Federal Reserve Bank of Chicago

Summary of Economic Activity

Economic activity in the Seventh District increased modestly overall in January and early February, and contacts generally expected a small increase in demand over the next year. Employment increased modestly; nonbusiness contacts saw a modest increase in activity; business spending increased slightly; manufacturing activity was flat; and construction and real estate and consumer spending declined slightly. Prices and wages rose moderately, while financial conditions tightened modestly. Prospects for 2024 farm income deteriorated some.

Labor Markets

Employment rose modestly over the reporting period, and contacts expected a similar rate of increase over the next 12 months. Many contacts noted cooling labor market conditions. There were reports of increased job applications per posting, improved applicant quality, job posting removals, and layoffs. A contact that hires spring and summer seasonal workers said hiring for the coming season was easier than last year. Wages rose moderately, with many contacts citing this as the outcome of their annual wage reviews. Benefits costs increased as new insurance rates took effect in the new year. Overall, contacts reported that insurance rates increased at about the same pace as a year ago.


Prices rose moderately overall in January and early February, and contacts expect growth to continue at that pace over the next 12 months. Producer prices moved up moderately. Nonlabor input costs continued to rise, with contacts highlighting increases in raw materials and shipping costs. Several contacts noted that shipping disruptions in the Red Sea had contributed to higher transportation costs. Consumer prices continued to rise moderately, though retail contacts noted that price growth was noticeably slower than six months ago.

Consumer Spending

Consumer spending decreased slightly on balance over the reporting period. Contacts noted that sales fell due to unseasonably cold weather in January and that a rebound in early February was not enough to offset the earlier decline. Nonauto sales decreased slightly. Contacts remained cautiously optimistic, though, with several commenting that the underlying positive trend in spending hadn't changed. Some also expected a slight pickup in the number of retail store openings this year compared with 2023. Light vehicle sales were little changed overall, with the mix of sales shifting toward more affordable models. Leisure and hospitality spending was softer. While spending on restaurants and cruises was higher, it was not enough to make up for weaker spending on air travel and hotels.

Business Spending

Business spending increased slightly in January and early February. Capital expenditures were up a bit, with contacts noting renovations or expansions of existing structures. Several contacts said they were holding off on investments because of high interest rates, slower sales growth, or both. Demand for truck transportation services decreased slightly. Inventories were comfortable for most retailers, including auto dealers, where inventories had been below desired levels for an extended period of time. Manufacturing inventories were slightly elevated, and several contacts reported that input shortages were limited or had disappeared entirely.

Construction and Real Estate

Construction and real estate activity decreased slightly over the reporting period. Residential real estate activity was down moderately, though prices were steady overall. High interest rates and a low supply of existing homes for sale continued to hold back activity. Residential construction was unchanged. A majority of respondents to a homebuilder's survey indicated that January demand met expectations. Cancellation rates for new home construction trended lower. Home renovation contractors reported some decline in backlogs, though overall they remained at a high level. Commercial real estate activity decreased slightly, as demand for large office and multifamily properties declined further. Contacts continued to point to high interest rates as the most important reason holding back potential deals. Nonresidential construction increased slightly. An Indiana contact indicated that the pipeline was still strong for data centers, industrial, and pharmaceutical projects. However, several contacts said it remained difficult to start new projects because of high building costs and tight credit conditions.


Manufacturing demand was flat on balance in January and early February. Auto production increased slightly, while heavy truck demand decreased modestly. Machinery sales were up modestly overall, partly due to heightened demand from the aerospace sector. That said, a contact in heavy machinery noted a drop in orders, albeit from historically high levels. Demand for steel increased slightly, in part because of a rebound in auto production following the UAW strike. Steel orders for industrial buildings remained strong. Activity in fabricated metals declined slightly, with contacts reporting mixed results across sectors. Chemicals production declined slightly, with lower demand from the construction, mining, and agriculture sectors more than offsetting higher demand from pharmaceuticals.

Banking and Finance

Financial conditions tightened modestly in January and early February. Bond market values were down slightly, while equity markets were up a bit. Volatility was little changed on balance. Business loan demand decreased slightly, with contacts highlighting declines in commercial real estate lending. Business loan rates were stable and terms tightened a little, while loan quality was flat. Consumer loan demand was unchanged overall, though several contacts reported declines in lending for boats and RVs. Consumer loan rates rose slightly, and terms tightened slightly. Consumer loan quality deteriorated some. One contact noted that delinquency rates for auto loans were above pre-pandemic levels, but repossessions were still low.


Income prospects for 2024 continued to deteriorate for Seventh District crop producers, while the outlook for livestock producers improved. Corn prices edged down once again, as low demand and a large 2023 harvest boosted stocks. Soybean and wheat prices were also down some. Fertilizer costs for crop production were down from the fall and well below those of a year ago. Hog, cattle, egg, and dairy prices increased from the previous reporting period. Margins for dairy farmers remained tight as labor costs rose, though lower feed costs helped some.

Community Conditions

Community and nonprofit contacts saw a modest increase in economic activity over the reporting period. State government officials continued to see healthy growth in tax revenues and low demand for unemployment insurance. However, there were signs of a deterioration in prospects for small businesses. Small business development organizations noted that requests for support had shifted away from start-ups and toward existing businesses as some businesses launched during the pandemic struggled with sustainability. Community Development Financial Institutions reported increased demand for working capital loans from businesses finding it difficult to obtain financing from banks. Nonprofits supporting households noted clients were increasingly relying on credit cards and that the financial position some prospective homebuyers had worsened because of the recent resumption of student loan repayments. Social service organizations indicated that despite lower inflation, high price levels for many household items were still an important concern for low-income consumers.

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

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Last Update: March 06, 2024