Federal Reserve Bank of Richmond

Summary of Economic Activity

Economic activity in the Fifth District expanded mildly in recent weeks. Consumer spending on retail goods, travel, and tourism was steady to growing modestly. Spending on other nonfinancial services was reported to have been steady. Residential housing market activity and mortgage lending continued to soften despite some increase in housing inventory. Commercial real estate was unchanged, overall. Manufacturing activity, trade volumes, and trucking volumes were slightly to modestly lower this period. Employment and wages rose moderately amid a tight supply of labor. Price growth continued to moderate but inflation remained somewhat elevated compared to historical rates.

Labor Markets

Employment in the Fifth District grew at a moderate pace in the most recent reporting period. The tight labor market led to continued wage pressure, resulting in several contacts making operational changes. A company that manages parking garages reported likely increases in prices and reductions in services due to all-time high wages. A specialized-software company's spending on salaries increased by 15 percent of total revenue, thus, significantly decreasing margins. As a result of increased wages, this firm expects to cut investment plans in 2024 since they need to continue hiring workers at higher wages to meet customer demand. Other contacts reported expanding their talent pools to find workers. For example, an engineering firm hired engineers with no work experience and spent time training them.


Price growth continued to slow slightly in recent weeks, but year-over-year inflation remained somewhat elevated. According to our most recent surveys, growth in prices received by service providers fell by about half a percentage point to 3.8 percent. Growth in prices received by manufacturers ticked up slightly but remained moderate, overall, at a rate of 2.8 percent. Looking ahead six months, both manufacturing and non-manufacturing firms expect growth in prices received to continue to moderate.


Fifth District manufacturing activity slowed somewhat in the most recent reporting period. An HVAC manufacturer reported an unexpected decline in new orders, resulting in the company curtailing expense spending to protect earnings. Contacts in some industries tied to discretionary consumer spending cited declines. A wine producer reported a 30 percent drop in sales as consumer demand dried-up. A dental laboratory reported a 10 percent drop in new orders as remaining yearly funds in FSA accounts were not used for dental work. However, some contacts reported unexpected increases in demand. An automotive fabric manufacturer, whose customers historically pull back on spending in December, experienced an uptick in new orders. Lastly, a paving equipment manufacturer saw a steady increase in demand due to a resilient housing market in their area.

Ports and Transportation

Trade volumes were down at Fifth District ports this period; imports were modestly lower year-over-year as wholesalers continued to work down high inventory levels. Loaded exports, however, were up this period. Spot shipping rates to the East Coast increased as carriers were dealing with issues at both the Panama Canal and the Red Sea. Empties were lagging but turn times were normal. Dwell times were fluid and stack occupancy remained low. Demand for airfreight was up slightly this period mostly due to ecommerce for the holiday season. Air cargo rates fell below 2019 levels due to higher capacity.

Trucking firms reported that freight volumes were slightly lower this period without the usual seasonal uptick. In the truckload segment, the greatest demand for shipping were with food, medical, automotive, and retail. In the less-than-truckload segment, firms noted some weakness in the industrial segment. Freight rates declined due to overcapacity in the system. Respondents stated that drivers were more readily available but there was still some upward wage pressure. Trucking companies stated that there were no significant backlogs on orders of new equipment but occasional issues receiving certain parts. With firms exiting the trucking sector, used equipment was more readily available.

Retail, Travel, and Tourism

Retailers reported steady to slightly increasing demand and revenues in recent weeks. One small, local retailer attributed some of their increased sales volume to customers saying that they preferred to support local businesses rather than shopping online. A few retailers said that they were looking to expand their business by opening new locations, but due to high interest rates, they were delaying construction of those sites. Food service and entertainment venues reported no change in demand but declines in revenues and higher costs were not being passed through to customers. Travel and tourism contacts reported steady to increasing sales, hotel occupancy rates, and passenger air travel.

Real Estate and Construction

In the Fifth District, residential real estate activity declined modestly this period due to the usual seasonal slowdown. However, buyer traffic increased this period as prospective purchasers were gearing up for a good spring market amid rising home inventory levels and declining mortgage rates. Home prices increased moderately and there were still multiple offers on desirable homes. Days on market increased slightly but remained below historic averages. Builders indicated that construction costs had moderated but there continued to be a shortage of some building materials and specialty sub-contractor labor. Appraisals were holding up and buyers were not having any difficulty obtaining mortgages.

Overall market activity in commercial real estate was flat this period. Retail remained strong, especially with fast casual restaurant chains. In the office sector, Class A office space was tightening with more leasing activity related to firms upgrading their space and moving away from central business districts. A lack of available financing continued to constrain new development and refinancing within the broader CRE sector. Construction projects were mainly limited to the industrial and multifamily segments. Contractors noted that due to the high cost of construction there were few new CRE projects and, as such, their backlog of work was shrinking.

Banking and Finance

Loan demand continued to modestly soften across all loan types, with residential mortgage lending seeing the biggest slowdown in demand. Respondents were generally in agreement that the higher rate environment and continued economic uncertainty were the primary drivers in this continued downward trend. One institution noted customers were "sitting on the sidelines" waiting for more clarity regarding rates and the economy. Deposit balances remained flat with still a great deal of competition for any available funds being shopped amongst institutions. Loan delinquency rates and credit quality metrics remained stable with no movement up or down.

Nonfinancial Services

Nonfinancial service providers continued to report that demand for their services and overall revenues remained stable. One firm noted they saw more of their clients comparing prices when shopping for their services and were entertaining more offers from competitors. This level of competition put pressure on pricing and maintaining current clients. Wages and workforce availability continued to be a challenge with low unemployment rates and employees continuing to ask for wage increases. Uncertainty was still a theme with both the firms surveyed and their clients, which made the industry as whole quite cautious going into the new year.

For more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis.

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Last Update: January 17, 2024