Federal Reserve Bank of Chicago

Summary of Economic Activity

Economic activity in the Seventh District increased slightly overall in April and early May, and contacts generally expected a similar rate of increase over the next year. Employment and construction and real estate activity were up modestly; business and consumer spending rose slightly; nonbusiness contacts saw little change in activity; and manufacturing activity edged down. Prices and wages rose moderately, while financial conditions tightened a bit. Prospects for 2024 farm income increased slightly, though income is still expected to fall below its 2023 level.

Labor Markets

Employment rose modestly over the reporting period and contacts expected growth to continue at that pace over the next 12 months. Some respondents, particularly in manufacturing, continued to report difficulty filling higher-skilled positions, and small business support organizations continued to report their clients were having difficulty filling lower-skilled positions. That said, several contacts reported that hiring was not as hard as it had been, and one financial services contact indicated that worker availability was now comparable to before the pandemic. Wages and benefits costs increased moderately, and there were again several reports of health insurance cost increases. Some contacts said that an updated Labor Department rule raising the minimum salary above which workers are exempt from being paid overtime had the potential to create wage pressures.


Prices rose moderately overall in April and early May 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 highlighting increases in energy and equipment costs. That said, there was a slowdown in the pace of cost growth overall. Several manufacturing contacts noted flat, and in some cases decreasing, input costs. Consumer prices rose moderately overall, though one retail sector contact indicated that deflationary price trends continued.

Consumer Spending

Consumer spending increased slightly over the reporting period. Nonauto retail sales were softer than usual in April, but this largely reflected sales pulled into March due to the early Easter. Spending on groceries and at restaurants rose, while outlays for items related to spring yardwork were up from a year ago. Discount store sales were also up. Contacts noted flat durable goods spending overall, with activity being dampened by high interest rates. Vehicle sales were unchanged on net. The sales mix remained concentrated in more affordable models such as compact and mid-size SUVs and crossovers. There was a further decline in travel-related spending.

Business Spending

Business spending increased slightly in April and early May. The pace of new capital expenditures ticked up, with contacts highlighting spending on facilities, including new hotels, office, and retail space. Several manufacturers reported that high borrowing costs led them to delay planned expansions or to purchase used equipment rather than new. There was a modest increase in demand for truck transportation services and little change in freight rates. Inventories for consumer goods decreased some and ended the reporting period at more comfortable levels, though auto dealers said inventories were somewhat elevated. Manufacturing inventories were also generally at comfortable levels.

Construction and Real Estate

Construction and real estate activity increased modestly on balance over the reporting period. Residential construction was up slightly, led by growth in single family homebuilding. The bulk of in-progress multifamily construction projects proceeded without delay, though there were reports of new projects moving slowly because of financing challenges. Residential real estate transactions increased modestly, with growth concentrated in the mid-range segment. Contacts noted that when mid-priced homes come on the market, they often receive multiple bids and sell quickly. Home prices increased modestly, while rents increased slightly. Multifamily rent growth was faster than expected in many areas of the District. Nonresidential construction activity rose modestly, and prices and rents were mostly unchanged. In the retail sector, some malls were being converted to senior living while others saw child activity centers move into vacant spaces. Commercial real estate activity decreased slightly. Contacts noted that greater equity commitments were required to close large deals. Property values continued to trend lower, and rents were mostly unchanged. Vacancy rates moved higher.


Manufacturing demand decreased slightly in April and early May. Machinery sales were down modestly, with reports of slower demand from the machine tools sector. Orders for fabricated metals decreased slightly and contacts highlighted a drop in sales to the heavy machinery industry. Steel volumes were unchanged on balance, and one contact noted that high interest rates were holding back sales to the construction and renewable energy sectors. Auto industry orders were up slightly overall, though there were multiple reports of slowing demand for electric vehicle parts. Heavy truck sales increased modestly, which was a faster-than-expected rate.

Banking and Finance

Financial conditions tightened slightly on balance over the reporting period. Bond and equity values fell and volatility spiked at the start of the reporting period, but values recovered and volatility had receded by mid-May. Business loan demand was little changed overall, though contacts noted weakness in the trucking and commercial real estate sectors. Interest rates were flat, but terms tightened slightly. Business loan quality was unchanged. Consumer loan demand was stable, while borrowing rates rose slightly and terms tightened some. Consumer loan quality edged down, with one banking contact noting that credit card delinquencies were now above pre-pandemic levels. Another banking contact saw a decline in consumer deposits.


Income expectations for District farmers increased slightly during the reporting period, as prices increased for several agricultural products. Widespread precipitation reduced the intensity of drought in Iowa, but also delayed corn and soybean planting after an early start. Corn, soybean, and wheat prices moved higher. Most livestock prices were up, though egg prices were down. Continuing concerns about the financial impact of avian flu in cattle were offset by additional support from the federal government. Butter and cheese prices rose, with reports of stronger exports. Several contacts noted increased costs for repairs, machinery parts, and fuel. Demand for operating loans was up, in line with lower levels of working capital for farms.

Community Conditions

Community, nonprofit, and small business contacts saw little change in economic activity overall, though activity continued at a solid level. Contacts' concerns shifted away from cyclical or pandemic-related issues to longer run, slow changing ones. State government officials reported solid tax revenues in line with growth in economic activity. Workforce development intermediaries said that employment opportunities, even for those who face barriers to employment, remained robust. Small business intermediaries again observed that hiring and retention of workers, particularly lower skilled ones, was the primary challenge for small businesses. Nonprofit and social service organizations struggled to right-size in response to decreased revenue as COVID-era funding sunsets, even as demand for services remains high. Contacts noted that many low-income tax filers received smaller refunds this year following the end of some COVID-era tax credits.

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

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Last Update: May 29, 2024