Eighth District Beige Book

Summary of Economic Activity

Economic activity and employment levels have remained unchanged since our previous report. Contacts continue to report that immigration policies have been resulting in labor shortages. Prices have increased moderately, with contacts reporting that inflation is eroding consumer purchasing power. Banking activity has remained unchanged since our previous report, with overall credit conditions remaining strong. Agriculture conditions are strained and have further deteriorated. The outlook remains slightly pessimistic.

Labor Markets

Employment has remained unchanged since our previous report. Most contacts reported no change to employment levels; they are not hiring, but also not laying off workers. A manufacturer in Louisville reported no change in employment levels since July and is currently postponing the filling of roles until the first quarter of 2026. Contacts in manufacturing, construction, and agriculture continue to report labor shortages due to workers not reporting to work because of fears of deportation. For example, a construction firm in Memphis reported that the reduced labor pool was driving up labor costs and resulting in project delays.

Wage growth has been moderate. An apparel retailer reported employment and compensation growth expected at 3.0 percent to 3.5 percent for this year. A regional airport implemented a 4 percent cost-of-living adjustment—the first in six or seven years—alongside a significant increase in employer contributions to the health insurance program.

Prices

Prices have increased moderately since our previous report. A technology firm in Memphis has reported maintaining stable prices but has reduced its price guarantee periods to 30 days. An apparel firm in Memphis expects overall price increases of around 3 percent, with some items such as uniforms rising 5 percent due to input cost increases. Several contacts reported an increase in grocery food prices, especially beef. A professional services firm in St. Louis reported increasing the prices they charge to customers due to tariffs and competitors also raising their prices. Contacts reported that price increases were not solely due to tariffs but also insurance premiums, utilities, and opportunism. A manufacturer reported slightly increasing their prices to customers as suppliers’ costs had increased despite having a primarily domestic supply chain.

Consumer Spending

Consumer spending has slightly declined, and businesses are anxious about the upcoming holiday season. While upper-income households and corporate clients continue to spend on travel, events, and luxury services, middle-income consumers are increasingly cautious, as they have been using credit to maintain their spending levels. Community contacts report rising food pantry usage among both low- and middle-income households, growing reliance on “buy now, pay later” services, and elevated credit card delinquency rates. A hotel owner in Missouri reported that travel demand had dipped in the past few months, especially among middle-class consumers, and described the current environment as a “middle-class recession” that is affecting select-service hotels. Similarly, a hotel and restaurant in Mississippi reported slow business in August and September. An event center in Northwest Arkansas reported fewer room rentals and gatherings, and youth-focused gaming facilities reported lower sales.

Manufacturing

Manufacturing activity has declined slightly since our previous report. A manufacturer in Tennessee reported there had been a downturn in new business inquiries in the third quarter, and an equipment manufacturer in Kentucky reported that sales had decreased relative to the start of the year. While some firms reported that they were building multiple facilities across the region to offset shipping and logistics costs, an apparel company reported offshoring manufacturing to the Caribbean due to labor challenges. Some contacts also reported looking for cost-effective strategies to manage tariffs, shipping, and labor dynamics such as shipping unfinished goods to the U.S. for final assembly.

Nonfinancial Services

Activity in the nonfinancial services sector has been generally unchanged since our previous report. Transportation and logistics companies reported observing changes in the shipping strategies of businesses and that the upcoming peak season would be affected by trade policy changes. A logistics firm in Northwest Arkansas reported that sharply rising trucking insurance premiums were compressing margins. A hospital in Mississippi reported they were continuing to face financial distress despite participating in a federal program designed to evaluate and plan for financial viability. The hospital CEO is concerned that new grant funding may not arrive in time to stabilize operations. Nonprofit organizations reported a growing demand for their services.

Real Estate and Construction

Residential real estate activity has remained unchanged since our previous report. Real estate agents across the District described the residential market as slow, which may in part be the normal seasonal pattern. Contacts reported that existing homes are staying on the market longer and that in some locations house prices are declining. A real estate agent in Mississippi reported that lower-priced homes were selling quickly unless they needed repairs, while higher-end homes were not moving. In rural areas, weak agriculture conditions and financial stress of hospitals are negatively impacting the housing market.

Commercial real estate activity has been mixed. One developer in Memphis reported that construction activity remained strong—primarily institutional, healthcare, and university-related construction—and that contractors were currently active with good backlogs. Other developers in the Memphis area also noted that new construction of multifamily, office, and industrial projects had plummeted, while retail remained strong. In Northwest Arkansas, an airport project had eight bids, significantly higher than for previous projects, indicating a slowdown in new commercial projects.

Banking and Finance

Banking activity has remained unchanged since our previous report, with moderate loan demand and overall credit conditions remaining strong. A Memphis banker reported low levels of past-due loans and strong commercial loan demand and a bullish mindset due to falling interest rates. Another banker reported that, while small business demand for credit was depressed, the pipeline was building back up. Contacts also noted that consumer delinquency rates have been steadily increasing over the past few months, and they expect this trend to continue. A banker reported an increase in the number of people going to credit counseling agencies after borrowing to maintain their level of spending. Bankers also reported tightening their lending standards with higher equity requirements, more scrutiny of small business loans, and limited access to credit for smaller investors.

Agriculture and Natural Resources

Agriculture conditions are strained and have further deteriorated. In addition to high input costs and low commodity prices, recent adverse weather conditions have resulted in lower quality of crops. A contact in West Tennessee reported that 2025 has been extremely challenging for agriculture due to extreme weather and poor crop conditions, especially for non-irrigated fields. Contacts continue to express that government support will be a critical lifeline for many farmers; however, they noted that some payments may come too late. A farmer in Arkansas estimated that up to one-third of Arkansas farmers may go bankrupt or exit the industry to avoid losing land or homes. On the other hand, contacts in the protein business reported that demand for protein continues to be very strong, with volume sales showing year-over-year growth and with labor being the main constraint to expansion.

Visit our Regional Economic Data and Reports page for more information about District economic conditions.