The Federal Reserve Bank of Atlanta's new Beige Book reports mostly neutral to negative feedback from business contacts, even as the Southeast's economy grew slightly from the middle of February through March.
For example, many firms reported reasonably stable demand for workers and mostly unchanged staffing levels. Yet a small but growing share of contacts said they plan slight cuts in payrolls in the face of weakening demand or mounting cost pressures. And some contacts said concerns about uncertain trade policy could further dampen demand and possibly prompt more downsizing.
The Beige Book says prices and nonlabor costs increased modestly in the six-week period. Many companies reported raising prices amid higher costs from tariffs on inputs they use to make products or deliver services. Even some firms not directly affected by tariffs cited the new levies and reduced foreign competition as triggers for price increases. Most contacts expect to pass the cost of tariffs through to customer prices, even if that reduces sales. However, some consumer-facing firms noted that increased price sensitivity among customers has led them to be strategic about any price hikes.
In fact, consumer spending across the Atlanta Fed's six-state district did decline modestly. Some retailers said foot traffic thinned, while restaurateurs reported more people chose to eat at home. Clothing merchants said demand weakened and could erode further amid the added cost of tariffs, as most apparel is imported.
In other economic sectors:
- Home sales improved modestly since the previous report, in line with seasonal trends.
- Commercial real estate activity weakened, as widespread uncertainty and tightened lending standards slowed investment decisions.
- Transportation activity rose modestly overall. Some ports reported significant increases in container volume from the same period last year, while freight brokers saw a sharp drop in average daily loads after months of strong demand as importers brought in large quantities of goods to beat the imposition of tariffs.
- Manufacturing dipped a bit, as several contacts reported slowing or pausing capital expenditures because of economic uncertainty.
- In the banking and finance sector, consumer loans outside of credit cards and auto loans contracted sharply.
- Energy activity grew slowly. Contacts reported concerns about tariffs on imported crude oil, refined petroleum products, and equipment and parts for chemical plant construction. Despite short-term uncertainty, most contacts remained upbeat about the longer term amid strong demand for energy and power.
- Agricultural activity declined, though bright spots included strong demand for chicken and beef.
The Beige Book is a Federal Reserve System publication about current economic conditions across the 12 Federal Reserve districts. The Fed System and regional reserve banks publish the Beige Book eight times a year, before each meeting of the Federal Open Market Committee. The reports from each District characterize regional economic conditions based on a variety of mostly qualitative information, gathered directly from District sources, including interviews and online questionnaires completed by businesses, community organizations, economists, market experts, and other sources. The Committee next meets May 6 and 7.
Charles Davidson
Staff writer for Economy Matters