YEMEN ECONOMICMONITOR Persistent Fragilityamid Rising RisksSpring 2025Public Disclosure AuthorizedPu.
2025-06-09
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OECD Economic Surveys:Sweden 2025June 2025Volume 2025/13versionlaunchOECD Economic Surveys:Sweden202.
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The Beige BookSummary of Commentary onCurrent Economic Conditions byFederal Reserve DistrictMay 2025F E D E R A L R E S E R V E S Y S T E MContentsAbout This Publication.iiNational Summary.1Federal Reserve Bank of Boston.5Federal Reserve Bank of New York.8Federal Reserve Bank of Philadelphia.12Federal Reserve Bank of Cleveland.16Federal Reserve Bank of Richmond.20Federal Reserve Bank of Atlanta.23Federal Reserve Bank of Chicago.27Federal Reserve Bank of St.Louis.31Federal Reserve Bank of Minneapolis.34Federal Reserve Bank of Kansas City.38Federal Reserve Bank of Dallas.42Federal Reserve Bank of San Francisco.46iAbout This PublicationWhat is the Beige Book?The Beige Book is a Federal Reserve System publication about current economic conditionsacross the 12 Federal Reserve Districts.It characterizes regional economic conditions and pros-pects based on a variety of mostly qualitative information,gathered directly from each Districtssources.Reports are published eight times per year.What is the purpose of the Beige Book?The Beige Book is intended to characterize the change in economic conditions since the lastreport.Outreach for the Beige Book is one of many ways the Federal Reserve System engageswith businesses and other organizations about economic developments in their communities.Because this information is collected from a wide range of contacts through a variety of formaland informal methods,the Beige Book can complement other forms of regional information gath-ering.The Beige Book is not a commentary on the views of Federal Reserve officials.How is the information collected?Each Federal Reserve Bank gathers information on current economic conditions in its Districtthrough reports from Bank and Branch directors,plus interviews and online questionnaires com-pleted by businesses,community organizations,economists,market experts,and other sources.Contacts are not selected at random;rather,Banks strive to curate a diverse set of sources thatcan provide accurate and objective information about a broad range of economic activities.TheBeige Book serves as a regular summary of this information for the public.How is the information used?The information from contacts supplements the data and analysis used by Federal Reserve econo-mists and staff to assess economic conditions in the Federal Reserve Districts.The qualitativenature of the Beige Book creates an opportunity to characterize dynamics and identify emergingtrends in the economy that may not be readily apparent in the available economic data.This infor-Note:The Federal Reserve officially identifies Districts by number and Reserve Bank city.In the 12th District,the SeattleBranch serves Alaska,and the San Francisco Bank serves Hawaii.The System serves commonwealths and territories asfollows:the New York Bank serves the Commonwealth of Puerto Rico and the U.S.Virgin Islands;the San Francisco Bankserves American Samoa,Guam,and the Commonwealth of the Northern Mariana Islands.The Board of Governors revisedthe branch boundaries of the System in February 1996.iimation enables comparison of economic conditions in different parts of the country,which can behelpful for assessing the outlook for the national economy.The Beige Book does not have the type of information Im lookingfor.What other information is available?The Federal Reserve System conducts a wide array of recurring surveys of businesses,house-holds,and community organizations.A list of statistical releases compiled by the Federal ReserveBoard is available here,links to each of the Federal Reserve Banks are available here,and a sum-mary of the Systems community outreach is available here.In addition,Fed Listens events havebeen held around the country to hear about how monetary policy affects peoples daily lives andlivelihoods.The System also relies on a variety of advisory councilswhose members are drawnfrom a wide array of businesses,non-profit organizations,and community groupsto hear diverseperspectives on the economy in carrying out its responsibilities.iiiThe Beige BookNational SummaryOverall Economic ActivityReports across the twelve Federal Reserve Districts indicate that economic activity has declinedslightly since the previous report.Half of the Districts reported slight to moderate declines inactivity,three Districts reported no change,and three Districts reported slight growth.All Districtsreported elevated levels of economic and policy uncertainty,which have led to hesitancy and acautious approach to business and household decisions.Manufacturing activity declined slightly.Consumer spending reports were mixed,with most Districts reporting slight declines or nochange;however,some Districts reported increases in spending on items expected to be affectedby tariffs.Residential real estate sales were little changed,and most District reports on new homeconstruction indicate flat or slowing construction activity.Reports on bank loan demand andcapital spending plans were mixed.Activity at ports was robust,while reports on transportationand warehouse activity in other areas were mixed.On balance,the outlook remains slightly pessi-mistic and uncertain,unchanged relative to the previous report.However,a few District reportsindicate the outlook has deteriorated while a few others indicate the outlook has improved.Labor MarketsEmployment has been little changed since the previous report.Most Districts described employ-ment as flat,three Districts reported slight-to-modest increases,and two Districts reported slightdeclines.Many Districts reported lower employee turnover rates and more applicants for openpositions.Comments about uncertainty delaying hiring were widespread.All Districts describedlower labor demand,citing declining hours worked and overtime,hiring pauses,and staff reductionplans.Some Districts reported layoffs in certain sectors,but these layoffs were not pervasive.Two Districts noted that,for many of their contacts,hiring plans had not changed since the startof the year.Wages continued to grow at a modest pace,although many Districts reported a gen-eral easing in wage pressures.A few Districts indicated that higher costs of living continued to putupward pressure on wages.Note:This report was prepared at the Federal Reserve Bank of St.Louis based on information collected on or beforeMay 23,2025.This document summarizes comments received from contacts outside the Federal Reserve System and isnot a commentary on the views of Federal Reserve officials.1PricesPrices have increased at a moderate pace since the previous report.There were widespreadreports of contacts expecting costs and prices to rise at a faster rate going forward.A few Dis-tricts described these expected cost increases as strong,significant,or substantial.All Districtreports indicated that higher tariff rates were putting upward pressure on costs and prices.How-ever,contacts responses to these higher costs varied,including increasing prices on affecteditems,increasing prices on all items,reducing profit margins,and adding temporary fees or sur-charges.Contacts that plan to pass along tariff-related costs expect to do so within three months.Highlights by Federal Reserve DistrictBostonEconomic activity decreased slightly overall.Consumer spending at retail stores and restaurants slowedmodestly.Employers paused hiring because of heightened uncertainty,with employment decliningslightly and wages increasing just barely.Prices increased only slightly,but larger price increases wereexpected for the summer.Contacts expressed mixed views concerning the outlook.New YorkEconomic activity in the Second District continued to decline modestly amid heightened uncer-tainty.Employment held steady,though demand for workers softened and wage growth slowed to amodest pace.Selling price increases remained moderate,but input prices grew strongly with tariff-induced cost increases.Capital spending plans declined,and the outlook was quite pessimistic.PhiladelphiaBusiness activity declined modestly in the current Beige Book period,as it did in the last period.Employment declined slightly,despite an uptick in manufacturing sector jobs.Wages increasedslightly,and firm price inflation was up moderately.Existing home sales grew slightly,and newhome sales declined moderately.Expectations for future growth rose moderately for manufac-turers and slightly for nonmanufacturers.ClevelandDistrict business activity continued to be flat in recent weeks,and contacts expected activity toremain flat in the months ahead.Retailers noted a pullback in consumer spending,and manufac-turers reported softer orders.Many contacts attributed robust cost increases to tariffs and saidthat their selling prices increased moderately.2The Beige BookRichmondThe regional economy continued to grow mildly in recent weeks.Consumer spending and nonfinan-cial services demand picked up slightly,financial services demand and real estate activity werelittle changed,and manufacturing activity contracted slightly.Port volumes increased strongly dueto a surge in import activity.Employment rose slightly,wage growth was modest,and overall pricegrowth remained moderate.AtlantaThe economy of the Sixth District grew slightly.Employment was steady,and wage pressuredecreased.Prices increased moderately.Consumer spending was flat,and travel and tourismdeclined modestly.Home sales rose slightly.Transportation activity grew at a modest pace.Loangrowth slowed.Manufacturing fell,but energy activity rose slowly.ChicagoEconomic activity increased slightly.Consumer spending and employment increased modestly;business spending and construction and real estate activity were flat;manufacturing declinedslightly;and nonbusiness contacts saw a slight decline in activity.Prices and wages rose mod-estly,and financial conditions loosened slightly.Prospects for 2025 farm income increased some.St.LouisEconomic activity has remained unchanged,but the outlook has slightly deteriorated.Employmentlevels were unchanged,and wage growth has been modest.Contacts expressed elevated uncer-tainty and concern that tariffs would result in further cost increases.MinneapolisThe District economy contracted slightly overall.Employment was flat and wages grew moderately.Some employers were preparing contingency plans for potential layoffs.Prices increased moder-ately overall;some contacts were adding or considering tariff surcharges.Manufacturing increasedmoderately and consumer spending fell.Agricultural conditions remained weak,but crop progresswas solid.Kansas CityOverall activity declined moderately,driven by lower retail spending,a decline in the demand forsingle-family homes,and a slight contraction in manufacturing.Businesses indicated they wereincreasingly cautious about hiring plans and capital expenditures,but employment levelswere steady.National Summary3DallasEconomic activity in the Eleventh District economy was little changed over the reporting period.Nonfinancial services activity held steady and growth in the manufacturing sector slowed.Loan vol-umes grew slightly,and the housing market remained subdued.Employment was flat and pricepressures held steady except for the tariff-related increases seen in the manufacturing sector.Out-looks generally deteriorated,and tariff uncertainty was making it hard for businesses to plan forthe future.San FranciscoEconomic activity slowed slightly.Employment levels were generally stable.Wages rose slightlyand prices increased modestly.Retail sales and consumer and business services demand eased.Conditions in manufacturing,agriculture,and real estate markets softened slightly.Activity in thefinancial services sector was stable.4The Beige BookFederal Reserve Bank ofBostonSummary of Economic ActivityEconomic activity slowed slightly amid persistent uncertainty.Consumers appeared increasinglycautious,evidenced by modest declines in retail and restaurant sales and slight declines in homesales.Manufacturing sales increased by a very small margin,on average.Commercial real estateactivity was flat overall,but office leasing expanded modestly in Boston and Providence.Uncer-tainty led to hiring delays,and employment declined a bit as a