April 2026 Beige Book Interview

Announcer: Welcome to this Beige Book episode of the St. Louis Fed’s Timely Topics podcast, where you get the latest on what we’re hearing from business and industry contacts in Arkansas and across the Eighth District. The information shared in this podcast is received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

Matuschka Lindo Briggs: The Beige Book was released yesterday, and today we’re taking a moment to reflect on what it shared. Let’s dive into the latest observations, both from across the nation and right here in our own District. I’m Matuschka Lindo Briggs, the Little Rock regional executive for the St. Louis Fed, and joining me today is Joelle Scally from the New York Fed and Chuck Gascon from the St. Louis Fed. How’s everyone today?

Joelle Scally: Hey, Matuschka, Chuck, I’m doing well, thanks. And I have to say, it is nice to feel like spring is finally arriving.

Chuck Gascon: Thanks, Matuschka. I was really surprised to see all the references to bad weather in this Beige Book. I know we’re going to get into it, but we’ve had great weather here over the last couple of months.

Lindo Briggs: Yeah, but do not forget: Do not plant those annuals before Mother’s Day. So, with that&mellip;

The week’s national summary was prepared by Joelle and the team at the New York Fed, giving her a great perspective on what contacts across the country are seeing and saying. Joelle, as you pulled the report together, share what stood out most.

Scally: Thanks, Matuschka. Well, the conflict in the Middle East was cited as a major source of uncertainty, complicating decision-making, with many firms adopting a wait-and-see posture.

With that being said, overall economic activity increased to a slight-to-modest pace in most Federal Reserve districts. Two districts, including ours in New York as well as Boston, reported slight-to-modest declines in activity.

We are hearing a lot about AI, and it’s not just about employment. We’re seeing AI’s influence in commercial real estate, with data centers being built to support AI infrastructure, and those are driving demand for industrial space. In New York City, AI firms are leasing up significant office space, and Atlanta even noticed a memory chip shortage from AI infrastructure demand, driving up prices for consumer electronics. Similar to our previous report, winter weather in some regions was cited as a drag on consumer spending and now also higher fuel prices. But despite these factors, businesses reported slight increases in consumer spending.

Lindo Briggs: That’s encouraging to hear, yet confusing. Did you get a sense of why spending is still holding up? Is it tied to certain products, or certain types of consumers? We’re hearing similar things in our District. Several contacts in Arkansas say they’re still surprised by how resilient consumer spending has been.

Scally: Well, it’s really a tale of two consumers. Reports indicated that spending among higher-income consumers was fairly resilient. They’re still out there buying, traveling, dining out. But many districts continue to report signs of financial strain among lower- and moderate-income consumers. In our district specifically, we heard from a retailer who noted a shift from cash to credit card payments, which suggests that consumers are maybe more inclined to borrow to support their spending. And that’s a sign that people are stretching to maintain their consumption levels.

We also had some restaurant owners telling us about reduced foot traffic. One mentioned that working-class consumers, in particular, are being restrained by higher costs for cars, for insurance and food.

Gascon: Matuschka, I would just add: Higher prices on items can also lead to reports of stronger sales among our retailers. For example, we heard from a clothing retailer that while their online order numbers have remained flat, the average amount in each customer basket was higher due to higher prices. So, that’s the kind of thing that can also show up.

Talking to bourbon producers in Kentucky, they noted that retail demand was down, but tourism spending remains robust, and contacts expect visitor spend to rise throughout the year.

Lindo Briggs: Any other themes that stood out on the national picture?

Scally: Let me share a few things on real estate, because there’s an interesting divergence happening there. On the residential side, housing market activity softened across several districts, and this is because heightened uncertainty, combined with rising mortgage rates, really dampened buyer demand. In our district, we saw financial market volatility and rising rates, keeping potential buyers and sellers on the sidelines.

On the other hand, commercial real estate markets actually improved. There’s real strength in industrial properties, especially with these data center projects. We’re talking about significant construction activity for data centers across multiple districts.

Office markets also showed solid demand for Class A space but weaker demand for lower-tier properties.

Lindo Briggs: Great update, Joelle.

Now, let’s bring it closer to home. Is there anything specific you’d like to share from the New York District?

Scally: As I mentioned earlier, activity in the New York Fed District declined modestly amid heightened uncertainty, which is stemming from two main sources: shifts in tariff policy and the conflict in the Middle East. And those two things just kept coming up in conversations with our contacts.

Manufacturing activity held steady after increasing during the prior period, but our service sector activity declined moderately. And that service sector weakness was really broad-based. Some of it was weather-related, but a lot of it reflected this more cautious posture.

Lindo Briggs: Going back to consumer spending, I’ll also add that we’re seeing quite a bit of economic activity in several parts of Arkansas. Hotels and restaurants are busy, but not because of tourism. Interestingly enough, it’s because of capital investment—contractors and construction crews working in those areas. That will be a steady revenue, as many of these projects will take several years to complete.

How about you, Joelle?

Scally: Oh, that’s interesting. Well, New York City’s tourism sector actually continued to show positive momentum. Hotels are seeing rising occupancy. Broadway ticket sales remain pretty strong.

There are mounting concerns about some potential impacts from the Middle East conflict. So, our tourism contacts are worried it could weaken global demand for travel, but also create some logistical disruptions to flight availability.

And to your point about the weather earlier, it’s interesting how that played out differently across the country. The big snowstorms actually benefited ski resorts in Boston’s district, but out West, the warm, low-snow winter meant early ski resort closures.

