July 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 the Eighth District and across the country. 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 you can read it at stlouisfed.org.

On today’s podcast, we are going to discuss what was summarized both from across the nation and in the St. Louis district.

Hello, I’m Matuschka Lindo Briggs, the Little Rock regional executive for the St. Louis Fed. With me today, I have Elizabeth Kepner from the Chicago Fed and Chuck Gascon from the St. Louis Fed.

Elizabeth and Chuck, how are you?

Elizabeth Kepner: Hi, Matuschka. Hi, Chuck. I’m doing well, thanks.

Charles Gascon: It’s great to be back.

Lindo Briggs: This week’s national summary was put together by Elizabeth and the Chicago Fed team. I’m excited to have her share what they are seeing and hearing across the country.

Elizabeth, I’m going to let you lead us off with what stood out most in this Beige Book.

Kepner: Overall, I would say that things look similar to the previous reporting period. The economy kept growing, though only at a slight-to-moderate pace. San Francisco was really the only district reporting economic activity being largely stable. Consumer spending crept up because of higher prices, especially fuel. But higher costs have seen many consumers trade down to budget-friendly items and dampen discretionary spending.

However, travel activity increased, helped in part by World Cup visitors in districts other than our own.

Across the country, businesses keep saying the same thing: AI is changing how they work. Companies are speeding up hiring, looking to boost productivity and driving demand for new data center build-outs. In San Francisco, some firms are reporting on testing how well their teams can work alongside AI in their workflow.

Lindo Briggs: We’re hearing similar things in our district.

Chuck, are there any signs that demand will begin to soften more, or will consumer spending continue to creep up? Also, is it tied to certain products, or certain types of consumers?

Gascon: I’ll share some insights from what we’ve been hearing, and I’ll pass it off to Elizabeth to share a little bit more on this topic.

Overall consumer spending in our district was relatively unchanged. We did hear signs of potential softening and demand for consumer spending.

Contacts reported price-sensitive customers. A large retailer reported that customers were making more trips to the store but spending less overall; they were just buying items that were on their lists.

Tourism and hospitality contacts saw similar trends, with many people opting to wait until the last minute to book travel, hoping to get a better offer. Others rolled back some of the price increases to try to attract more customers to their stores, to their establishments.

Kepner: I agree. Consumer spending is really starting to show some slowdown across all types of consumers. High-income earners are still spending and are fairly resilient. For example, New York is still reporting strength on luxury items, but there have been some reports of softening decline. Atlanta reported that higher-end consumers and restaurants were starting to shift toward more value-based options.

In our district specifically, consumer spending ticked up, but people were clearly being more careful with their money. Higher energy prices were nudging shoppers to rethink purchases, even as early Amazon Prime days and other discounts helped boost activity.

In the auto market, hybrid demand stood out. Used-car prices rose, and some drivers even started delaying routine maintenance to save a little cash.

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

Kepner: Sure. Let me share a few things on real estate, because that’s an interesting divergence that’s happening.

On the residential side, housing market activity softened across several districts. There’s heightened uncertainty combined with rising mortgage rates, and this really dampened buyer demand. In our district, homebuilders and renovators saw smaller projects and weaker backlogs.

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

Lindo Briggs: Elizabeth, let’s shift our focus just a bit. Are there any specific insights or developments from the Chicago district that you would like to highlight for us?

Kepner: Yeah, I’ll touch on something that we’re seeing not only in our district, but across a couple of others as well, and that’s the strength of manufacturing demand. We saw manufacturing demand pick up in the Seventh District across a variety of sectors, including fabricated metals and machinery production. Many of these sectors saw increases due to defense production and data center build-outs. This is happening even as manufacturers saw increases in supply chain issues and some higher input costs this round.

Lindo Briggs: So glad you brought up manufacturing. We are also seeing a notable increase in manufacturing demand here in Arkansas, especially in the defense industry. Many major employers are actively expanding their operations, bringing job growth and new investments. You know, this momentum is mirrored across the state in the manufacturing sector. As a whole, we’re seeing demand in aerospace, plastics and industrial construction.

All right. Let’s move to jobs. Elizabeth, what does the national picture on the labor market look like?

Kepner: I’ll start with the big picture: Employment is ticking up overall. In fact, five districts are seeing modest-to-solid gains. This is a noticeable shift from the last report, where really only one district showed that kind of momentum. Most other districts are basically holding steady, with little to no change.