result.Prices rose only modestly,but nontrivial price increases were expected to hit consumer goods by summer.The outlook wasmostly unchanged and was characterized by a mix of cautious optimism and blunt pessimism.Themore optimistic contacts pointed to the possibility that resolution of uncertainty could unlock eco-nomic activity moving forward;the more pessimistic contacts,in contrast,emphasized the poten-tial negative impacts on demand from tariffs and other federal policies.Labor MarketsEmployment was down slightly,and wages edged up.Staffing services contacts said thatemployers across many industries delayed hiring because of uncertainty related to tariffs.Manu-facturing contacts echoed that description,reporting that headcounts were down slightly amid cau-tious hiring.Regarding labor supply,government-sector layoffs brought new jobseekers to themarket,while current employees in retail,restaurant,and other industries became less likely toquit or seek new jobs.Wages increased only slightly as a variety of firms delayed planned raises,again because of tariff-related uncertainty.Some manufacturing firms,especially those lessexposed to tariffs,proceeded with moderate annual merit increases.Staffing firms said thatstarting compensation rates were mostly stable but noted that experienced pay rates decreasedmoderately for selected roles.Contacts agreed that economic uncertainty would probably continueto hold back labor demand going forward,but no major layoffs were planned.PricesPrices rose only modestly in recent months,but a growing number of contacts planned to raiseprices going forward.Manufacturers prices increased moderately on average,driven by a partialpass-through of tariff-related cost increases.However,some manufacturers held prices fixed,either because they were not exposed to tariffs or because they stockpiled inventories of foreign5inputs in advance of tariffs.Retail prices were stable recently but were expected to rise substan-tially in the coming months.A clothing retailer,which typically tags items with prices months inadvance,took the rare step to retag items with higher prices to cover the cost of tariffs,and thoseitems will hit store shelves this summer.Restaurant menu prices were stable,but tariffs onimported foods could drive menu prices higher over the summer.Hotel prices in Boston increasedmodestly year-over-year.Staffing firms billing rates were unchanged,although their insurancecosts increased sharply.Pricing plans were mixed,as firms not exposed to tariffs planned to keepprices steady,while firms exposed to tariffs expected to raise prices by moderate or potentiallylarge margins,depending on the eventual size of the tariffs.Retail and TourismFirst District restaurant sales and retail sales slowed modestly in recent months,while tourismactivity was flat.A Massachusetts restaurant industry contact said that,following a very slowwinter season,Aprils sales remained depressed relative to one year earlier,while Mays sales sofar came closer to last Mays levels.A clothing retailer experienced flat sales overall in recentmonths.A discount retailer reported a modest decline in sales overall,driven by substantialdeclines at stores along the Canadian border.Airline passenger traffic through Boston increasedmodestly,with most of the growth coming from international travel.The hotel occupancy rate ingreater Boston dropped slightly from a year earlier but remained strong compared with long-runaverages.Restaurant contacts remained cautious about the outlook but gained some optimismbased on recent activity.Retailers expected tariffs to continue to weigh on cross-border commercefrom Canada and,eventually,to hurt domestic demand once pending price increases wentinto effect.Manufacturing and Related ServicesManufacturing sales were up slightly on average from the previous quarter,as most firms reportedflat sales and only one experienced moderate growth.Firms said that demand for goods and ser-vices had slowed in recent months amid uncertainty over the impact of tariffs.Most firms boostedinventories of foreign inputs to get ahead of tariffs.Capital expenditures were largely unchanged;however,one firm considered making additional investments in the U.S.to mitigate the impact oftariffs.The outlook became more pessimistic on balance,as most firms expected sales to slow atleast modestly in the coming quarters.The expected weakness stemmed mostly from tariff-relatedconcerns,but a contact in the life sciences industry cited cuts to federal research funds as adownside risk,and a veterinary industry contact pointed to consumer weakness as their mainobstacle to growth.Nonetheless,a manufacturer of domestic-made goods with limited exposure totariffs maintained an optimistic outlook.6The Beige BookStaffing ServicesContacts in the First District experienced somewhat weaker demand on balance.Outcomes were mixed,however,ranging from a moderate increase in demand from one year earlier,to an abrupt decline in rev-enues from the previous quarter.The composition of staffing demand also varied across firms,with onenoting an increase in temporary hire demand and a decrease in direct hire roles,and another reportingthe opposite pattern.Contacts noted that hiring activity was constrained by uncertainty surrounding tar-iffs.The outlook for staffing demand ranged from cautiously optimistic to somewhat pessimistic,in linewith firms respective recent experiences.Commercial Real EstateCommercial real estate activity was flat on balance amid mixed reports.Office leasing picked up mod-estly in Boston and Providence,while in the Hartford area,industrial leasing slowed,and office leasingwas stagnant.Policy uncertainty held back greater activity,causing many businesses to delay majordecisions.Investment sales were mixed and about flat on average.Contacts noted that deals tooklonger to close,and one said that foreign investors grew generally skittish about investing in the UnitedStates.Construction activity slowed modestly,constrained by rising costs,but demand for multifamilyconstruction remained high.A Providence contact noted a rise in office-to-residential conversions,butBoston-area contacts reported comparatively little such activity.The outlook was marked by elevateduncertainty,and changes in sentiment were mixed.Most contacts maintained a cautious outlook orbecame slightly more pessimistic;others,however,became more optimistic,in large part becauseincreased return-to-office policies were expected to boost office leasing in the Boston area.Residential Real EstateAcross the First District,home sales dipped slightly in early spring(March or April,depending on thestate)compared with one year earlier,marking the second consecutive report showing declining salesactivity.The weakness was concentrated in single-family home sales,which slowed at least slightly inall reporting markets(Connecticut furnished no data)and tapered considerably in the Boston area.Con-dominium sales performed better than single-family sales,increasing moderately from one year earlierin most markets but finishing moderately lower in Massachusetts.Contacts attributed weak homesales to declining consumer confidence,stock market volatility,and buyer fatigue from limited invento-ries.However,contacts noted that inventories,while still tight,increased substantially from the pre-vious year,an outcome they hoped would boost sales moving forward.Median sales prices increasedonly slightly from the previous year,a reflection of weaker demand and stronger inventories.For more information about District economic conditions visit:https:/www.bostonfed.org/in-the-region.aspx.Federal Reserve Bank of Boston7Federal Reserve Bank ofNew YorkSummary of Economic ActivityEconomic activity in the Second District continued to decline modestly amid widespread uncer-tainty.Employment held steady,though the demand for workers softened and wage growth slowedto a modest pace.Selling price increases remained moderate,but input prices rose strongly withtariff-induced cost increases,especially for manufacturers.Manufacturing activity continued todecline modestly.On balance,consumer spending picked up modestly,with ongoing strong autosales.Housing markets picked up,though inventory remained exceptionally tight.Capital spendingplans declined,and the outlook was quite pessimistic.Labor MarketsOn balance,employment in the region continued to hold steady.Firms in business services andmanufacturing saw ongoing declining headcounts,while modest increases were observed amongretail,information,and leisure and hospitality establishments.Demand for workers softened,and in some industries the supply of workers exceeded demand.Contacts noted that attrition was exceptionally low,lessening the need to hire replacements.Asoftware firm in upstate New York reported that despite holding headcount steady,they were sub-stantially reducing employee hours.Some businesses said they were putting hiring on hold untileconomic uncertainty recedes.A community banker reported receiving large numbers of over-qualified applications for open positions.Some contacts in manufacturing and leisure and hospi-tality expressed concerns that immigration restrictions would make it difficult to hire the workersthey need.Still,there were no mentions of major layoffs.Wage growth slowed to a modest pace.Firms in the transportation,wholesale,and education andhealth industries reported a considerable easing in wage growth,while personal services and lei-sure and hospitality firms said that wage growth remained more substantial.Contacts noted thatjob switchers were no longer receiving outsized pay increases.8PricesThe pace of selling price increases eased somewhat but remained moderate.However,inputprices rose strongly amid rising tariffs,with the price of manufacturing inputs surging to thefastest pace in years.While some firms said they were absorbing tariff-induced cost increases,most reported that they were passing through some or all of such cost increases to their cus-tomers by raising prices.An upstate wood mill noted that their ability to raise prices to recouphigher costs was constrained by market forces,significantly reducing profit margins.A heavy con-struction equipment supplier said they raised prices on goods unaffected by tariffs to enjoy theextra margin before tariffs increased their costs.A number of businesses reported they were nolonger stocking goods whose higher prices were becoming infeasible.A florist reported adjustingflower varieties based on rapidly changing costs by source country.Uncertainty about the tariff out-look continued to make it difficult for many firms to set prices.Businesses continued to expectsubstantial increases in input prices in the months ahead.Consumer SpendingOn balance,consumer spending continued to rise modestly through much of the District.Autodealers in upstate New York reported that inventories were depleted by ongoing strong sales ascustomers tried to get ahead of potential tariffs.Used car sales were mostly solid,though inven-tory availability was sometimes limiting.Restaurant traffic picked up around New York City,especially in Brooklyn.However,ongoing reductions in visits from Canadian tourists contributedto a decline in spending in the North Country as well as a decline in sales at an upstate brewery.An investment advisory firm said that clients had stopped buying services due to heighteneduncertainty.Manufacturing and DistributionManufacturing activity continued to decline modestly,though new orders and shipments picked upslightly after declining during the last reporting period.A manufacturer of store displays noted thatclients became flighty due to uncertainty and tariffs,leading to postponed and cancelled orders.Aproducer of retail cooking supplies said that they were ramping up production at their factories out-side of China to avoid tariffs.Two manufacturers reported inquiries from clients looking to reshoremanufacturing to avoid tariffs.Wholesale and distribution-related firms reported that activity wassteady.A shipping contact indicated that there was a significant drop in imports,with somerecovery during the later part of the reporting period.Delivery times were unchanged,and invento-ries increased slightly.Supply availability worsened and is expected to worsen further in thecoming months.Manufacturers and wholesale firms planned to reduce capital spending in themonths ahead.Federal Reserve Bank of New York9ServicesActivity