Federal Reserve Bank of Chicago

Summary of Economic Activity

Economic activity in the Seventh District was up modestly overall in late November and December. Contacts generally expected a small decline in demand over the next year. Employment increased moderately; nonbusiness contacts saw a modest increase in activity; consumer spending was up slightly; construction and real estate and business spending were flat; and manufacturing decreased modestly. Prices and wages rose moderately, while financial conditions loosened modestly. Net farm incomes were above average in 2023.

Labor Markets

Employment rose moderately over the reporting period and contacts expected a similar rate of increase over the next 12 months. While several contacts continued to report difficulty finding workers—especially in manufacturing—there also were further signs that the labor market was cooling. Some contacts noted that applicant pools had grown, and contacts in construction, real estate, and finance reported staffing reductions. Wages rose moderately, and contacts indicated that wage pressures had eased considerably compared with 6 months ago. Benefits costs increased as new insurance rates took effect in the new year.


Prices rose moderately overall in late November and December and contacts expected a similar rate of increase over the next 12 months. Producer prices moved up moderately. Nonlabor input costs continued to rise, with contacts reporting increases in raw materials, energy, and shipping costs. One contact in heavy machinery manufacturing noted greater pushback on price increases from customers. Consumer prices also increased moderately overall, though several retail contacts noted more modest price growth.

Consumer Spending

Consumer spending increased slightly on balance over the reporting period. Nonauto retail sales were up slightly. Contacts reported that holiday sales met expectations, which had been for a small improvement over last year's level. Apparel and grocery sales were relatively strong, while consumer durable goods sales were soft. Leisure and hospitality spending rose modestly, with contacts highlighting increased sales at restaurants. Light vehicle sales rose slightly. Dealers said solid overall demand continued to keep prices high, but that many consumers were substituting toward smaller, more affordable models.

Business Spending

Business spending was flat overall in late November and December. Capital expenditures were up slightly, with several contacts reporting investments in computers, software, and new vehicles. However, demand for truck transportation services declined slightly. Inventories were comfortable for most retailers; auto dealers' inventories were around desired levels following an extended period with lower than desired inventory. In manufacturing, many contacts again stated they were no longer experiencing input shortages, and some even noted that their inventories were a little high.

Construction and Real Estate

Construction and real estate activity was little changed on balance over the reporting period. Residential construction activity was flat. Contacts said that high labor and materials costs, elevated interest rates, and slower rent growth were all slowing the pace of new multifamily construction. Residential real estate activity decreased slightly, with contacts highlighting a decline in multifamily leasing. High mortgage rates continued to put a damper on home sales, though one contact noted that the recent decline in rates had supported some new activity. Home prices were up slightly. Rents rose overall, though one contact noted that the percentage of multifamily units offering concessions had increased. Nonresidential construction activity increased slightly, while prices were unchanged. One auto dealership group said that the expectation interest rates would begin falling soon was a factor in their proceeding with a project to increase service-center capacity. Commercial real estate activity was unchanged. Demand for industrial properties remained at elevated levels. While prices fell slightly, rents, vacancy rates and the availability of sublease space were all unchanged.


Manufacturing demand decreased modestly overall in late November and December. Steel orders were down modestly, with one contact reporting a decline in sales to the auto sector. Fabricated metals orders ticked down, led by lower demand from residential construction. Machinery sales decreased slightly. Auto production returned to levels seen before the UAW strike, according to contacts. Heavy truck demand remained low amidst weak freight markets and the bankruptcy of a major carrier.

Banking and Finance

Financial conditions loosened modestly on balance. Bond and equity values increased moderately while volatility fell modestly. Business loan rates were steady, terms tightened slightly, and loan quality decreased slightly. Business loan demand was flat. One banking contact noted that their clients in the auto industry weathered the UAW strike well. Consumer loan rates were little changed overall and terms tightened slightly. Loan demand fell some as did loan quality, with one contact reporting "normalized levels of past dues" for consumer loans after an extended period of below average past dues.


District net farm income was above average for 2023 according to contacts, helped by stronger than expected crop yields. However, expectations for 2024 farm income were lower, as prices started the year below break-even levels for many commodities. Corn and soybean prices edged down during the reporting period while wheat prices were up a bit. Cost changes for crop production inputs were mixed. Dairy, hog, and cattle prices decreased. Egg prices were slightly higher and rising avian influenza cases led to concerns about a repeat of last winter's large outbreak. Contacts felt District farms generally ended 2023 in strong enough financial positions to weather whatever 2024 brings.

Community Conditions

Community and nonprofit contacts saw a modest increase in economic activity over the reporting period. Workforce development agencies said that continued tight labor market conditions were making it easier than usual for individuals facing barriers to employment to find work, and economic development agency contacts reported the approval of several new projects in their areas. In contrast, a state government official saw some decline in tax revenues. Contacts at small business development organizations said that high interest rates combined with other rising costs, such as for insurance, were deterring clients from expanding. While the slowing rate of inflation was welcome, social service organizations noted that low income consumers were still facing the challenges of rising housing costs, additional expenses for clothing and heating during the winter months, and the end of COVID-era government financial support.

For more information about District economic conditions visit: https://chicagofed.org/cfsec.

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Last Update: January 17, 2024