Federal Reserve Bank of Kansas City

Summary of Economic Activity

Economic activity in the Tenth District declined moderately in recent weeks. Consumer spending fell across several categories. Contacts noted sales volumes at low-cost quick-serve restaurants, which had been robust despite pullbacks elsewhere, declined moderately in recent weeks. Community organizations providing food assistance indicated the number of persons seeking aid rose significantly, particularly among working families and seniors. Job gains were modest in the private sector, but several reports suggested other measures of labor demand weakened. For example, the use of seasonal employees was subdued at the end of last year, and businesses were reportedly much less likely to convert seasonal worker to full-time staff than in years past. Expected wage growth was reportedly much lower for the coming year. Despite the recent softening in activity, most contacts expressed a favorable outlook for the next six months. Prices grew slightly on average, but food retail contacts indicated they had no more ability to pass higher prices to customers. Contacts in commercial real estate (CRE) reported very low transaction volumes as potential buyers were waiting for, or pricing to, a bottom, creating large spreads between bids and asks that made price discovery difficult. CRE lenders reported minimal loan modification activity, citing concerns about future credit performance and lack of borrower liquidity.

Labor Markets

Labor market conditions in the Tenth District were mostly unchanged on balance due to increased hiring in manufacturing being offset by slight declines in services employment. Despite little change in hiring, contacts reported a notable reduction in labor utilization, reflected in declines in hours worked and reduced hiring of temporary and seasonal employees. Additionally, some retail and delivery businesses reported a shift in their approach to seasonal employment during the holiday season. While some businesses averted hiring of seasonal employees altogether, others noted that their conversion of seasonal employees to permanent employees was down relative to previous years. Business contacts across industries overwhelmingly reported expectations for a substantial deceleration of wage growth in the coming year.


Prices grew slightly over the last month on average, with reports mixed across industries. While manufacturing contacts reported moderate increases prices for finished products, service contacts reported a slight decline in prices, which they attributed to limits on their ability to pass still rising input and labor costs onto their customers. Food retailers were reportedly much less willing to accept higher input prices from distributors. In particular, grocers pushed back on their suppliers, citing concerns about their ability to pass cost increases onto customers.

Consumer Spending

Consumer spending fell moderately over the past month across several categories. Contacts at restaurants and other food service companies continued to report a decline in the number of customers served. Furthermore, they emphasized declines in sales volumes extended to quick-serve restaurants recently, which had previously seen strong demand even as spending at more expensive dining options was falling in recent months. Both new and used auto sales fell modestly. Spending on other large ticket items like home appliances and retail furniture also fell.

Community Conditions

Food insecurity reportedly worsened across most of the Tenth District as food assistance organizations reported substantial increases in the number of persons served compared to the same time last year. Most organizations said they were serving more working families and seniors. While high food prices continued to be an issue, organizations noted that the burdens of other cost-of-living increases significantly contributed to growing food insecurity. Nearly all organizations reported declining donations leading some to cut back their services, such as offering families assistance once every sixty days rather than every thirty days.

Manufacturing and Other Business Activity

Business activity within the District declined modestly over the last month. Manufacturing activity contracted slightly, driven by weak orders and slowing production. However, sales at service companies declined more severely. Sales of durable goods declined robustly, due to high financing costs and an unwillingness for consumers to spend on bigger ticket items. Consumer discretionary businesses also saw substantial declines, as consumers were reportedly less willing to spend on non-essentials like leisure, travel, and eating at restaurants. Despite the recent softening in activity, the majority of contacts within both manufacturing and services sectors expressed a favorable outlook, with expected demand to be as high, or greater, over the next six months as compared to the past year.

Real Estate and Construction

Contacts indicated transaction activity for commercial properties was suppressed in recent weeks. Potential buyers of many office properties, and some multifamily properties, were reportedly waiting for a bottom as loans are set to be repriced over the medium term. Those buyers not waiting on the sidelines were reportedly pricing to a bottom among distressed sellers, resulting in large spreads between bid prices and ask prices that made price discovery difficult in most markets. Some contacts suggested that transaction activity may pick up slightly in coming months as appetites for restructuring loans may increase after year end. Yet, falling rents and rising insurance costs adversely affecting net operating incomes remained widely cited concerns inhibiting loan restructuring when desired.

Community and Regional Banking

Loan demand weakened modestly across a range of loan types amid the backdrop of elevated interest rates and continued economic uncertainty. CRE demand was particularly weak due to rising borrowing costs and cash flow pressures. Coupled with this reduced demand for credit, contacts noted that loan quality worsened compared to this same period a year ago, driven largely by various consumer loan segments and commercial real estate deals. Bankers stated their credit standards remained unchanged and noted minimal modification activity for existing CRE borrowers. Concerns around future credit performance and lack of borrower liquidity were perceived as key barriers for future modifications in CRE deals over the near term. Deposit levels remained stable despite seasonal balance fluctuations and continued migration from noninterest-bearing accounts to higher-yielding products.


After declining significantly in recent months, rig counts rebounded somewhat over the past month alongside a recent rise in oil and gas prices. District firms' drilling activity and profits fell, and are expected to increase only slightly in the next six months as near-term price expectations are below the price needed for a substantial increase in drilling activity. Despite this, employment levels rose somewhat, and firms expect either steady or slightly increasing employment in 2024. Capital expenditures remain steady with mixed expectations heading into the new year, even as most firms expect steady or increasing input prices and reduced access to credit.


Agricultural economic conditions in the Tenth District were steady through December, but softening farm income and credit conditions remained a concern. Crop prices were stable over the past month, ending 2023 considerably lower than a year ago. Profits narrowed the past year alongside the moderation in prices, particularly in areas where yields were impacted by drought. Corn and soybean yields increased slightly from last year in Nebraska and parts of Kansas but remained below the five-year average in all District states. Despite some recent volatility, cattle prices were strong alongside low inventories and supported profitability for cow/calf producers. Many District contacts cited ongoing pressure from elevated production costs and higher interest rates as major factors for the outlook of the farm economy in 2024.

For more information about District economic conditions visit: https://www.KansasCityFed.org/research/regional-research.

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Last Update: January 17, 2024