in the service sector continued to decline moderately.There were strong declines in the lei-sure and hospitality and information sectors,and more moderate declines in business and per-sonal services.A regional hospital system noted that reductions in federal funding will disrupttheir business.Service sector firms remained unusually pessimistic about the outlook,with plansto reduce capital investment in the months ahead.Tourism activity in New York City held steady.During the busy college graduation season,hoteloccupancy edged higher than last year,and room rates reached a historic high.While attendancewas slightly weak at attractions,ticket sales at Broadway theatres remained solid.Still,tourismindustry contacts anticipated a decline in international visitors in New York City in the coming year.Winery contacts in the Finger Lakes region of upstate New York reported a significant decline invisits due to fewer Canadian tourists.Real Estate and ConstructionHousing markets picked up across the District as the spring selling season neared its peak,withrising demand amid exceptionally tight inventory.Bidding wars were prevalent in upstate New Yorkand in the suburbs around New York City.Sales were up significantly in the Hamptons since lastyear,with the higher end of the market driven by cash sales from drawdowns of financial assets.Sales in New York City also increased,with record high prices in some neighborhoods.A housingmarket expert noted that economic uncertainty had become a more significant issue than highmortgage rates for potential buyers,and there were multiple accounts of buyers withdrawing frombidding and then re-entering later.Rents in the District continued to rise,with New York City rents reaching historic highs.Rents con-tinued to edge up in upstate New York and northern New Jersey.Rental supply was tight,withManhattan and Brooklyn vacancy rates at long-time lows.Commercial real estate markets improved slightly.Vacancy rates in Manhattans office market con-tinued to decline,and rents picked up in recent weeks following a decline in the previous period.A New York City commercial real estate contact noted that amid increasing demand,the supply ofhigher quality office space was becoming scarce.Leasing activity was strong.NorthernNew Jerseys industrial market leveled off after a period of weakness earlier in the year,althoughindustrial vacancy rates remained elevated.Construction activity continued to decline.10The Beige BookBanking and FinanceActivity in the broad finance sector continued to decline modestly.Small-to-medium-sized banksreported that loan demand weakened across the board.One New York banker noted that tariffuncertainty had put deal activity on hold.Credit standards continued to ease and loan interestspreads narrowed.Deposit rates continued to decline.Delinquency rates improved,most notablyfor commercial mortgages.Community PerspectivesNon-profits and other community-based organizations continued to face heightened financial pres-sures.Increasing distress due to federal government cuts to social programs have extended intohealthcare,housing,and the arts and humanities.At the same time,non-profits and other com-munity organizations have also faced higher costs of materials due to tariffs.While local govern-ments have stepped in to provide support and relief payments to subcontracting organizationsaffected by delayed or cancelled federal funding,gaps remain.For more information about District economic conditions visit:https:/www.newyorkfed.org/regional-economy.Federal Reserve Bank of New York11Federal Reserve Bank ofPhiladelphiaSummary of Economic ActivityOn balance,business activity in the Third District continued to decline modestly.Employmentdeclined slightly despite an uptick in manufacturing jobs.Wage inflation continued to ease,withwages increasing slightly this period,down from a modest increase last period.Firm price inflationincreased moderately,although contacts reported that tariffs have not yet affected prices in mostsectors.Staffing and recruitment activity was mixed.Manufacturers reported strong demand forand supply of labor,while firms in the nonmanufacturing sector reported declining employmentdue to attrition and layoffs.Many staffing contacts reported increased hesitancy to hire amongfirms,citing economic uncertainty.Existing home sales ticked up slightly,and new home salesdeclined moderately.On balance,expectations for economic growth over the next six months weremodest.The index of expectations rose moderately for manufacturers and slightly for non-manufacturers.Labor MarketsEmployment again declined slightly this period.On average,nonmanufacturers reported moderatedecreases in full-time employment in our April and May surveys.Nonmanufacturing firms alsoreported a slight decline in part-time jobs,down from a slight increase in March.Over the sameperiod,manufacturing firms reported modest increases in employment and a slight decline in theaverage workweek.Meanwhile,the average workweek index for nonmanufacturers increasedmoderately.Overall,a few contacts reported a general hesitancy to hire,given heightened economic uncer-tainty.One contact who specializes in recruiting for manufacturing sector jobs reported a stronguptick in hiring in May so far,after declines in the first quarter,owing to increased business confi-dence.Meanwhile,another contact with clients in the food industry reported significant declines inthe number of jobs due to attrition and layoffs as supply chain issues weighed heavily on thisindustry.Wage inflation continued to ease.Firms across industries reported wages grew slightly this period,down from modest increases in the last period.Most contacts reported less upward wage pres-12sures over the period,and one contact even reported decreased wages for entry-levelunskilled jobs.On a quarterly basis,expectations of the one-year-ahead change in compensation cost per workerfor all firms rose to a trimmed mean of 3.7 percent in the second quarter of 2025,up from3.3 percent one quarter earlier.Compensation expectations were mixed among firms.Manufac-turers expectations edged down from 3.7 percent to 3.5 percent,and nonmanufacturers expecta-tions climbed from 2.8 percent to 3.9 percent.PricesFirm price inflation was moderate this period,up from a modest pace in March.Although contactsin the auto and construction industries reported that the effects of tariffs have not yet affectedselling prices,they noted that these prices have still been rising.One retailer reported paying higher prices for coffee that is imported from Canada.However,thecontacts firm followed the lead of its competitors and did not pass on these price increases to itsalready price-sensitive consumers.This increased price sensitivity appears to be broadly based.Approximately half of the respondents to our monthly surveys reported that their customers havebecome more price sensitive.Based on our quarterly survey,firms reported increases in prices received for their own goods andservices over the past year in the second quarter of 2025 compared with the first quarter,afterdeclines in the prior two quarters.The trimmed mean for reported price changes rose to 2.8 per-cent from 1.4 percent for all firms.Looking one year ahead,the increases that firms anticipate inthe prices for their own goods also increased in the second quarter of 2025.The expected rate ofgrowth increased from 3.1 percent to 3.5 percent for manufacturers and from 2.2 percent to2.7 percent for nonmanufacturers.When asked about anticipated changes to their industries costs over the next six months and howthey expect their competitors to respond,more than two-thirds of the surveyed firms anticipatedincreased costs and expected their competitors to increase prices in as little as two months.ManufacturingOn average,current manufacturing activity declined slightly this period,after recording a modestincrease in March.The index for new orders fell moderately in April before increasing slightly inMay.The shipments index declined moderately,remaining negative over the April to May period.Federal Reserve Bank of Philadelphia13Expectations among manufacturers for growth over the next six months jumped sharply in May,after two months of low readings.More than two-thirds of the firms expect increases in neworders and in shipments over the next six months.Trade and ServicesOn balance,firms across a broad spectrum of nonmanufacturing industries reported a moderatedecrease in activity.The sales/revenues index decreased modestly.The index for new ordersdeclined moderately,essentially unchanged from March.Retailers(nonauto)reported a slight decline in sales over the current period.One retailer statedthat customers are overly burdened by higher prices and that in-store visits continue to be flat toslightly down despite the extensive use of promotions.Auto dealers reported a slight decline in auto sales,after strong increases in the last period.Although tariffs have yet to affect auto prices,prices have still been trending up partly owing tolower inventories on hand.Activity in the tourism sector rose slightly,unchanged from the last period.Leisure travel rosemoderately despite minor dips in hotel bookings and air travel.Two contacts reported a slightincrease in bookings along the Jersey Shore but noted slight declines in bookings in Cape MayCounty,owing to less demand from the usual Canadian tourists who frequent this area.Businesstravel increased slightly despite some slowdown,which one contact attributed to lower govern-ment expenditures and heightened uncertainty among corporate clients.Expectations among the nonmanufacturers for their own growth over the next six months recov-ered from a moderate decrease in March and April to a slight increase in May.Sentiment foractivity in the region overall continued a moderate decline.Real Estate and ConstructionExisting home sales increased slightly this period.The inventory of for-sale properties and thenumber of closed transactions ticked up in March and April,after a slow start to the year.One con-tact partly attributed this uptick to seasonal effects at the start of spring buying season.New-home builders reported moderate declines in sales,traffic to offices,and signed contracts.In nonresidential markets,leasing activity and transaction volumes recorded slight growth.Onecontact noted an uptick in the logistics and warehousing area,led by smaller warehouses.14The Beige BookNonresidential construction activity recorded slight declines,unchanged from last period.Contactsreported some activity in the eds and meds spaces and continued public infrastructure projects.One contact noted that some construction projects are being held up because of the inability toproperly price material inputs due to uncertainty with tariffs.New construction in office spacesremains muted.Credit ConditionsThe volume of bank lending(excluding credit cards)increased slightly during the period(not sea-sonally adjusted),after holding steady last period and increasing moderately one year ago.District banks reported a slight decline in commercial real estate lending.Residential mortgagesincreased slightly,and volumes of home equity lines increased moderately.Consumer lending(other than auto and credit cards)declined slightly.Auto lending grew modestly,and commercialand industrial lending held steady.Credit card volumes increased slightly,up from modestdeclines during the same period one year ago.Banking contacts reported an uptick in activity,good credit quality,and the ability to attractdeposits.One contact reported that some clients have put credit facilities on pause and identifiedthe minor uptick in delinquencies in residential mortgages as an area to monitor.Contacts in thenonprofit sector continue to develop contingency plans for alternative sources of funding to offsetbudget shortfalls due to funding requests taking longer or failing to be approved.For more information about District economic conditions visit:https:/www.philadelphiafed.org/regional-economy.Federal Reserve Bank of Philadelphia15Federal Reserve Bank ofClevelandSummary of Economic ActivityContacts reports continued to suggest flat business activity in the Fourth District in recent weeks,and they expected activity to remain flat in the months ahead.Retailers noted a pullback in con-sumer spending,and manufacturers said that ongoing economic and trade policy uncertainty con-tinued to dampen demand for their