National Summary
Overall Economic Activity
Overall economic activity increased at a slight to modest pace in eight of the twelve Federal Reserve Districts, with three Districts reporting no change and one reporting a modest decline. This marks an improvement over the last three report cycles where a majority of Districts reported little change. Most banks reported slight to modest growth in consumer spending this cycle, largely attributed to the holiday shopping season. Several Districts also noted that spending was stronger among higher-income consumers with increased spending on luxury goods, travel, tourism, and experiential activities. Meanwhile, low to moderate income consumers were seen to be increasingly price sensitive and hesitant to spend on nonessential goods and services. Auto sales were little changed to down across most Districts. Manufacturing activity varied with five Districts reporting growth and six reporting contraction. Nonfinancial services demand was generally seen as steady to increasing somewhat. Banking conditions were generally reported as stable or improving, with some increased demand coming from credit cards, home equity loans, and commercial lending. Residential real estate sales, construction, and lending activity softened in the majority of Districts that report on the sector. Agriculture conditions were largely unchanged with only Atlanta reporting a modest decline due to weaker demand for exported commodities. Energy demand and production was flat to down slightly. Outlooks for future activity were mildly optimistic with most expecting slight to modest growth in coming months.
Labor Markets
Employment was mostly unchanged in the most recent period, with eight of the twelve Districts reporting no changes in hiring. Multiple Districts reported an increase in the usage of temporary workers, with one contact reporting this allows them "to stay flexible in uncertain times." When firms were hiring, it was mostly to backfill vacancies rather than create new positions. Firms reported continued challenges finding skilled labor, particularly in engineering, health care, and other trades. Several reports mentioned that fewer workers were switching jobs. Multiple contacts reported exploring AI implementation primarily for productivity enhancement and potential future workforce management. AI's current impact on employment was limited, with more significant effects anticipated in the coming years rather than immediately. Wages grew at a moderate pace, with multiple contacts reporting that wage growth had returned to "normal" levels.
Prices
Prices grew at a moderate rate across a large majority of Districts, with only two Districts reporting slight price growth. Cost pressures due to tariffs were a consistent theme across all Districts. Several contacts that initially absorbed tariff-related costs were beginning to pass them on to customers as pre-tariff inventories became depleted or as pressures to preserve margins grew more acute. But contacts in a few industries—like retail and restaurants—were reluctant to pass costs along to price-sensitive customers. Energy and insurance costs continued to be a significant strain on margins. Looking ahead, firms expect some moderation in price growth, but anticipated prices to remain elevated as they work through increased costs.
Highlights by Federal Reserve District
Boston
Economic activity increased slightly despite a moderate decline in home sales. Consumer spending rose slightly overall, with strong growth for high-end goods and services. Employment and wages were flat, with only selective layoffs. Prices rose further at a modest pace overall, with ongoing cost pressures reported for some goods and services. The outlook trended slightly more optimistic.
New York
Economic activity continued to decline modestly. Employment declined slightly and wage growth remained modest, with ongoing reports of layoffs at major employers in the region. The pace of price increases picked up further but remained moderate. Consumer spending was up slightly over the holiday season, buoyed by strong spending from higher-income consumers. Businesses generally expected little improvement in the months ahead, though manufacturers were more optimistic.
Philadelphia
Economic activity in the Third District rebounded to a slight pace of growth from a modest decline during the prior period. Employment levels also appeared to rise modestly. Wage increases have eased and are failing to keep pace with price increases—stressing low- and middle-income households.
Cleveland
Fourth District business activity increased slightly in recent weeks, with expectations for continued slight growth in the months ahead. Several manufacturing and construction contacts noted increased confidence among businesses despite lingering uncertainty. Meanwhile, consumer spending declined modestly. Nonlabor cost pressures remained robust, while selling prices continued to increase moderately.
Richmond
The regional economy continued to grow modestly in recent weeks. Consumer spending on retail, travel, and tourism increased moderately but auto sales declined. Manufacturing activity declined slightly this cycle. Residential real estate slowed modestly while commercial real estate activity picked up slightly. Employment was unchanged and wage growth remained moderate. On balance, prices continued to grow at a moderate rate.
Atlanta
The Sixth District economy grew slightly. Employment levels were flat to slightly down. Prices grew slightly. Retail sales improved, and travel rose modestly. Home sales improved, but commercial real estate declined. Transportation activity was flat to slightly down, while manufacturing activity was flat to slightly up. Energy demand was flat.
Chicago
Economic activity in the Seventh District was little changed over the reporting period. Consumer spending and construction and real estate demand rose slightly; employment was flat; nonbusiness contacts saw no change in economic activity; business spending fell slightly; and manufacturing activity declined modestly. Prices rose moderately, wages were up modestly, and financial conditions loosened modestly. Net farm income in 2025 was similar to 2024.
St. Louis
Economic activity has modestly increased since our previous report. The uptick in activity was attributed to the end of the government shutdown and strong late-holiday sales. Employment levels were unchanged. Prices continued to increase moderately.
Minneapolis
District economic activity was flat. Employment declined slightly and more firms were cutting head counts than increasing them, particularly larger firms. Prices increased slightly but some firms were planning increases in the new year. Holiday spending was solid despite harsh weather, which benefited winter tourism. Manufacturing activity contracted.
Kansas City
Economic activity rose slightly, reflecting gains in service sector sales and manufacturing orders. The labor market remains stable and balanced, while prices have gone up modestly from input costs and labor cost pressures. Energy activity declined as oil prices remained below profitable levels. Agriculture remains mixed, with weak crop profitability offset by strong cattle prices.
Dallas
Economic activity in the Eleventh District held steady over the reporting period. Little change was seen in manufacturing, retail, nonfinancial services, and real estate. The banking sector was a bright spot, with loan volumes increasing over the past six weeks. Employment was largely unchanged, and prices increased moderately. Outlooks remained cautious, dampened by concern over the level of demand and the inflationary impact of tariffs.
San Francisco
Economic activity expanded modestly. Employment levels largely held steady, and wages grew somewhat. The pace of price increases intensified, shifting from modest to moderate. Retail sales grew modestly, with strong holiday shopping driven by high-income households. Activity in services, real estate, and agriculture was stable on net. Manufacturing activity softened somewhat, while lending activity increased slightly.
Note: This report was prepared at the Federal Reserve Bank of Richmond based on information collected on or before January 5, 2026. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.