Full text of Eighth District Beige Book : November 2023

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Federal Reserve Bank of

St. Louis
The Beige Book ■ November 2023

Summary of Economic Activity
Economic activity has slowed slightly since our previous report. Labor markets remained tight, but reports of easing
continued. An increased share of contacts reported holding wages flat. Prices rose moderately, though businesses
continued to report consumer price sensitivity. Retailers and freight transport contacts reported slowing demand, particularly for high-end goods, but hospitality and travel contacts saw steady growth. Construction activity slowed, especially
for multifamily projects, many of which have been delayed or cancelled due to higher interest rates. Loan demand fell,
and delinquencies ticked up above pre-pandemic rates. The general outlook for the regional economy weakened slightly
due to concerns about future demand.

ly increase prices. Among respondents who do not plan
to fully pass on costs to consumers, two main reasons
stood out: First, some previous price increases were
enough to cover more-recent cost increases. In an effort
to raise prices less frequently, some businesses hedged
by implementing larger increases earlier in the year. For
example, an Arkansas brewer reported that they incorporated potential future volatility in input costs in past price
increases. Second, increased consumer sensitivity to
price increases has lessened businesses’ ability to raise
prices. Some items, such as luxury handbags and
watches, have seen price decreases of about 15%.

Labor Markets
Employment has remained unchanged since our previous report. Labor mismatches and struggles replacing
departing employees have contributed to a tight labor
market, but reports of easing have continued. Some
contacts reported that availability of skilled workers
remains a top issue, while others reported a more stable
labor force for the first time in a few years. Staffing contacts reported clients are staying at jobs and less prone
to leave than they were last year.
Wages have continued to grow slightly since our previous report, with an increased share of contacts reporting
that wages remain level. A manufacturing contact in
Evansville noted that hourly wages have risen only
slightly, but an increase in overtime pay due to labor
shortages has driven up labor costs. Several hiring
contacts in St. Louis reported wage growth has slowed
or reverted to pre-pandemic trends and fewer prospective employees have successfully negotiated for higher
wages.

Consumer Spending
District general retailers, restaurant, and hospitality
contacts reported mixed business activity since our
previous report. In general, auto dealers reported a
decline in business activity. Louisville auto contacts
reported that higher interest rates have slowed consumer demand for new car purchases. October real sales tax
collections increased in Kentucky, Missouri, and Western
Tennessee relative to September and decreased in
Arkansas. A Little Rock pawn shop noted that, while
sales over the past 18 months have been at high volumes historically, sales have slowed in recent months. A
Memphis hospitality contact noted that hotel occupancy
rates have been consistent compared with the same 6-

Prices
Prices have increased modestly since our previous
report. Although approximately three-quarters of contacts reported higher labor and nonlabor input costs,
many businesses are choosing to maintain or only slight-

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Federal Reserve Bank of St. Louis
month period last year.

construction has all but stopped for developments aside
from single-family housing. While the number of ongoing
projects remains high, contacts with a strong existing
project pipeline have reported slowing demand for future
projects.

Manufacturing
Manufacturing activity growth has declined slightly since
our previous report. In Arkansas and Missouri, firms
reported slight decreases in production and employment
and slight increases in delivery lead times and new
orders. Missouri reported a slight decrease in inventories, while Arkansas saw a very slight increase. Higher
interest rates and the auto worker strikes impacted deliveries of some products for local automotive markets. On
average, firms reported they expect slight decreases in
production, capacity utilization, and new orders in the
coming quarter.

Banking and Finance
Activity in the banking sector has slowed modestly since
our previous report. A survey of contacts found that,
overall, credit card and commercial and industrial loans
all show signs of modest decreases in demand. Mortgage loan demand moderately declined due to high
mortgage rates and low housing inventory, making housing affordability beyond the reach of many buyers. Contacts across the District reported that profit margins are
tightening due to higher interest expenses. Consumer
delinquencies continue to rise and are being closely
monitored by banking contacts, who report they are
returning to and in some cases exceeding pre-pandemic
levels. Overall, banks continue to report stable conditions due to low credit risk and high asset quality.

Nonfinancial Services
Activity in the nonfinancial services sector has cooled
since our previous report. Overall, sales and sales expectations were the same or slightly lower, and the general outlook was slightly worse. A Louisville tourism
contact reported postponing capital expenditures because of flagging demand but also reported local growth
in the hospitality industry. A St. Louis tourism contact
reported continued investment and expressed hope that
the local economy would be somewhat insulated from
economic challenges faced by more expensive areas. A
Memphis freight contact echoed the sentiment of low
demand, which, coupled with overbuying during the
COVID pandemic, has contributed to slow reduction of
inventory. A St. Louis transportation contact reported
stable demand from ongoing customers, but less new
client acquisition. A Little Rock healthcare provider reported lower sales expectations and a worsening outlook.

Agriculture and Natural Resources
Agriculture conditions have improved slightly since our
previous report. Yields for the District’s primary commodity crops were at or moderately below 2022 levels. Despite this slight decline, total corn production in the District rose relative to last year. Rice production also rose,
reaching levels over 33% higher than in 2022, while
soybean production dipped slightly below 2021-22 levels
and cotton production returned to 2021 levels. Commodity crop prices fell but remained at or above typical levels
for the 2015-2020 period and stayed relatively stable
throughout the reporting period. District contacts reported a mixed outlook but were generally less pessimistic
than in previous reports. A Louisville contact attributed
the moderate improvement in outlook to higher-thanexpected yields and prices for crops such as corn and
soybeans. ■

Real Estate and Construction
Residential rental prices across the District have remained unchanged since our previous report. In the
Louisville, Memphis, and Little Rock MSAs, pending
sales and houses off the market in two weeks have
fallen since our previous report, while inventory and
months of supply for residential real estate have increased. Contacts reported high mortgage rates continuing to constrain demand for buying homes. In commercial real estate, strong demand for office space continues to be focused on Class A buildings, while vacancies
remain high for Class B and C office space.
Commercial construction has slowed sharply since our
previous report, particularly for new starts in the warehouse and industrial sectors. Residential construction
has also seen slowing activity, with some projects sidelined or cancelled, especially for multifamily. One Memphis commercial real estate contact reported that new

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