goods.Demand for professional and business servicesincreased driven by higher demand for consultations amid the shifting regulatory environment.Overall,contacts reported slight increases in employment levels;however,mentions of staff reduc-tions became more frequent.Wage pressures remained moderate but eased in a couple of sec-tors amid increased labor availability.Contacts reports suggested that their nonlabor costs grewat a robust pace,a situation which they attributed to tariff impacts,and that their selling pricesgrew moderately.Labor MarketsEmployment levels generally increased slightly in recent weeks,according to contact reports.Pro-fessional and business services firms were more likely to report staff increases,while those inmanufacturing and freight were more likely to report staff reductions.Increased labor availabilityallowed some contacts across industries to more easily hire entry-level staff.Some contacts whocited decreased demand reported initiating staff reduction efforts through layoffs,not replacingstaff,or cutting hours.On balance,contacts expected employment to increase slightly in thenear term.Contacts reported that wage pressures were moderate in recent weeks.Firms across industriescontinued to implement cost-of-living and merit-based wage increases for current employees.Pro-fessional and business services and banking contacts were more likely than contacts in other sec-tors to report offering wage increases,a situation which many attributed to sustained competitionfor skilled workers.Firms hiring for entry-level positions reported declining wage pressures amidincreased labor availability.Some manufacturing and freight contacts noted that slowing sales ledthem to offer minimal pay increases.16PricesOn balance,contacts indicated that nonlabor input costs rose at a robust pace in recent weeks,continuing an upward trend that began after a period of stability in 2024.Contacts from multiplesectors noted that tariffs were now increasing the costs of materials that they import.Some con-tacts also noted secondary impacts of tariff-related cost increases from domestic producers.Forexample,one manufacturer said that their US-based raw materials suppliers raised prices tofactor in the overtime needed to meet increased domestic demand.Some food and hospitalitycontacts reported that many food costs remained elevated,but one restaurateur reported reliefthat egg costs had declined.Contacts generally expected costs to grow at a strong pace in thecoming months.Selling prices rose moderately on balance,and the share of firms reporting that they increasedtheir prices was higher than in the previous reporting period.Contacts across industries,particu-larly those in manufacturing and construction,said that they raised prices to cover costs related totariffs and to elevated prices of materials such as steel.Auto dealers generally mentioned raisingprices of new and used vehicles,and one said that they were offering less discounting because ofhigher demand.Overall,professional and business services firms continued to increase theirprices moderately;however,one law firm said that clients had started pushing back.Consumer SpendingIn recent weeks,consumer spending was flat on balance.Many auto dealers reported an increasein purchases ahead of planned tariffs,and one dealership expected tariff-related sticker shock tohit customer demand starting in early June.Retailers reported a general pullback in consumer dis-cretionary spending,although one retailer benefited from customers who traded down from largerdiscretionary purchases to more modest ones.Contacts had difficulty forecasting demand for thecoming months because of uncertain impacts of trade policy but expected demand to see amodest slowdown on net during this period.ManufacturingOn balance,contact reports suggested that demand for manufactured goods stabilized at a lowlevel after declining moderately in the prior reporting period.Several manufacturers continued toreport flat or softer orders because of ongoing economic and trade policy uncertainty.Some pro-ducers also noted softer orders from international customers,and one contact added that theirfirm had moved production of international orders out of the United States to avoid retaliatory tar-iffs.By contrast,a small number of manufacturers reported higher orders from customers thatwere seeking domestic substitutions for imported products.Some of these customers werelooking to avoid import tariffs or stabilize their input prices,while others were aiming to findFederal Reserve Bank of Cleveland17domestic substitutions for imported products that were being held at ports temporarily duringtrade negotiations.Contacts generally expected demand to increase modestly in thecoming months.Real Estate and ConstructionReports from residential construction and real estate contacts suggested moderate growth indemand for homes in recent weeks.One real estate broker noted that prospective buyers hadaccepted current mortgage rates as the norm,making them less hesitant to move forward withpurchases.On balance,residential construction and real estate contacts anticipated continuedgrowth in demand in the coming months.On the commercial construction side,contacts reported a slight decline in activity in recent weeks.Several builders and developers said that uncertainty around economic policy was causing busi-nesses to be more cautious with their construction investment decisions.Contacts expected flatdemand in the coming months,anticipating that economic and policy uncertainty will continue toweigh on activity.Financial ServicesOn balance,loan demand was flat in recent weeks.Several bankers reported that economic uncer-tainty surrounding trade policy caused some clients to pause or delay projects and purchases.Conversely,a couple of bankers reported that demand for auto loans increased as clients pur-chased vehicles ahead of planned tariffs to avoid potential price increases.Looking ahead,bankers expected loan demand to remain flat as economic uncertainty persists.While mostbankers reported no change to their loan application standards,one banker mentioned that theirinstitution began to consider tariff exposure as a criterion for credit approval.Nonfinancial ServicesOn balance,contacts reported robust demand for professional and business services in recentweeks,a situation which they expected to continue over the coming months.Firms demand forlegal and consulting services increased amid regulatory changes.By contrast,freight and trans-portation contacts reported a modest decline in demand in recent weeks and expected a robustdecline over the coming months.Following the pre-tariff purchasing surge,a transportation contactnoted fewer imports,and a logistics firm noted increased demand for storage capacity.18The Beige BookCommunity ConditionsCommunity contacts reported that uncertainty surrounding federal funding,inflation,and tariffscaused disruptions in social service and economic development programs serving low-andmoderate-income households.One contact observed that funding cuts led some organizations topause hiring or provision of new services,and others noted a general reduction in essential wrap-around services.Another contact mentioned that funding cuts led to monies being pulled frommajor brownfield remediation projects,leaving site cleanups and the consolidation of police,fire,and 911 services partially complete.Uncertainty over the impacts of inflation and tariffs onbuilding costs led to the stoppage of some housing developments,according to one organization.For more information about District economic conditions visit:https:/www.clevelandfed.org/en/region/regional-analysis.Federal Reserve Bank of Cleveland19Federal Reserve Bank ofRichmondSummary of Economic ActivityThe Fifth District economy continued to expand at a mild rate in recent weeks.Consumer spendingpicked up slightly in recent weeks,but contacts were concerned that declining sentiment couldmean slower activity in the near future.Nonfinancial services providers also saw a slight increasein demand this cycle.Meanwhile,demand for financial services remained steady and commercialand residential real estate activity was little changed.Port activity increased as import activitysurged and was attributed to frontloading shipments to get ahead of tariffs.Export activity,on theother hand,contracted.Manufacturers also reported a slight contraction this cycle.Employmentrose slightly,overall,amid modest wage growth.Year-over-year price growth remained moderate.Labor MarketsEmployment in the Fifth District increased slightly in the most recent period.Contacts were mixedon hiring plans based on business expectations.For example,a Maryland construction companyplanned on increasing employment due to available work and a fast-casual restaurant decided tomove ahead with adding locations,thus increasing employment.Conversely,a different fast-casualrestaurant located in the DC-region paused all hiring due to local economic uncertainty.ARichmond-based business consultant planned on reducing headcount by twenty percent due todeclining revenues and uncertainty about future business.Contacts continued to report modestwage increases and felt pressure to raise wages further due to expected increases in cost-of-livingfor their workers.PricesYear-over-year price growth remained moderate,overall,despite rising input costs for many firms.According to our recent surveys,manufacturers reported a slight increase of annual price growthwhile non-manufacturers reported a slight decrease,with both sectors seeing prices grow in the2.5 to 3.0 percent range,on average.Firms across both sectors reported input costs rising atfaster rates,which many businesses attributed to tariffs on materials they import.Firms expectedprices to increase at faster rates over the next six months.20ManufacturingManufacturing activity in the Fifth District declined modestly in the most recent reporting period.Multiple contacts reported adjusting their operations due to increased uncertainty.A multinationalmachine manufacturer shut down a domestic product line that sold internationally due to tariffs onexports.A small food manufacturer laid off a full-time employee due to uncertainty about futureinput costs.A furniture manufacturer reduced the average work week to four days.A few firmsmentioned being surprised by an uptick in new orders.A cabinet maker saw an increase in busi-ness due to clients going ahead with office projects to get ahead of tariffs and interestrate changes.Ports and TransportationOverall cargo volumes in the Fifth District increased robustly since the last reporting period,withsome ports seeing record import levels not seen since the Fall 2023 post-COVID surge.Contactsattributed the increase in imports to pre-tariff frontloading of goods from East Asian countries,with notable upticks in automobiles and auto parts.Export volumes decreased moderately,whichwas attributed to new tariffs imposed by other countries that shifted demand for U.S.agriculturalproducts like timber,grain,and soybeans.Contacts reported that demand for bonded warehousespace has gone“through the roof”across the region as shippers look for space to hold cargonear ports and wait out changes in tariffs.After the initial tariff escalation,maritime bookingsdecreased by half with flattening freight rates and record blank vessel capacity space.Port con-tacts expected import volumes to slow down later this year due to the recent frontloading of ship-ments.Despite a surge in import volumes,trucking demand remained weak as those importswere largely being warehoused close to ports.One airport began expansion of warehousing spaceto accommodate the increased demand for cargo staging space.Retail,Travel,and TourismConsumer spending increased slightly in recent weeks.Most retailers reported steady toincreasing sales,overall,but noted a decline in big ticket purchases.Several contacts mentionedthat consumers continued to be price sensitive and were opting for lower priced alternatives.Simi-larly,hospitality contacts saw an overall increase in activity and shifts in consumer preferencestowards budget hotels and quick service restaurants.At the same time,some luxury retailers,hotels,and experience providers reported strong sales.Despite recent increases in activity,manycontacts expected sales to slow in the coming months and pointed to declining consumer senti-ment,potentially higher prices,and