July 2024 Beige Book Interview – Little Rock

St. Louis Fed Senior Economist Charles Gascon discusses the latest Beige Book release with Regional Executive Matuschka Lindo Briggs.
This 7-minute podcast was released July 18, 2024, as a part of the Timely Topics podcast series.
The St. Louis Fed’s Matuschka Lindo Briggs, senior vice president and regional executive of the Little Rock Branch, and Charles Gascon, senior economist, discuss economic insights about the Arkansas region and the Eighth District from the latest Beige Book release.
Matuschka Lindo Briggs: Thanks for joining us for our economic snapshot where we discuss in eight minutes or less what’s happening across the state, as shared by businesses and industry contacts in the Little Rock Zone of the Eighth District. The information we share in this podcast is received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.
I’m Matuschka Lindo Briggs, the regional executive. Joining me today is Research Officer, Chuck Gascon, who is responsible for national and regional economic analysis at the Federal Reserve Bank of St. Louis.
Thanks for joining me today, Chuck.
Charles Gascon: Thanks, happy to be here. Always loved to chat about the economy.
Lindo Briggs: Before we get into the details on what we’re seeing in Arkansas, can you give us a summary of economic conditions nationally?
Gascon: So overall, the economy seemed to maintain that modest pace of growth that it had over that it’s had over the last couple of months. That being said, consumer spending was generally flat as auto sales declined. And many contacts across the this across the nation noted that that had something to do with the cyberattack that happened at dealerships and just slowing the sales down there.
Transportation activity started to turn around, with many retailers starting to pick up their holiday orders. They actually have to order your stuff now to make sure it’s in the stores in time for holiday shopping. So, those orders are picking up and that’s leading to an increase in transportation activity.
On the labor market, conditions remain pretty healthy, but there were some signs of weaknesses with employers noting that they’re being more selective on their hiring and maybe not backfilling as many positions as they have in the past.
On the inflation front, pressures seem to cool. And a lot of retailers are discounting their products to move sales and input costs are also stabilizing. So, that was a welcome development to hear from many businesses across the country.
Lindo Briggs: Okay. I want to get more into inflation. That was a great update. Now let’s dive into what I’m hearing in the Little Rock Zone. And key areas I want to cover today are consumer spending, inflation pressures and banking conditions.
Let’s start with consumer spending. It sounds like spending is trending downward. There seems to be a widening pattern of various storylines, I guess I could say.
For example, one story is consumers are cutting back on spending and going to discount stores. They are skipping the extras at fast food, meaning maybe, you know, they’ll just get the burger, just get the sandwich and not get anything else. They’re not buying or spending extras on any clothing, and they’re skipping name brand items at the grocery store.
How does that compare with what you’re hearing throughout the district?
Gascon: I think you hit a lot of the really key points. I would describe things as being a little bit more mixed. It’s definitely true, we’re hearing a lot of reports of consumers looking for deals, but they are still spending. So, when they find those good deals, those dollar outlays are still coming out there. And that’s showing up in some of aggregate data. But there is some slowing taking place there.
Due to higher interest rates, big purchases like automobiles are down and appliances and things like that that rely on financing. But again, if there are promotions that are in place, we are hearing reports that those products are moving. So, it’s just a matter of getting the right incentives in front of somebody and then they’re willing to still pull the trigger.
Lastly, I would say there’s a lot of reports that people are putting their money towards experiences. So, travel is up at airports across our district and across the nation, and social gatherings, events, concerts and things like that. They seem to be selling well. So, anecdotes that we’re getting from that side the economy tend to continue to be pretty strong.
Lindo Briggs: Yeah. And we’re hearing the same thing, both airports in Arkansas, things are up and things are going well.
So, that takes us into inflation. When you ask around or in your surveys, what are the responses you are hearing from organizations in the Eighth District?
Gascon: Well, overall prices continue to increase, that’s what inflation is. And as prices are increasing at a slower rate, we’re seeing the inflation come down. And that’s generally the story that we’re getting, which is prices are increasing but at a rate slower than what they’ve increased in the past. Despite expectations in some cases that businesses are seeing their costs climb, they’re not passing on all those costs to customers. It really just depends on the market power. If they if they’re able to pass on the costs, they will. But in some cases, they’re just not able to the way they were before.
On the commodity side of things, commodity prices have increased in recent months, as have shipping costs. Again, there are supply chain disruptions that have kind of arisen. And combine that with, again, holiday orders starting to come in. We’re seeing some improvements there, but that’s something that I definitely keep an eye on going forward.
And then housing and rents are a really big part of inflation and the supply of new apartments that has come on the market in the last couple of months, in the last year or so, is really helping to push down new rents. So, as more households renew their leases and go on to a new place, they’re finding that there’s options to get another month free down, or as those leases renew they’re just going to see that inflation pressure start to moderate a little bit. So, that’s a welcome development.
Lindo Briggs: So, similar story. I’m pretty much everything you said I’m hearing the same thing. Costs seem to be trending up for food, insurance costs. And then a random item, for instance, cement prices seem to be soaring. One thing I do want to mention is for nonprofit organizations, donations and pledges, we’re hearing that those are down. And that is a little concerning, especially with the recent events in our state. The tornadoes that we’ve had in northwest Arkansas and central Arkansas. So, the demand for those services are up. So, that’s something I just wanted to bring up.
A reminder that in this podcast we are sharing the economic conditions collected from outside contacts and reflected in the most recent Beige Book report, which came out yesterday, July 17th. You can find it on the Saint Louis Fed website under research.
Chuck, let’s touch on banking conditions before we wrap up today. As I visit bankers across the state, banking conditions for the most part remain stable in Arkansas. Some are trying to prepare for the future by filling reserves just in case. Past dues are starting to tick up. But still, for the most part, I’m not hearing about any major issues with delinquencies.
And rural community banks are struggling to find replacements in succession for upper management, but are leaning on training from within. What are you hearing around the region when it comes to banking conditions?
Gascon: Yeah, overall, I think conditions are stable. But banks are definitely adjusting their portfolios with their loans to match their deposits. There’s a lot of competition for deposits, and interest rates on our deposits have gone up. So those that makes it expensive for banks to keep those deposits. So, as a result of that, banks have tightened their lending as hard as they’ve tried to adjust these portfolios.
In some ways, they’re either passing on opportunities that show up or they’re looking for more equity on projects before they’re going to sign off on them just because they want that stability there. For example, construction lending has come down, pretty significantly. And some of that does seem like it’s self-regulated, as builders have cut down on the number of projects that they have. And again, with higher interest rates, it becomes more costly for that financing. So, that that loan that in on demand has definitely slowed. But overall, I’d describe conditions as stable at this point.
Lindo Briggs: Well, it’s great to have you, Chuck. It never seems like it’s enough time, but it’s so helpful for us to hear what is happening on Main Street in our entire footprint. For a full summary of what is happening in the Eighth District, visit the Saint Louis Fed’s website at stlouisfed.org. The next Beige Book release will be Sept. 4th, followed by our podcast Sept. 5th.
Thanks for listening.
Listen to previous episodes: Stream more interviews with host Matuschka Lindo Briggs.
View the latest Beige Book: The Beige Book is a Federal Reserve System publication about current economic conditions.