This pickup isn’t confined to one corner of the economy. We’re seeing more hiring in manufacturing, construction, retail—it’s a broad mix. It’s not a hiring boom, but steady gains are spread across several major industries.

Now, even with those gains, the story hasn’t changed much when it comes to skilled workers; they’re still hard to find. Technicians, tradespeople—employers are really competing for them. That competition is pushing wages up modestly to moderately in most places. So, a couple of districts are seeing only slight bumps.

Gascon: I’d like to add a little bit more here on the difficulty of hiring skilled workers. We heard from a healthcare contact that they still can’t fill positions that require certain licenses, and a local development authority contact reported that firms are having to lean into contract workers to meet demand for some of those skilled positions that Elizabeth mentioned.

However, firms are still concerned about over-hiring. For example, a consulting firm noted that they’re seeing an increased use of fractional staffing services to limit full-time hiring and manage their costs.

Kepner: Looking to make workers more efficient or eventually reducing hours has come up in many district reports.

AI continues to come up in conversations as a tool to boost current staff productivity and efficiency. While most districts said AI hadn’t yet significantly impacted overall staffing levels, some noted that these productivity improvements had enabled firms to delay or reduce hiring.

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

Lindo Briggs: I don’t have much to add except to confirm what both of you have said. I’ve not heard of any major layoffs either; mostly dwindling numbers of staff due to attrition.

I hear mixed reports on workforce. Decent candidates are available, but turnover is slightly ticking up, even in entry-level positions. In rural areas, labor remains a challenge for many small businesses when it comes to hiring and retention.

Now, let’s take a look at inflation, looking at prices. Elizabeth, let’s start with you.

Kepner: Overall, prices are still climbing moderately. Most regions say things aren’t getting worse, and in some spots, price growth is even slowing relative to last period.

A lot of businesses are feeling squeezed. Energy, transportation and raw material costs jumped partly because of Middle East tensions and tariffs. Some firms say their own selling prices aren’t rising fast enough to cover those higher costs.

Looking ahead, expectations are mixed. Some contacts think inflation will keep moving along at the current pace, while others expect things to cool, especially if fuel prices ease.

Lindo Briggs: I want to add that most of my contacts in Arkansas say gas prices have been a continued struggle. Although overall conditions seem to be stabilizing, local businesses are still feeling ongoing increases in everything we talk about—food costs, utilities, insurance and supplies.

Chuck?

Gascon: Our contacts reported that they are observing higher costs across all the products that you just mentioned. In many cases, they need to pass those on to customers over the coming months and spread them out because of this price-sensitivity issue.

A Memphis area firm observed that their vendors are actually adding inflation index price adjustments to their service contracts as a way to manage their pricing and costs going forward.

Contacts have cited a laundry list of costs rising, and now they’re adding into it additional factors such as structural steel and copper. And a lot of that’s driven by strong demand for data center construction.

Lindo Briggs: So, stepping back from all these details, how would you describe the overall sentiment among your contacts? Are they leaning toward optimism, maintaining a cautious stance, or perhaps just showing a mix of both?

Kepner: The outlooks were varied amid widespread uncertainty, but there was a general feeling of slight improvement or things to be the same in the coming months. Chicago contacts generally expected a slight uptick in activity in the coming year. Districts such as Kansas City and Cleveland also were expecting some growth, and Boston and New York are seeing some businesses reporting to be more optimistic. So, we’re seeing slight optimism for improvement, but a lot of caution is still being carried.

Gascon: Here in the Eighth District, we describe the outlook as unchanged from our previous report, with cautious optimism and uncertainty weighing on the outlook for overall economic conditions.

Lindo Briggs: Okay. We’re coming to an end here. We have covered some key topics—consumer spending, labor, inflation—and touched on several anecdotes.

Are there any final thoughts either of you want to share?

Kepner: I’ll just add that across several districts, farm income expectations edged down over the reporting period. This is in part due to lower commodity prices and higher input costs.

Gascon: Just to wrap things up&mellip;On the consumer side of the economy, and household side of the economy generally speaking, that look is a bit weaker. While on the other side of the economy, in manufacturing, data center construction and the AI build-out, that’s where we’re hearing much more bullish reporting and context.

Lindo Briggs: Thank you both. We’re out of time. Truly enjoyed your insights and this total conversation.

For a deeper dive of what’s happening around the Eighth Federal Reserve District, you can visit the St. Louis Fed’s website at stlouisfed.org.

We will be back again with the next Beige Book release on September 2, followed by our podcast on September 3.

Take care, everyone. Thanks for listening.