heightened uncertainty as potential headwinds.Federal Reserve Bank of Richmond21Real Estate and ConstructionResidential real estate activity flattened in recent weeks.Home inventory levels continued to increasewhile buyer traffic decreased slightly.Homebuilders in the district continued to echo their frustrationwith the expense that regulatory“red tape”adds to costs and the uncertainty that tariffs have on futureprices for raw materials and home appliances.A Maryland builder stated they have started to see pur-chase agreement cancellations on new homes as many of their customers work directly or indirectly forthe federal government.Buyers continue to qualify for loans across the district.A Virginia agent men-tioned they have 60 to 70 people prequalified that are waiting to see if mortgage rates drop.Commercial real estate flattened overall as companies hesitated to make new investments.Industrialspace took the biggest hit as businesses tried to assess operating space,tariffs,or whether to con-tinue their U.S.presence.A South Carolina agent said that“Industrial deals have dropped with pens inhand,companies freeze because they cant figure out the rules of this tariff game.”Across the district,office space continued to see vacancy rates decrease as employees return to in person work.Upfits inoffice space are seeing a slight uptick with these returns.A Virginia agent mentioned government con-tractors have an impetus to upfit their space for security reasons.Banking and FinanceFinancial institutions continued to report steady demand for most loan types,and modest increases indemand for commercial real estate loans.One respondent noted that borrowers did not see currentmarket disruptions as permanent,so they were continuing to move forward,albeit cautiously.Consumerreal estate loan demand increases were described as seasonal in nature but still at historically lowlevels.Home equity loan demand continued to be steady.Delinquency rates continued to see modestincreases,but overall rates are still at traditionally low levels.Deposit levels continued to remain stablewith an easing of competition between institutions.Nonfinancial ServicesNonfinancial service providers reported a slight increase in demand for their services,but they wereunsure how long this demand would last.A marketing consulting firm noted that they have seen anincrease in the number of inquiries they have received from job seekers,while those serving specializedindustries such as mining were still finding it hard to fill positions.A number of consulting firms sur-veyed noted that they would either be reducing staff or at a minimum maintaining their current work-force until both their clients and they can gain more certainty with the overall economy.For more information about District economic conditions visit:https:/www.richmondfed.org/research/data_analysis.22The Beige BookFederal Reserve Bank ofAtlantaSummary of Economic ActivityThe Sixth District economy grew slightly from mid-April through May.Labor markets remainedsteady,but some firms cited caution around hiring.Wage pressures eased.Prices increased at amoderate pace.Firms that reported paying more for inputs because of tariffs also looked for waysto cut costs to help offset what they could not pass through to customers.Nonprofits reportedthat cuts to federal funding were constraining organizations abilities to provide services.Con-sumer spending was flat,and travel and tourism activity declined modestly.Home sales grewslightly,attributed to stabilizing mortgage interest rates.Commercial real estate conditions weresteady.Demand for transportation services increased modestly.Loan growth and deposits slowedat District financial institutions.The energy sector saw moderate growth.Labor MarketsEmployment levels remained flat over the reporting period.Many firms held headcounts steadyand expected relatively stable staffing levels in the coming months.However,some contactsreported caution around hiring given economic uncertainty,and some firms developed contingencyplans,including workforce reductions through layoffs,in the event conditions do not improve.Mostfirms reported that labor was readily available,and turnover was down.Hospitals and healthcareproviders continued to hire robustly.A few firms shared concerns about labor supply constraintsresulting from tightening immigration policy,particularly in agriculture,construction,hospitality,and manufacturing;however,this did not appear to be restricting the current availability of labor ina significant way.Firms reported less wage pressure amid decreased turnover and increased labor availability.Wagegrowth was generally lower than a year ago,and many firms held wages flat or delayed wageincreases.PricesPrices rose moderately since the previous report.Inflationary concerns related to trade policy werereported by firms across sectors,geographies,and firm sizes.More businesses began to raiseprices,often through flexible measures such as tariff surcharges.While demand was reportedly23softening,some firms increased prices,sacrificing volume to cover added costs.Many contactscited a multi-pronged approach to managing tariffs,including pushing costs back to suppliers,reconfiguring supply chains,absorbing costs in margins,and passing costs through to customers.Community PerspectivesA broad range of nonprofit and philanthropic contacts said that current and potential federalfunding cuts threatened the ability of social service providers to meet community needs or con-tinue operations,as other funding sources are generally insufficient to replace federal dollars.Contacts in the sector reported taking action to shore up their financial positions,including reduc-tions in staff and building reserves.Consumer SpendingConsumer spending was little changed since the previous report.Some retailers noted a modestspike in durables sales,particularly big-ticket items such as autos,as consumers rushed to frontrun tariffs.Overall,however,retailers noted some evidence of softening consumer demand that isexpected to dampen future sales.Some retailers noted they were still working through previouslyacquired inventories and thus had not raised prices.However,they believe that consumer pricesensitivity will remain high and expect a drop in sales when tariff-related price increasesare enacted.Travel and tourism activity,including hotel bookings,declined modestly.Room rates were flat orrose slightly,and some hotels offered increased incentives such as an additional night free.Con-tacts reported a slowing of international travelers to the U.S.,and while previously concentratedamong Canadian visitors,the slowdown recently expanded to visitors from Asia and Europe.Domestic leisure travel was flat.Declining consumer confidence slowed leisure travel for lowerincome consumers but also caused more higher-income Americans to vacation in the U.S.insteadof abroad.Business travel was down slightly as government agencies and contractors restrictedtravel.Group travel dipped in recent weeks but seemed to be recovering based on forward-lookingbookings.Construction and Real EstateHome sales increased slightly over the reporting period,boosted by the stabilization of mortgagerates.Home prices remained steady,though in some geographies,increased inventory created adrag on prices.Existing home inventory levels rose sharply in most areas of the District,butstronger demand over the past month absorbed much of that growth.Demand for new homesremained below seasonal norms,and homebuilders noted the need for increased incentives,par-24The Beige Bookticularly for first-time home buyers.Some builders reported pulling back on lot purchases in antici-pation of further declines in demand.Commercial real estate activity was stable,on balance.Vacancy rates in office space fell slightlyand sales prices rose,but the strain on the sector continued,resulting in rising delinquencies.Industrial capacity continued to increase,driving up vacancies in a sector already experiencingelevated uncertainty due to tariff impacts.Multifamily conditions remained largely unchanged,butnew developments slowed moderately,attributed to rising construction costs,even as smallpockets of growth in demand and of rising rents emerged throughout the District.TransportationDemand for transportation services rose modestly.Railroads reported healthy year-over-yearincreases in intermodal freight volumes and total traffic.Some logistics contacts indicated thatwarehouses remained relatively full as firms had pulled ahead inventories in the first quarter;how-ever,volumes were described as dwindling.District ports continued to see robust container traffic.Some trucking firms noted that volumes were below normal seasonality over the reporting period.Contacts expressed concerns about a dearth of capacity over the short term in rail,warehousing,trucking,on ships and at ports,as a surge in imports is expected amid the pause on higher tariffson Chinese goods.ManufacturingManufacturing activity declined moderately.Several firms noted a contraction in production,neworders,backlogs of work,and finished goods inventory following a robust first quarter during whichconsumers and firms tried to get ahead of tariff-related price increases.According to the AtlantaFeds April Business Inflation Expectations Manufacturing Sector Report,firms reported thatunit sales levels were significantly lower than normal.The manufacturing outlook for the next12 months was mostly negative,and contacts who were concerned about a potential recession inthe U.S.overwhelmingly listed trade policy as their top concern,along with inflation,consumerdemand,geopolitical risks,interest rates,and the equity markets.Banking and FinanceLoan balances at District financial institutions decreased across all lending categories,withconstruction/land development and mortgages/home equity lines experiencing the largestdeclines.Community banks noted tighter standards for commercial lending,particularly in indus-tries affected by tariffs.Both loan originations and deposits slowed moderately,leaving loan-to-deposit ratios unchanged.Delinquencies and loan loss allowances ticked up,but contactsreported continued strength in the credit quality of loan applicants and customers.Federal Reserve Bank of Atlanta25EnergyEnergy industry contacts reported moderate growth across most sectors.Liquefied natural gasproduction,exports,and overall global demand remained an area of strength.While domesticdemand for U.S.crude oil was steady,global demand softened.Utility companies described robustresidential power demand,modest growth in commercial,and some slowing in industrial.Althoughutility sector contacts reported growth opportunities linked to data center development,somenoted a slight deceleration in activity,attributed to concerns over potential tariffs increasing thecost of power infrastructure and impeding investment.Offshore wind contacts reported a signifi-cant decline in demand,resulting in downsizing.For more information about District economic conditions visit:https:/www.atlantafed.org/economy-matters/regional-economics.26The Beige BookFederal Reserve Bank ofChicagoSummary of Economic ActivityEconomic activity in the Seventh District increased slightly over the reporting period,though con-tacts expected a slight decline in activity over the next year.Consumer spending and employmentincreased modestly;both business spending and construction and real estate activity were flat;manufacturing declined slightly;and nonbusiness contacts saw a slight decline in activity.Pricesand wages rose modestly,and financial conditions loosened slightly.Prospects for 2025 farmincome increased some.Labor MarketsEmployment rose modestly over the reporting period,and contacts expected a similar pace ofgrowth over the next 12 months.Some contacts in construction and manufacturing continued toface tight labor market conditions,with several indicating that they were having difficulty findingskilled workers and were using higher wages to attract new employees.Other contacts acrossindustries noted either stable or easing hiring conditions.A staffing agency reported that manybusinesses had paused hiring due to economic uncertainty.Several contacts noted low attrition,and a furniture manufacturer reported attrition was at a record low.In addition,a restaurant ownerindicated that job applications had increased,and a contact in heavy truck manufacturing notedthat all OEMs had announced