June 2025 Beige Book Interview – Little Rock

Matuschka Lindo Briggs: Good afternoon, Chuck. Well, I’ve been on the road traveling in northwest Arkansas. What have you been up to the last few weeks?

Charles Gascon: I’ve been on the road a little bit, but last week, St. Louis was responsible for writing the national summary of the Beige Book. So, I got to read all 12 district reports from across the nation and follow up with some districts on what they were hearing, and understand a little bit what some of the words mean, write a few paragraphs and just do a quick turnaround. It’s kept me busy. I’m glad that we’re off the hook for about a year and a half, but I’ll be happy to do it again.

Briggs: Does not sound like an easy lift. So, can you share with us what you wrote in this summary?

Gascon: Yeah, absolutely, be happy to.

Reports indicate that economic activity declined slightly since our previous report. Half of the districts around the nation reported slight-to-moderate declines in activity. Three reported no change, and three reported a slight growth. So, a little bit of a mixed bag, but generally pointing toward slower growth.

All districts reported elevated levels of economic and policy uncertainty, and this was leading to hesitancy and a really cautious approach to business and household decisions.

Employment was little changed. Many districts reported lower employee turnover rates and more applicants for open positions, and there were some comments about uncertainty delaying hiring plans—those were pretty widespread, to say the least.

Prices increased at a moderate pace, but there were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward. A few districts described these increases as being strong, significant or substantial.

Turning to the outlook, it remains slightly pessimistic and uncertain, which is generally unchanged from our previous report.

Briggs: You shared common themes between the 12 districts, but were there any differences, any gems or quirks that really stuck out?

Gascon: I noted at a headline level that the outlook was unchanged from the last report, but there were some districts that noted that things were getting better and some that noted things had deteriorated further.

One of my favorite quotes was from a contact at a Wisconsin career fair that noted that attendance was good, and that there were fewer candidates wearing pajamas. So, I think that really gives us an idea that quality of labor has improved.

Some others that caught my eye were from a South Carolina real estate agent, which told the Richmond Fed that deals had dropped with pens in hand—companies freeze because they can’t figure out the rules of this tariff game.

Briggs: I have heard that—I have.

Gascon: A manufacturer told the Dallas Fed that right now they’re working on triage, and they will worry about diet and exercise later.

Briggs: Interesting spin on wordsmithing; those were fun to hear.

You mentioned that all districts reported elevated levels of trade policy uncertainty, leading caution among businesses and households. This is a continuing theme from our previous report. Any further insights in this report on how or what caution means and the effect of uncertainty?

Gascon: Let me take it in two ways: first, talking about the labor market and then a little bit on consumer spending.

So, on the labor market, this was delaying hiring plans and generally reducing the demand for labor. Some businesses were reducing hours worked or overtime hours, instituting hiring pauses, putting staff reduction plans out there so they were ready to go if that had to be the case. There were some reports of layoffs in certain sectors, but these layoff reports were not pervasive.

Turning to the consumer side, spending reports are really mixed. Most districts reported slight declines or no change. But there were pockets of strength where goods that were expected to be affected by tariffs were selling quite strongly. But many contacts expect their sales to slow in the coming months. I think it’s going to be interesting to see how consumer spending plays out in the next couple of months.

Briggs: I will say, in our region, we had a logistics contact from St. Louis report that recent increased demand could be attributed to stockpiling to avoid higher tariffs in the future.

Gascon: Absolutely. A contact at the Richmond Fed reported that demand for bonded warehouse space has gone through the roof. These are shippers looking for space to hold cargo near ports and wait out any changes in tariffs.

Briggs: [An Eighth] District manufacturer reported that they had modified their receipts to display a 7% increase in cost due to tariffs, but that this line could easily be removed if tariffs were no longer in place. Also, a hotel owner reported that vendors have warned of cost increases due to tariffs but have not yet published new prices.

Gascon: Absolutely. One of the things that there did seem to be some agreement on was that costs and prices are expected to increase as a result of tariffs. However, how businesses were responding was varying. Some, as you mentioned, are looking at these temporary fees and surcharges; others only on the specific items being affected.

But there were other contacts that were spreading it out across all items or even reducing profit margins if necessary. What did show up is that a couple of districts, including ours in St. Louis, noted that when tariff costs were increasing, they expected to pass on those costs within the next three months.

Briggs: I mentioned manufacturing earlier, and I want to elaborate a bit more. I can tell from our contacts that manufacturing firms are struggling in this environment. District manufacturers reported slight declines in new orders. One contact noted the decline in orders has led to an overstocking in inventories and decreasing production. Some District manufacturers are creating plans to regionalize their supply chains rather than relying on a global network. Are manufacturers in other districts having a similar experience?

Gascon: Most districts reported a decline. As you said, things are complicated, to say the least. In Boston, sales were up slightly for manufacturing. The New York Fed reported that some businesses were seeing increasing inquiries from clients looking to re-shore manufacturing—similar to that regionalization piece.

The Cleveland Fed actually reported that they saw the decline in their last report and then some stabilization. So that’s a bit different. The Chicago Fed—which is a good place to go for reports on auto production—they noted that auto production had declined at a moderate rate, but for heavy-duty trucks and medium-duty trucks, production fell sharply.

Briggs: Well, I think we can safely say that the underlying theme thus far is the impact of changes in trade policy uncertainty.

Let’s shift gears toward the services side of the economy. The summer travel season is just ahead of us, and I’m thinking these sectors shouldn’t be directly affected by trade policy. Recreation and hospitality contacts in our District reported on net a slight increase in activity. The northwest Arkansas contact shared that consumer eating has changed. People are going out less; fast food and drive-through or fresh, healthy delivery from grocery stores are the new norms for putting food on the table.

But if they are eating out, one restaurant owner noted that customers were skipping the appetizer and dessert—that sounds like the cautious approach you mentioned earlier. What are we hearing about tourism across the nation?

Gascon: One thing that stood out was that districts along the Canadian border had reported a slowdown in Canadian tourists. For example, a tourism contact in Montana noted that they had a 20% decline in Canadian visitors.

But tourism activity in New York City has held steady. Broadway ticket sales remain pretty solid. But again, those contacts anticipate a decline in international visitors coming into New York City in the coming year.

With respect to airline travel, reports from the Dallas Fed indicated some waning demand for leisure travel, and they attributed this to declining consumer sentiment.

On the flip side, the Atlanta Fed noted that group travel seems to be recovering based on forward-looking bookings.

Briggs: As we close, I’ll repeat something that you started with, as I think it sums up this report: Elevated levels of economic and policy uncertainty have led to hesitancy and a cautious approach to business and household decisions. I think we need more time to see how this all plays out over the next few months.

Chuck, thanks so much for breaking this all down for us, as usual.

For a full summary of what is happening in the Eighth Federal Reserve District, visit the St. Louis Fed’s website at stlouisfed.org. The next Beige Book release will be July 16, followed by our podcast July 17.

Thanks for listening.