Lindo Briggs: Okay, let’s talk about jobs. Joelle, what does the national picture on the labor market look like?

Scally: On the labor market, employment levels have generally been steady to up slightly across districts, but most districts described a low-hire, low-fire environment, with low turnover, minimal layoffs and hiring that’s mostly for replacement rather than for growth.

Several districts did note increased demand for temporary or contract workers, with firms cautious about committing to more-permanent hires. That tells you something about the level of uncertainty—that companies want the flexibility.

Many districts reported that labor availability had improved overall, although it was still difficult to find some types of workers, and that was particularly true in the skilled trades.

Chicago’s report actually mentioned something in particular, that electricians were being offered substantially higher wages by data center developers. So, there’s this interesting dynamic where the boom in data center construction is actually pulling skilled workers away from other sectors by offering premium wages.

Gascon: Matuschka, I want to add a little bit more about this hiring-for-replacement topic that’s been coming up across these district reports.

We heard from manufacturers that with some of the departing workers, particularly those that are retiring, they’ve been very difficult to replace, and firms are actually willing to bring them back part-time or with more flexibility as they struggle to hire in those positions.

Then on the other side, some contacts have added this little caveat that they’re hiring replacements for critical positions but also looking to gain efficiencies and use AI.

So, that does suggest that employment levels could go lower if firms deem that those positions for departing workers are not critical.

Scally: AI continues to come up in our conversations. And while most districts said that AI hadn’t yet significantly impacted overall staffing levels, some did note that these productivity improvements had enabled firms to delay or reduce hiring.

In our district, high school tech workers with AI skills especially are in very high demand. But AI has reduced demand for entry-level workers performing more routine tasks.

To your point, Chuck, about employment levels, there were no major layoffs reported during this period.

Lindo Briggs: My labor market takeaways line up similarly. AI comes up in nearly every conversation, not just how to use it, but how to manage it. Skilled workers remain hard to find, and many contacts are talking about upcoming headcount reductions—not mass layoffs, but gradual cuts. So, it really does point to a continued cooling in the labor market.

Let’s shift to inflation, taking a closer look at prices. Joelle, let’s start with you.

Scally: Sure. Price growth remained moderate across most districts. But there’s this thing: Input costs are rising faster than what businesses can charge customers. So, profit margins are getting compressed.

Energy and fuel costs shot up sharply, which cascades into higher freight and shipping costs, plus higher prices for plastics and fertilizers. We’re also seeing metal prices climbing, such as for steel, copper, aluminum—that’s largely due to tariffs. On the service side, technology costs are up along with insurance premiums. So, it’s coming from many directions.

Lindo Briggs: When we talk about input costs outpacing revenue, my mind goes straight to row-crop farmers in Arkansas. Planting season kicked off last week, and I’ll admit, I was a little worried as I was driving around the state that we wouldn’t see much activity, but there were plenty of tractors in the fields, thankfully, which gives me some hope for the season ahead. Farmers are still squeezed by higher input costs, but they’re pressing forward.

Gascon: Matuschka, across the District and many other sectors, the reports are very consistent with what Joelle shared. Firms are reporting that higher costs need to be passed on to customers due to already tight margins. For example, a transportation company indicated that recent contract renewals reflected an average increase by about 5%, and this was primarily driven by elevated fuel prices and depreciation rates.

But contacts cited just a laundry list of costs rising, as Joelle mentioned.

Scally: In our report, we described it as a constellation of rising costs.

Gascon: I like that one.

Lindo Briggs: So, when you zoom out from all these details, what’s the general outlook among contacts? Are they sounding more upbeat, more cautious, or a bit of both?

Scally: Well, business outlooks were extremely varied amid widespread uncertainty. Here in New York’s district, businesses expected little improvement in the months ahead, although manufacturers were a bit more upbeat. Other districts, like San Francisco and Dallas, reported weaker economic outlooks as well.

Boston was interesting: Despite the slight decline in activity, contacts there remained optimistic on balance, although they did acknowledge that the Middle East conflict had created fresh uncertainty.

So, you’re seeing this real tension. There’s some resilience in the underlying economy, but a lot of caution.

Gascon: Here in the Eighth District, we described the outlook as cautiously optimistic, but contacts were attentive to risks to the economy.

Lindo Briggs: We need to wrap up, but before we do, are there any final insights or antidotes to share?

Scally: The story that really stuck with me was from our Community Perspective section. We heard from community organizations about low- and moderate-income households facing rapidly rising energy costs, and how utility bills are rising faster than incomes.

One food pantry operator described long lines and unusually high demand. It just really drives home that while we talk about these economic trends in aggregate, there are real people behind these numbers. And when we say that consumer spending is holding up overall, but there’s financial strain, this is what that looks like.

Lindo Briggs: That’s a great point, Joelle.

One more quick thing. Let’s discuss the elephant in the room: How many times do we say “uncertainty” in this Beige Book? You know people are going to count.

Scally: People are definitely going to count. I wasn’t keeping a running tally as we were putting it together, but it was a lot. There’s uncertainty about energy prices, tariffs, how long the conflict in the Middle East will last. And this is adding a real friction to business decision-making.

Lindo Briggs: Thank you both. This was a great conversation. I love how we’re working with our colleagues across the system to bring the national picture together with what we’re seeing across our District, and to make it meaningful and accessible to our listeners.

If you’d like to dive deeper into the latest trends across the Eighth Federal Reserve District, you can visit the St. Louis Fed’s website at stlouisfed.org.

The next Beige Book will be released on June 3, followed by our podcast on June 4.

Have a good day, everyone, and thanks for listening.