layoffs in the coming months.Wages and benefits costs were upmodestly overall.PricesPrices rose modestly since the last report,and contacts expected a faster pace of growth over thenext 12 months.Producer prices increased modestly.Nonlabor input costs rose moderately,withreports of higher prices for equipment.Several manufacturers noted increased costs for raw mate-rials including steel and electrical components like semiconductors.Consumer prices rose mod-estly overall.One retail industry analyst reported that price increases from higher tariffs wereshowing up in prices for some consumer goods like appliances and tools.27Consumer SpendingConsumer spending increased modestly over the reporting period.Nonauto retail sales were upmoderately.Contacts noted pull-forward spending for big ticket items such as computers,elec-tronics,and appliances.Consumer staples,such as groceries,posted solid gains.Sales in thelawn and garden and landscaping categories were healthy.However,leisure and hospitalityspending continued to be soft.A museum contact indicated that admissions were down,thoughspending by visitors was strong.Air travel declined,but hotel demand picked up.Light vehiclesales remained robust as consumers looked to get ahead of potential tariff actions.Vehicle partsand service activity strengthened slightly.Business SpendingBusiness spending was flat in April and early May.Capital expenditures increased slightly from alow level,and expectations for spending over the coming year were also up slightly.Demand fortruck transportation declined.Retail contacts said inventories remained stable,though theyexpressed concern about receiving inventory in a timely fashion because there was a surge inorders for Chinese imports after tariffs were cut.Auto inventories declined slightly from elevatedlevels.One consultant for the heavy truck manufacturing industry noted record-high inventories.Manufacturing inventories were comfortable overall.Reports of materials shortages remained low,though some manufacturers had concerns about the potential for shortages of imported goodsgiven rising tariffs.Construction and Real EstateConstruction and real estate activity was unchanged on balance over the reporting period.Resi-dential construction was flat.Higher tariffs led builders to expect costs to increase significantly inthe coming months for new home construction and remodeling projects.Residential real estateactivity was also unchanged.Prices increased slightly and rents rose modestly.Nonresidential con-struction was up slightly,with contacts highlighting growth in demand for data centers and medicaloffices.Commercial real estate activity was unchanged,though demand for industrial spaceremained robust.Contacts noted that demand for retail space was increasingly dependent onlocation.Prices decreased slightly.Contacts said that the gap between buyer and seller propertyvaluations was often significant;for instance,some hospitality property owners postponed sellingbecause they couldnt find buyers willing to pay what they think the property is worth.Rents andvacancy rates were unchanged.28The Beige BookManufacturingManufacturing activity declined slightly over the reporting period.Demand for chemicals wasunchanged overall,though one contact noted growing demand from the medical device industry.Steel orders increased despite softer demand from the heavy machinery industry.Demand for fab-ricated metals manufacturing was flat,with increases in demand from the aerospace industry off-setting decreases in demand from the automotive industry.Machinery sales fell modestly,led bycontinued declines in demand from the automotive industry.Auto production fell moderately.Acontact in the heavy truck manufacturing industry noted that orders for medium-and heavy-dutytrucks fell sharply.Banking and FinanceFinancial conditions loosened slightly in April and early May.Bond values rose slightly and equityvalues increased sharply over the reporting period.Volatility fell significantly.Business loandemand was up slightly,with one contact noting greater demand for multifamily constructionloans.Several contacts reported a further slowdown in acquisition financing.One banking contactnoted an increase in credit utilization by businesses and attributed it to a pull-forward of inventorypurchasing.Business loan quality decreased slightly,and one contact highlighted defaults onloans for office space.Business loan rates and terms were unchanged.In the consumer sector,loan demand,quality,and terms were flat.Consumer loan rates decreased slightly.AgricultureExpectations for 2025 farm income increased slightly on balance over the reporting period despiteongoing uncertainty about agricultural trade.Income expectations rose for livestock operations butwere flat for crop producers.That said,there were reports of large crop and hog operators scalingback or ceasing operations.Corn and soybean planting proceeded quickly in much of the District,though the southern portions faced excessive precipitation which could lead to fields needing tobe planted after the window for optimal yield.Corn prices decreased while soybean pricesincreased.Hog,cattle,and dairy prices rose,and egg prices declined.Contacts reported concernsabout the loss of access to agricultural financing for heavily leveraged operators or those unableto pay off 2024 loans.There were limited sales of new farm machinery given high prices.Community ConditionsCommunity,nonprofit,and other nonbusiness contacts reported a continued decline in economicactivity and noted the ongoing negative impact of federal policy uncertainty on activities and plan-ning.State government contacts saw increases in sales tax revenues but declines in payroll with-holding.One contact said that while initial unemployment claims had increased in their state,theFederal Reserve Bank of Chicago29length of unemployment spells had declined.Small business intermediaries reported that their cli-ents were working to understand the impact of tariffs on their business and pricing models.Leaders of nonprofit and social service organizations noted increased competition for private andphilanthropic dollars due to federal funding cuts and fewer federal funding opportunities.Organiza-tions serving low-income communities reported concern about the impact of reduced federal sup-port,in particular on the availability of childcare.For more information about District economic conditions visit:https:/chicagofed.org/cfsec.30The Beige BookFederal Reserve Bank ofSt.LouisSummary of Economic ActivityEconomic activity has remained unchanged since our previous report.Employment levels wereunchanged,and wage growth has been modest.Prices continued to increase moderately,andmost contacts expecting higher nonlabor costs due to tariffs indicated they would pass the costsalong to customers.Contacts expressed a high degree of uncertainty and concerns that tariffswould result in further cost increases.Heavy rains and storms have resulted in planting and con-struction delays and lower traffic to some recreational businesses.Tornados in St.Louis haveresulted in casualties,power shortages for several days,and the destruction of many properties.The outlook remains slightly pessimistic,with signs of continued deterioration.Labor MarketsEmployment has remained unchanged since our previous report.Most contacts indicated theirstaffing plans had not changed since the start of the year.A manufacturer in Indiana reportedthat,despite slower business,they were still hiring;however,hours worked decreased and over-time hours were no longer needed.Another manufacturer reported they were expecting employ-ment levels to remain constant;however,they were reducing their temporary workers in favor ofmore full-time workers.A construction company reported that,while they were not planning anystaffing cuts soon,they were making contingency plans in case business conditions worsened.Wage growth has been modest,and most contacts have not expressed concerns about wage pres-sures.A contact from Arkansas reported that despite cost increases they would not be raisingwages until the end of the year.A recreational business in Missouri reported that wages hadincreased due to increases in the minimum wage.PricesPrices have increased moderately since our previous report;however,businesses expect costs toincrease due to tariffs and are looking for ways to reduce the impact on their profits.Most con-tacts expecting nonlabor costs to increase next quarter reported that they would pass along thecosts to customers within three months.A manufacturer reported they had modified their receiptsto display a 7 percent increase in cost due to tariffs,but that this line could easily be removed if31tariffs were no longer in place.A hotel owner reported that vendors have warned of cost increasesdue to tariffs but have not yet published new prices.A professional services firm reported thatthey were facing cost increases;however,there was lower consumer acceptance of increasedprices.A food manufacturer in Kentucky reported that their costs had increased due to avian flu,as eggs and chicken were components of their food mix.Consumer SpendingConsumer spending reports were mixed.Recreation and hospitality contacts reported,on net,aslight increase in activity.A restaurant owner in Louisville reported that they were expecting salesto continue to grow and were spending on capital improvements in their restaurants.Another res-taurant owner in Kentucky noted that customers were coming to dinner,but they were skipping theappetizer and dessert.Retail sales have slightly declined,especially for discretionary items.Sev-eral retailers reported that sales have been below expectations,with customers being cautiouswith their spending.One retailer reported that food and consumable sales remain stable,whilegeneral merchandise sales have been weak,resulting in higher inventories of these items.Autodealers reported no change in sales.A Missouri dealer reported that higher-end vehicle sales weresignificantly lower and buyers were paying cash for those vehicles instead of financing.ManufacturingManufacturing activity has slightly decreased since our previous report.Manufacturers across theDistrict reported that new orders had slightly decreased.One contact reported this had led to anoverstocking of inventories.Contacts also reported a decrease in production and capacity utiliza-tion.However,a midsize food manufacturer reported that,while 30 percent of their overall produc-tion is exported to China,they had not yet seen any changes in ordering behavior.Some manufac-turers are creating plans to regionalize their supply chainsthat is,to source and produce withina specific geographic area,rather than relying on a global network.Nonfinancial ServicesActivity in the nonfinancial services sector has been mixed.Transportation and logistics contactsreported a slight increase in activity,particularly in international activity,while domestic activityhas slowed slightly.A logistics contact from St.Louis reported that recent increased demandcould be attributed to stockpiling to avoid higher tariffs in the future.Activity in the professionalservices sector has been mixed.An architecture business reported a slight weakening in theirworkload and a decrease in the demand for new projects.Similarly,another professional servicescontact in Memphis reported that their sales pipeline has diminished,which would negativelyimpact performance in the second half of the year.In contrast,an Arkansas firm reported theirsales had exceeded expectations,as a major customer has placed several large orders.32The Beige BookReal Estate and ConstructionResidential real estate activity has remained unchanged since our previous report.Active listingshave increased relative to a year ago,but sales continue to fall behind prior years.Contactsreported that low inventory levels,uncertainty,and interest rates were the main factorsimpacting sales.Commercial real estate activity has been mixed.A contractor reported that customers were tryingto complete their projects sooner out of fear of higher costs,while others reported that new proj-ects were not starting due to uncertainty and high costs.Contacts in St.Louis and Louisvillereported that weather conditions had delayed or slowed construction and that projects dependenton government funding were also paused,with developers uncertain whether they would continuereceiving funding to complete