pressures. Consumer spending declined recently, particularly for retailers and restaurants. Across goods and services, price growth slowed to a moderate, yet still-brisk, pace. Energy activity slowed modestly, facing headwinds from falling oil and gas prices.

Modest economic growth continued, with an acceleration in the manufacturing sector but an abatement in the service sector. Retail sales and home sales fell further, while oil and gas activity expanded. Employment growth continued and wage and price growth stayed elevated. Outlooks were mostly pessimistic except for the energy sector, and many contacts voiced concern about weakened demand, a potential recession, and inflation.

  • Energy Energy activity continued to expand during the reporting period, with a slight increase in the Eleventh District rig count over the past six weeks and sizeable increases in both oil and natural gas production in fourth quarter 2022. Contacts seemed confident that crude oil markets will remain tight for the next several years, keeping oil prices in the $80 to $90 per barrel range, which is high enough for most District producers to profitably drill new wells. Due to high demand for oilfield services and supply chain issues, the industry remained constrained on equipment and labor, and expectations were for activity to expand at a slow, steady pace this year. Outlooks improved overall, and most contacts expect increases in capital spending this year.

San Francisco
Economic activity expanded modestly. Employment levels grew at a modest pace as labor supply improved. Wages and prices remained elevated but rose at a slower pace relative to the previous reporting period. Demand for retail goods and services was stable. Manufacturing activity was mixed, while conditions in the agriculture sector remained weak. Residential real estate activity weakened, and lending activity rose slightly.

Source: Beige Book – January 18, 2023

From The TradersCommunity News Desk