Federal Reserve Bank of Cleveland

Summary of Economic Activity

On balance, Fourth District business activity increased modestly over the recent period, and contacts expected similar conditions to persist in the months ahead. Consumer spending firmed, though some retailers reported that discretionary spending remained soft. Demand for manufactured goods was flat, and manufacturers noted softer orders as customers rebalanced inventories. Demand for new homes strengthened, according to homebuilders; meanwhile, existing home sales were constrained by a shortage of inventory. Employment levels increased at a modest rate in recent weeks, the first notable increase in the last six months, and overall wage growth edged up to a moderate pace. Overall, nonlabor cost pressures continued to be moderate, while selling prices increased slightly. Contact reports suggested that both appeared to be stabilizing compared to prior years.

Labor Markets

Overall, employment increased at a modest pace in recent weeks after a period of stability. Some construction and manufacturing contacts reported hiring for new projects or planned expansions in 2024, with one manufacturing contact saying, "Our plan for 2024 is to increase another 30% and we have added two more production lines out of ten to accomplish this." However, other manufacturers held staffing levels steady and increased production levels through automation. Contacts across industries continued to note an increase in worker availability, and one agricultural contact said this increase allowed them to hire permanent staff and reduce their dependence on contract workers. Contacts generally anticipated that modest growth in employment will continue in the coming months because they expect further increases in product demand and improved worker availability.

Wage pressures edged up in recent weeks to a moderate level. Many firms continued to report that wage pressures were normalizing, with many retail, construction, and manufacturing contacts saying they were offering only the standard annual cost-of-living adjustment. Moreover, some contacts across industries said they were reducing wages for current job openings, a situation which several attributed to increased worker availability. One restaurateur said, "we've seen wages stabilize and haven't had to escalate wages to hire good people." Still, many financial services and healthcare contacts noted there were targeted wage increases to attract and retain staff who were high performing or senior level or had a specialized skillset.


On balance, nonlabor input cost pressures continued to increase moderately. However, many contacts across sectors said that some of their costs continued to stabilize and in some cases decreased. Some manufacturers noted that suppliers were adjusting prices less frequently, with one stating, "Our raw material costs have roughly held flat during first quarter of 2024." One contact reported that efficiencies gained by automating processes lowered their per unit production costs. Still, firms across industries reported cost increases for utilities, professional services, health insurance, and property and casualty insurance.

Meanwhile, selling prices increased slightly, at a pace similar to that of the prior two reporting periods. Many retailers and restaurateurs continued to increase prices only selectively, and the majority held prices steady, with some deferring increases until later in the year. A few freight haulers continued to lower their rates, and one contact said that they are at "a point where we can barely find any profit in moving freight." By contrast, some manufacturers had increased selling prices during annual contract adjustments to cover higher materials costs or recapture some price concessions that were made in 2023.

Consumer Spending

Consumer spending increased modestly after decreasing modestly during the prior period. One apparel retailer said that sales had increased by more than the expected seasonal trend, and several other retailers and restaurateurs reported that sales had increased amid warmer weather. Still, some retailers reported that sales of discretionary items remained stagnant, and one large general merchandiser indicated that household budgets were still tight because of persistently high food prices. Reports from auto dealers were mixed. Most dealers continued to report low sales because of high interest rates and vehicle prices. By contrast, a small share of dealers noted that better supply of new vehicles and more manufacturer incentives helped boost sales. On balance, firms expected consumer spending to increase moderately in the near term.


On balance, demand for manufactured goods remained flat in recent weeks. Some manufacturers noted softer orders as their customers rebalanced inventories or because of general economic and political uncertainty. Firms selling to electric vehicle (EV) producers noted lower overall demand as automakers recalibrated for slower than anticipated EV sales. By contrast, firms selling to aerospace companies and for data center construction reported steady demand and orders. Looking forward, manufacturers generally expected activity to increase moderately in the coming months.

Real Estate and Construction

Demand for new homes strengthened again in recent weeks as the spring selling season heated up, according to homebuilders. Existing home sales were again constrained by a dearth of inventory. Contacts expect activity to increase further in the coming months, though sales may be muted by limited supply and potential homebuyers' waiting for further mortgage interest rate declines.

Reports from builders indicated that nonresidential construction increased modestly in recent weeks. One contact suggested that industrial and distribution center development was particularly strong, while another suggested that demand had increased because "[o]rganizations are beginning to truly address expansion plans." In commercial real estate, one realtor noted that lower occupancy rates in existing units caused property managers to offer incentives to tenants such as renewing leases without increasing rates. On balance, contacts expected nonresidential construction to increase in the months ahead, albeit at a somewhat slower pace.

Financial Services

On balance, bankers reported that loan demand increased moderately. One banker attributed an increase in consumer lending to lower interest rates. Another banker said that improved commercial demand was associated with increased optimism surrounding economic conditions, adding that "companies are ready to move forward with [capital expenditure] needs, expansion and growth opportunities and investments that may have been put on hold based on the uncertainty and rate environment we saw in 2023." Bankers generally expected loan demand to increase further amid anticipated rate reductions and less economic uncertainty. Core deposits were flat, and a couple of bankers expected deposit outflows to decrease. Bankers reported that consumer delinquency rates increased slightly but remained close to historically low levels.

Nonfinancial Services

Overall, professional and business services contacts reported that demand continued to increase as clients moved forward with projects and as economic uncertainty decreased. On balance, contacts expected that demand would continue to increase with improved supply chains, reshoring activity, and stable interest rates. In addition, a couple of consultants mentioned that they planned to launch new service offerings. Freight and transportation activity increased modestly in recent weeks. Looking ahead, freight and transportation contacts anticipated that demand would continue to increase.

Community Conditions

In a semiannual survey, two-thirds of District nonprofit service providers reported that low- and moderate-income households experienced a decline in financial well-being in the past six months as higher prices continued to strain budgets. Moreover, nearly three-quarters said that the availability of affordable housing decreased amid rising rents, the loss of units to blight, and insufficient unit supply. Some contacts noted that housing market dynamics were adversely affecting seniors. One mentioned that a senior housing community had a waiting list of 1,500 people. Another suggested that reassessed property values increased property taxes, straining seniors' budgets.

For more information about District economic conditions visit: https://www.clevelandfed.org/en/region/regional-analysis.

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Last Update: April 17, 2024