the projects.Banking and FinanceBanking activity has remained unchanged since our previous report.Loan demand has slightlyincreased,but by less than was expected as of the previous quarter.A banker from Memphisreported that loan demand has been negatively affected by uncertainty,as it is very difficult toprice goods and contracts.Bankers in Arkansas reported that they had seen an increase in com-mercial real estate and auto loan demand.Bankers across the District reported that,despitedelinquency rates being relatively low,they expect consumer and commercial delinquencies toincrease in upcoming months due to continued stress for consumers and expectations of aweaker economy.Agriculture and Natural ResourcesAgriculture conditions have remained unchanged since our previous report.Wet soil conditionscontinue to delay planting in some areas.Despite these delays,overall acres planted remain con-sistent with prior years.Contacts noted that continued delays accessing fields will result in a shiftin planting away from corn and toward soybeans.Contacts expressed uncertainty over the costand availability of feed ingredients and chemicals sourced outside the U.S.Demand for creditremains elevated;however,obtaining loans at affordable rates remains a top concern.A cottonindustry contact expects demand from retailers will weaken over the next few months.For more information about District economic conditions visit:https:/www.stlouisfed.org/research/regional-economy.Federal Reserve Bank of St.Louis33Federal Reserve Bank ofMinneapolisSummary of Economic ActivityNinth District economic activity decreased slightly since the previous report.Employment was flatand wages grew moderately.Prices increased moderately overall,with greater pressure on inputs.Activity increased in manufacturing,and vehicle sales were up slightly.Consumer spending fellmodestly.Construction fell slightly,while residential real estate activity decreased modestly andcommercial real estate was flat.Agricultural conditions were flat at weak levels.Activity amongminority-and women-owned business enterprises was mostly unchanged.Labor MarketsEmployment was flat since the last report.Surveys found that hiring sentiment and job openingsrebounded modestly with warmer weather.However,employers said hiring was most often relatedto filling turnover;new openings for part-time and seasonal jobs also outpaced full-time positions.Hiring among construction firmsincluding for new,full-time positionsremained healthy despitereported softness in sectoral activity.However,a staffing firm with multiple District locationsreported a 30 percent decline in job orders compared with the same period last year.A largemajority of nonprofit contacts were either not hiring or hiring only to fill turnover due to revenuedeclines.Numerous employers noted increased uncertainty about future labor needs,and somewere preparing contingency plans for potential layoffs.Employers widely reported that labor avail-ability continued to improve.A Wisconsin contact reported very good attendance at a recent jobfair,adding that“there were fewer candidates wearing pajamas.”Wages grew moderately.Median wages across a large set of District businesses grew just over3 percent year over year.Tourism and accommodations employers reported somewhat strongerwage increases,and nonprofits reported weaker wage increases.Multiple construction contactsnoted recent union wage increases over 4 percent;but in response to slow construction activity,one remodeling firm reported that it was discounting general labor costs in exchange for bookedprojects.34PricesPrices increased moderately overall,at about the same rate of increase as the previous report,while input price pressures intensified.More than a third of District firms increased the prices theycharged to customers in April from a month earlier,according to a monthly survey,while more thanhalf reported increased input prices.In their month-ahead outlooks,more than half of firms sur-veyed anticipated increasing their prices.Some manufacturing contacts reported they were addingsurcharges to offset steel and aluminum tariffs.One contact reported adding a surcharge line toinvoices but not using it yet.Contacts in other sectors were not putting explicit tariff surcharges inplace,but some were adjusting overall prices or planning to do so in the future.Retail fuel pricesin District states were flat overall since the last report.Worker ExperienceResults from a survey of workforce development specialists in Minnesota showed that on averageit was taking longer for job seekers to be placed into jobs;nearly half said it was taking more thanthree months.A survey participant shared that job seekers were also encountering less remotework and schedule flexibility from employers.A contact in central Minnesota noted that hiring ofimmigrants and refugees has slowed.A labor contact in Montana shared that opportunities forpublic employees have declined,and the contact expected competition for available jobs tointensify.Consumer SpendingConsumer spending fell modestly.Retail contacts generally reported slower business of late.Sev-eral restaurants noted that activity was concentrated on weekends and less busy during the week;patrons were also spending less.Tourism and hospitality firms in Minnesota reported that recentcustomer traffic,revenue,and profits were all lower compared with a year ago.Some improvementwas expected over the coming summer months,but overall sentiment was still slightly pessi-mistic.Contacts reportedand border-crossing data confirmedthat Canadian travelers to theDistrict continued to decline.A tourism contact in northwestern Montana reported a 10 to20 percent decline in Canadian visitors.Hotel occupancy and revenue per average room werelower across District states in April compared with a year ago.Vehicle sales were slightly higheroverall,but new-vehicle sales fell slightly,according to a large dealership.Sales of recreationaland powersport vehicles were lower.Construction and Real EstateConstruction activity edged slightly lower since the last report.In a recent survey,the share ofrespondents who reported decreases in activity was higher than those who reported increases.AFederal Reserve Bank of Minneapolis35large share expected activity to decline or remain unchanged at low levels in upcoming months.Increased competition for projects,pervasive high costs,and labor constraints were anticipated tolimit activity.For more than half of respondents,expectations turned pessimistic as uncertaintyfrom tariffs crept up.“No one wants to spend money when the future is so uncertain,”shared anorthern Minnesota firm,adding that price uncertainty was“pushing projects out of budget”andcomplicating bidding.Recent permits issued were flat for residential projects and higher for com-mercial projects with some variation across markets.Commercial real estate was flat overall.Office vacancy rates remained high;leasing was report-edly picking up overall while larger tenants were downsizing their space needs.Industrial and retailvacancy rates remained low thanks to a dearth of new development,and multifamily vacancy wasexpected to improve as new construction starts have fallen significantly.Residential real estatewas lower.Despite rising inventories in many markets,closed sales were widely lower in April com-pared with a year ago.ManufacturingDistrict manufacturing activity increased moderately since the previous report.Manufacturingsurvey respondents reported a net increase in orders in April from the month prior,but sentimentwas notably mixed,as a large share saw their orders decrease.The month-ahead outlook fororders in May was also net positive.An index of regional manufacturing conditions indicatedactivity increased in Minnesota,North Dakota,and South Dakota in April from the previous month.Some contacts reported an increase in interest from customers in reshoring parts production.Other reports indicated that customers were canceling large orders while they wait to see if tariffsdecrease to avoid paying a surcharge.Agriculture Energy and Natural ResourcesDistrict agricultural conditions remained weak overall,but planting season was going well.According to the most recent Ag Credit Survey,80 percent of respondents reported that farmincomes decreased in the first quarter from a year earlier,as low commodity prices continued toweigh on farm operations.However,corn,soybean,and spring wheat planting progress and emer-gence in District states as of mid-May were well ahead of average.Persistent drought conditionswere causing concern among contacts,particularly in the western portion of the District.Oil andgas exploration activity and production decreased slightly since the previous report.Minority-and Women-Owned Business EnterprisesActivity among minority-and women-owned business enterprises(MWBE)was mostly unchanged inrecent weeks.A shrinking ability to pass higher costs on to consumers continued to put downward36The Beige Bookpressure on profit margins.A Minnesota retailer observed that while consumer traffic was up,average spending was down.The downward trend in head count and job openings dipped furtheramong MWBEs.A Wisconsin manufacturer shared that the number of applicants per job openingwas higher than in recent years.In Minnesota,a professional services firm was seeing“great can-didates apply,but we dont have the cashflow to hire.”Instead,they were working to implementartificial intelligence to reduce staff and“gain efficiencies.”For more information about District economic conditions visit:https:/www.minneapolisfed.org/region-and-community.Federal Reserve Bank of Minneapolis37Federal Reserve Bank ofKansas CitySummary of Economic ActivityOverall activity in the Tenth District declined moderately in recent weeks across several sectors ofthe regional economy.Consumer spending fell,particularly on retail and other discretionary items.Contacts indicated they expected consumer demand will further weaken in coming months butexpressed high levels of uncertainty about the outlook for household spending.Businesses inboth consumer and industrial sectors described a cautious approach to capital expenditures,looking only to pursue“no regret”investments that have shorter payback periods,are smaller inscale,and are less sensitive to policy developments.The near-term outlook for capital spendingremained favorable but contacts expressed greater uncertainty about investment activity for thecoming years.Businesses indicated they similarly took a cautious approach to staffing levels,making few changes to employment levels,albeit with reduced hours and a pullback from contac-tors.New home building activity slowed,and sales of existing homes fell.Lower demand fromhome buyers led to an increase in the housing inventory available for sale and slight reductions inhome prices in several parts of the District.Labor MarketsEmployment levels were unchanged across most sectors.However,employers reported reducingovertime hours and indicated plans to scale back employment of contractors and temporaryworkers.Businesses indicated they were taking a cautious approach to staffing levels that priori-tized flexibility,suggesting that future changes to workforce size or hours will likely be incremental.A slim majority of contacts indicated their hiring plans have not changed since the beginning of theyear,while about a third of firms across both services and manufacturing sectors indicated theyhave reduced their hiring plans.Wage growth was moderate,led by an acceleration of wages inconsumer-oriented service sectors.PricesPrices continued to grow at a moderate pace over the last month and business contacts reporteda willingness to adjust their prices more frequently compared to last year.Ongoing shifts in tradepolicy led to businesses accelerating import activity to limit exposure to looming import levies,resulting in higher global transportation costs.Many U.S.