Fed Fifth District economy grows slightly

The economy in the Federal Reserve’s Fifth District (a multistate region including Virginia, North Carolina, South Carolina, West Virginia and Maryland) grew slightly in recent weeks, according to the latest edition of the Federal Reserve’s Beige Book, released Wednesday.

Published eight times per year, the Beige Book is based on anecdotal information about economic conditions gathered from the 12 Federal Reserve Banks. It is compiled from reports by bank and branch directors, as well as information gathered from business contacts, economists, market experts and other sources. Wednesday’s release is an update from the Fed’s July 12 report.

Here’s what the most recent Beige Book edition revealed about the direction the economy is taking:

Employment in the Fifth District increased slightly over the most recent reporting period but not as quickly as it did in prior reports, according to the Fed, and some firms reported that the labor market continued to be tight. Service providers noted that the labor pool improved, though, helping to slow wage growth.

Price growth eased in recent weeks but remained high. Price growth for manufacturers dropped to an annual rate slightly over 3%, according to Fed surveys. For service providers, annual price growth remained at about 5%.

Manufacturing slowed, and hiring for the sector remained difficult, according to respondents.

Import volume in Fifth District ports dropped back to pre-pandemic levels, largely because of a decrease in consumer goods. Imports were lower year-over-year but flat month-over-month, ports reported. Exports rose slightly, mainly for agricultural products, wood pulp, resins and vehicles. Container dwell times dropped to normal levels, according to the Fed.

Trucking firms reported steady demand and moderate increases in contract rates. Labor, parts and new equipment costs were high, however.

Consumer spending grew modestly, according to respondents. Auto sales remained steady, and retail and food service companies saw steady or modest sales growth. Furniture stores reported declining sales, likely because of slower real estate markets.

Travel and tourism rose because of summer travel. In the Fifth District, revenue grew because of room nights sold, but average room rates were down compared to last year. That wasn’t the case for Virginia from January through July — hotel revenues rose compared with 2019 because of high room rates, but hotel rooms sold dropped.

The residential real estate market remained tight across the district and saw a seasonal slowdown. Respondents reported increased sales prices because of low inventory. Virginia has reflected the larger trend, with home sales slowing because of the low inventory and increased prices.

Fifth District commercial real estate activity slowed, although retail and industrial leasing saw rising rents. Companies continued to downsize offices. Office rental rates were flat, but landlords offered additional incentives to tenants. Multifamily rents began to soften as more units came onto the market.

In the financial sector, consumer and commercial loan demand remained stable at pre-pandemic levels. For banks, deposit levels continued to shrink.