Federal Reserve Bank of St. Louis

Summary of Economic Activity

Economic activity across the Eighth District continued to increase slightly since our previous report. Employment was unchanged and wages increased slightly. Inflation pressures increased moderately due to higher input costs. Consumer spending was unchanged, with signs of weakness at higher price points. Real estate activity cooled slightly. Poor weather conditions slowed progress on District crop planting. Banking conditions remained stable. The outlook among contacts was slightly pessimistic, which is weaker than our previous report but better than one year ago.

Labor Markets

Employment remains unchanged from our previous report. The labor market continues to be tight, with businesses still struggling to find employees. A manufacturing contact in southern Indiana reported not being able to fill open jobs, and an agriculture contact in the Memphis area noted that low labor force participation was a problem. Some signs of labor mismatch also appeared, with a real estate contact in Louisville reporting a struggle to find employees matching their qualifications.

Wages have increased slightly, with growth starting to level off to pre-pandemic rates. A Louisville human resources contact reported wage growth has been increasing at normal rates compared to the past few quarters. Other contacts reported wage increases have strained budgets, with a St. Louis construction contact reporting wage raises have increased costs.


Prices have increased moderately since our previous report. About one-third of District survey respondents reported higher or slightly higher prices since the first quarter. Just over half of contacts reported similar prices, with the remaining contacts reporting lower or slightly lower prices. These responses appear to be driven by increasing input costs, with over three-fourths of respondents reporting higher or slightly higher nonlabor costs and a similar share reporting higher or slightly higher labor costs. Contacts generally expect current cost pressures and pricing strategies to continue into the third quarter.

Consumer Spending

Consumer spending was generally unchanged since our previous report. Most retailers and auto dealers reported that overall sales met expectations; however, dollar sales were lower than the same period one year ago. Comments indicated slower growth in discretionary purchases due to smaller household budgets and increased price sensitivity. For example, auto dealers reported a significant decline in demand for high-end vehicles, while demand has increased for lower-priced vehicles. Tourism and hospitality contacts reported that sales were in line with expectations and overall activity is unchanged from the same period one year ago.


Manufacturing activity was unchanged since our previous report. Manufacturers in the automotive, textile, and food processing industries also reported softer demand from consumers for their products. Firms in Arkansas and Missouri reported slight increases in delivery lead times, production, inventories, and new orders. However, employment has modestly decreased. On average, firms reported they expect slight decreases in employment in the coming quarter. Employee turnover remains high compared to previous years. Though there is a high demand for workers, several firms reported an inability to find people who are willing to work and that employees may voluntarily leave as quickly as one week.

Nonfinancial Services

Activity in the nonfinancial services sector has weakened modestly since our previous report. The exception to this was the transportation sector, where the outlook has improved, with higher demand and sales exceeding expectations. One Arkansas contact reported unexpectedly high travel demand, and another St. Louis contact had success executing sales strategies. In most other nonfinancial services, the outlook has worsened. A Louisville consulting and management contact reported project delays. This sentiment was echoed by a St. Louis architecture and engineering contact, who reported steady client demand but longer project start and cancellation times, coupled with higher construction costs and higher interest rates. An Indiana health care contact reported a worsening outlook, while an education contact reported low public college enrollment. Overall, multiple contacts cited a worsening outlook due to some combination of higher interest rates, inflation, and political uncertainty.

Real Estate and Construction

Residential home sales have declined slightly since our previous report. About half of contacts reported sales did not meet expectations, with particularly weaker sales of higher-end homes. However, median-priced home sales were strong and continually sold for over their asking price. The District experienced a slight increase in home prices as the total inventory of homes for sale remains low across the District.

Commercial real estate sales leasing activity has slowed since our previous report, and construction has remained stagnant. Contacts indicated that the prospect of higher-than-expected interest earlier this year has kept prospective developers on the sideline. A construction contact reported many have delayed projects due to higher interest rates. However, construction demand for transportation, federal, and lodging projects remains elevated.

Banking and Finance

Banking conditions and lending activities have remained stable from our previous report. According to contacts, demand for loans continues to be lower than one year ago, However, the growth of credit card, mortgage, and commercial and industrial loans has risen modestly since the past quarter. Contacts reported that competition for deposits continues to be intense as cash flow remains tight with high interest rates. Contacts provided mixed signals on nonperforming loans, with some banks reporting low credit risk and optimistic projections, while others reported signs of slow payments due to steady consumer spending; yet, they have not seen a significant rise in delinquent loans.

Agriculture and Natural Resources

Agriculture conditions have declined slightly since our previous report, with most contacts describing conditions as falling below expectations. District contacts were mixed on inventory, sales, and capital expenditures and noted increased labor costs as an additional stressor. Elevated rainfall and extreme weather events such as tornados continued to disrupt the planting progress for soy, cotton, and corn across all District states, while rice-planting progress remained similar to one year ago. The most-active planting periods have either ended or will end in the next two weeks; however, soy, corn, and cotton were all around 50 percent planted as of mid-May, down from over 90 percent planted at the same time one year ago, and slightly below average over the past few years. District contacts were mixed on inventory, sales, and capital expenditures and noted increased labor costs as an additional stressor.

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Last Update: May 29, 2024