-bound ocean shipping routes were tightlybooked,causing surge pricing in spot markets for shipping.Moreover,some retail firms reported38they opted for the quicker and more flexible,but much more costly,option of air freight to avoidtariffs.Contacts noted they intend to pass these higher shipping costs onto consumers over thenext year.Businesses generally anticipated higher input and output prices in the coming months.Consumer SpendingSpending declined significantly across several retail categories,including apparel,electronics,andfurniture.Both foot traffic at retail locations and online retail sales softened in recent weeks.Con-sumers seemingly spent more time at home over the past month as modest declines in spendingat restaurants and hotels were offset by moderate growth in spending on groceries and homemaintenance.Several contacts indicated expectations for a reduction in consumer demand ahead,with lots of uncertainty about the size of the change in spending.The primary driver of the soft-ening outlook for consumers was an expectation higher prices would tighten household budgets,and consumers would reign in spending to some extent,particularly on travel-related services andretail goods.Community ConditionsMost Community Development Financial Institutions(CDFIs)across the Tenth District reportedtheir underwriting standards tightened modestly and that they were seeing more financial stressamong clients.Credit scores and conditions of their clients were worsening,and more clients werecoming in seeking debt consolidation.Payday and student loans were a rising concern with moreborrowers showing derogatory marks on their credit reports.Native CDFIs highlighted concernsregarding CDFI recertification,which one contact estimated could result in a loss of 40 percent ofNative CDFIs nationwide.Moreover,Native CDFIs expressed concerns about lending to organiza-tions with revenues associated with government contracts.Manufacturing and Other Business ActivityBusiness activity was mixed amid volatile demand conditions,with manufacturing activity con-tracting slightly,and consumer retail and discretionary spending declining substantially.However,activity in wholesale service sectors rose at a robust rate,driven by sales of materials,industrialequipment,and health care supplies.The rise in wholesale activity was often attributed to busi-nesses responding to shifting trade dynamics by building their inventories.Just under half ofmanufacturing firms reported increasing their inventory stock levels,though almost as many firmsreported running down their inventory of parts and materials.Very few manufacturing firms indi-cated they did not adjust their inventory management strategy in recent months.A machinery pro-ducer noted that“tariff uncertainty has made long-term planning difficult,”prompting a shift towardshorter planning cycles and higher precautionary inventories.Services firms showed similar,though more modest,changes in inventories.Capital expenditures remained under pressure.Federal Reserve Bank of Kansas City39Nearly a third of manufacturing firms and a quarter of service firms reported they decreasedcapital spending plans.The outlook for capital spending over the next six months remained some-what favorable,but contacts expressed greater uncertainty about investment activity for thecoming years.As one contact put it,“right now we are working on triage,well worry about diet andexercise later.”Real Estate and ConstructionSingle family home builders indicated activity slowed in recent months.Customer demand fornewly built homes softened despite builders offering relatively strong incentives to offset highinterest rates.Builders also faced greater competition for customers from the existing homemarket.Inventories of homes for sale rose substantially,prices declined slightly,and low house-hold mobility in recent years generated some preference for move-in ready homes among the still-subdued number of households seeking to buy a home.Builders also felt pressure from robustincreases in materials costs over the past month.The supply of construction labor was reportedlystable,but many builders indicated they were considering cuts to their workforce.Community and Regional BankingLoan demand was mostly unchanged across lending categories,although bankers noted a slightincrease in demand for commercial and industrial loans.Underwriting standards were unchangedfollowing the modest tightening observed in prior months.Several respondents continued to antici-pate overall loan quality will deteriorate somewhat over the next six months,primarily due to gen-eral economic uncertainty.Yet,loan quality remained relatively stable in recent weeks.Depositlevels were mostly unchanged,though some bankers noted slight changes from the prior month,which they attributed to competition for rates and tax payments.EnergyElectric power generation capacity in the Tenth District grew moderately in recent months,drivenby a mix of new wind and solar investments.Several contacts in the power and renewables indus-tries reported utilities and power producers are carrying forward many planned renewable energyinvestments decisions despite recent or anticipated policy changes.Still,contacts noted thatrising equipment costs,supply chain uncertainty,and energy policy uncertainty are putting mar-ginal projects on hold in the near term.Developers emphasized they are looking to advance onlythose“no regret”investments in smaller projects with swifter payback periods.Overall,contactsanticipated rising retail electricity prices in the coming years,driven by strong demand and con-strained supply.40The Beige BookAgricultureConditions in the Tenth District farm economy remained weak through early May.Corn,soybean,and wheat prices remained low and kept profit opportunities narrow for most producers.Winterwheat conditions in Colorado,Kansas,and Oklahoma were near historic averages,but the crop inNebraska was particularly poor and raised concerns about reduced revenues in those areas.Soilconditions for corn and soybeans were ideal in most of the region,and planting was pacing near orahead of typical trends in all District states.In the livestock sector,cattle prices increased over thepast month and continued supporting profit opportunities for cow/calf producers.District contactsmentioned payments from the Emergency Commodity Assistance Program could bolster liquidity formany crop producers,but profitability for crops in the year ahead remained a key concern.For more information about District economic conditions visit:https:/www.KansasCityFed.org/research/regional-research.Federal Reserve Bank of Kansas City41Federal Reserve Bank ofDallasSummary of Economic ActivityEconomic activity in the Eleventh District economy was little changed over the reporting period.Nonfinancial services activity held steady and growth in the manufacturing sector slowed.Retailsales were mixed.Loan volumes grew slightly,energy activity eased,and the housing marketremained subdued.Employment was flat and price pressures held steady except for the tariff-related increases seen in the manufacturing sector.Outlooks generally deteriorated,and tariffuncertainty was making it hard for businesses to plan for the future.Several contacts noted anerosion of consumer sentiment amid economic uncertainty.Labor MarketsEmployment was fairly flat over the reporting period.Contacts noted that hiring was at a standstill,with many companies instituting a hiring freeze.A headhunting firm noted that multiple clientsrecently paused on making offers for senior managerial positions that they had committed tofilling.Among energy contacts,headcounts were largely unchanged,but several noted that theywere planning to reduce staffing in the months ahead as they rein in spending.Layoffs were notedin the retail sector.A few contacts voiced concern over changes to immigration policy and theimpact on the workforce.Recent changes in federal funding have placed a strain on staffingamong local nonprofit organizations.Numerous contacts across industries noted that higher tariffsand elevated uncertainty weighed on hiring plans.Wage pressures were largely stable over thepast six weeks.PricesPrices continued to increase at a moderate pace,though fuel prices declined,and a more markedpickup was seen in the manufacturing sector.Manufacturing raw materials prices jumped up inApril and to a lesser extent in May,and companies reported a faster pace of finished goods priceincreases in response.This is largely driven by tariffs,with the estimated impact centering on a5 to 10 percent cost increase,according to several contacts.Reports were mixed on the extent towhich companies were able to pass along the higher costs to customers,with a minority expectingfull pass through.Oilfield services firms noted particular difficulty passing through tariff increaseson steel products,machinery components,and equipment.Among firms passing through tariff42cost increases to customers,about 60 percent are doing so within a month of the tariff takingeffect,and 90 percent are doing so within three months,according to an April Dallas Fed survey ofTexas business executives.ManufacturingManufacturing output continued to grow but at a slower pace over the reporting period,and neworders declined.Machinery and nondurable goods manufacturing were bright spots,while growthabated for most durable goods production.Gulf Coast refineries noted healthy capacity utilizationrates.Manufacturing outlooks worsened further amid widespread expectations of a negativeimpact from higher tariffs this year.Half of manufacturers source at least 10 percent of theirinputs from outside the U.S.,according to an April Dallas Fed survey of 83 Texas factory execu-tives.More than 60 percent expect decreased profit margins this year as a result of higher tariffs,44 percent expect lower capital spending,and 29 percent expect a drop in production.Retail SalesRetail sales rebounded in April but declined notably in May.Auto sales dipped after strengtheningin March amid forward buying ahead of tariffs.There were scattered reports of product delaysamong retailers,sometimes stemming from shipping issues.Retail outlooks worsened notablyover the reporting period,and higher tariffs are expected to have an extensive impact,as mostTexas retailers source at least 25 percent of their goods from outside the U.S.Retail executivesare expecting squeezed profit margins and decreased sales this year due to higher tariffs.Nonfinancial ServicesActivity in nonfinancial services held fairly steady.An uptick was seen in professional and busi-ness services,while leisure and hospitality and transportation services exhibited weakness.Air-lines noted waning demand for leisure travel,which they attribute to a decline in consumer senti-ment.Port contacts noted a distortion in shipping patterns,with carriers front loading cargo amidtariff uncertainty.Staffing services firms spoke of flat demand,mostly below levels seen last year,though a couple noted a pickup toward the end of the reporting period.Tariff concerns werepresent among nonfinancial services contacts,though not as prevalent as in other sectors.Pri-marily,high levels of federal government policy uncertainty weighed on company outlooks.Construction and Real EstateHousing market activity remained subdued,with both traffic and sales continuing at a slow pace.Affordability challenges persisted,and heightened uncertainty and stock market volatility damp-ened buyer sentiment.Inventory levels were rising for both new and existing homes,and buildersFederal Reserve Bank of Dallas43were having to offer more incentives to close deals,placing additional pressure on margins.Builders voiced concern about the impact of tariffs on construction costs,but said the impact hasbeen subdued thus far.Commercial real estate activity generally remained steady during the reporting period.Apartmentleasing was strong,though rent growth continued to be lackluster due to elevated supply.Indus-trial demand was solid,but there were reports of slowing leasing activity due to tariff uncertainty.Outlooks were cautious,with uncertainty stemming from tariff polices causing developers andinvestors to take a wait-and-see approach on new deals.Financial ServicesLoan volume grew slightly over the past six weeks,while loan demand was unchanged.Credittightening continued,but loan pricing declined.Loan nonperformance continued to rise but onlyslightly,increasing at the slowest pace since the end of 2022.Nevertheless,bankers reported fur-ther contraction in general business activity.Bankers cited financial and/or economic uncertainty,cybersecurity,loan demand,and liquidity as their top outlook concerns for the next six months.Concern regarding office and multifamily commercial real estate loan performance remainedstable from February and down from the peak in August 2024;however,performance concerns forother 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