Economic growth across the United States is slowing somewhat, reflecting a patchy landscape of expansion and caution, according to the Federal Reserve's latest Beige Book. The report, reflecting the performance of February, found that seven of the twelve districts saw slight to moderate increases in overall activity, while five reported conditions that were flat or declining—up from four in the prior report.
Oxford Economics noted that the latest findings "showed some softening in economic activity compared to the start of the year," though there were encouraging signs of progress in manufacturing. However, the research firm cautioned that data collection occurred before the full impact of the Supreme Court's recent tariff ruling or the US/Israel-Iran conflict could be reflected in the data.
Price pressures persisted "moderately," with costs rising for insurance, utilities, energy, metals and other inputs, according to BMO Economics Senior Economist Priscilla Thiagamoorthy. She added that many districts saw tariffs elevate expenses, prompting some companies to pass increases along to customers.
Even so, firms expected price growth to ease somewhat in the near term. Thiagamoorthy also reported that consumer spending "edged up overall," though lower-income households were pulling back amid economic uncertainty.
Commercial real estate activity presented a similarly uneven picture. In Boston, activity "weakened somewhat," with slower industrial leasing and softer rents for larger warehouses, though smaller spaces held steady. Retail leasing edged higher, office leasing stayed subdued and multifamily investment waned.
New York experienced modest strengthening in CRE markets, particularly for Class A and trophy office properties, while demand for lower-quality buildings remained "tepid." Philadelphia saw steady CRE loan volumes but a "slight decrease" in broader activity. Cleveland landlords stayed "cautious," with softening retail rents but improving office demand and solid senior and multifamily housing needs.
Further south, Richmond brokers reported a "burst" and "resurgence" of activity, especially in Class A offices, widening the divide from lower-tier spaces. In Atlanta, conditions slowed as new deliveries and demand eased across most sectors, with office tenants preferring smaller spaces and multifamily vacancies remaining elevated.
Chicago reported slight increases in overall activity, with steady industrial rents and prices, although some electric-vehicle suppliers vacated properties following regulatory changes. St. Louis recorded modest improvement, even as firms anticipated an ongoing surplus in retail and office inventory.
Cold weather and immigration enforcement weighed on construction in Minneapolis, while Dallas reported more CRE transactions, boosted by increased office leasing and stable or slightly higher demand in industrial and retail. In contrast, San Francisco's CRE market was steady overall, with soft industrial leasing and falling rents, though retail demand showed signs of pickup in certain areas.
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