October 2024 Beige Book Interview – Little Rock

The St. Louis Fed’s Matuschka Lindo Briggs, senior vice president and regional executive of the Little Rock Branch, discusses economic insights from the latest Beige Book.
This 8-minute podcast was released October 24, 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, economist and research officer, discuss economic insights from the latest Beige Book release with a focus on the Arkansas region and the Eighth District.
Matuschka Lindo Briggs: Chuck, let’s jump right in with an overview of national economic conditions. I also would like to understand people’s sentiments.
Charles S. Gascon: On balance, economic activity was little changed in nearly all districts since September. Employment increased slightly during this reporting period, with more than half of districts reporting slight or modest growth, and the remaining districts reporting little to no change in employment. But there are reports of worker availability improving. And with that improvement in worker availability, contracts across multiple districts pointed to a slowdown in wage increases. So, I think that’s notable.
Lindo Briggs: We’re seeing a little of the same. Some manufacturers in Arkansas are still seeing competitive wage hikes when it comes to skilled labor.
Gascon: Yeah, absolutely. Some difficulties in that in that skilled labor session and difficulty filling those very specific positions.
Turning to inflation. Inflation pressures continue to moderate, although home prices have edged up slightly in many districts. But rents have reported reportedly been steady or down slightly. Multiple districts reported that input prices are generally rising faster than selling prices, and that’s putting some compression on firms profit margins.
Turning to the banking sector. Activity was generally steady or up slightly, and loan demand was mixed, with some districts noting that there is an improvement in the outlook due to the recent decline in interest rates.
Lindo Briggs: Thanks for kicking us off with a national overview. Since our last podcast, we both have traveled around various parts of Arkansas, but we’ve also had our advisory councils from our seven-state region traveled to headquarters in St. Louis to update us on conditions in various industries. We definitely have a lot to talk about today.
Let’s start with an Agriculture update. In Arkansas, contacts have shared, currently, row crop farmers see their income decreasing from last year and are concerned with their outlook. Input prices remain stable overall. Feed prices have gone down due to row crop prices also decreasing. I’m hearing that the livestock sector is seeing a strong demand for protein.
I’m also hearing that land values are doing well. So, we’re definitely seeing two sides of the coin here. Something that everyone is saying is that there’s just a lot of uncertainty in the outlook. There is election uncertainty, port worker strikes and of course the weather. How does all this compare with what you’re hearing throughout the district?
Gascon: Well, let me start with the weather. The hurricanes that came across the country over the last couple of months didn’t directly impact our district. We are seeing some remnants from those disruptions. For example, automobile manufacturers in Kentucky reported slowing production due to supply chain disruptions stemming from the devastation affecting plants in North Carolina. In context also, you know, anticipating the port worker strike was occurring, contacts reported building up inventories as anticipation of some disruptions playing out there.
So far that has resolved relatively quickly. So, they’re sitting out of elevated inventories. But, you know, despite the elevated level of uncertainty that we’re seeing in the economy, contacts were somewhat more optimistic about the longer-term outlook than they have been in the recent couple reports. So, I think that’s a really positive development.
Lindo Briggs: Yes, I’m seeing the same. And something that has bubbled up in every conversation I’ve had lately is consumer spending. We’re starting to hear that the pattern of consumption is finally returning to normal. Consumers are being very savvy with their dollars, and they are very price sensitive. Retailers and restaurants are aware that they need to be really careful in trying to pass higher prices down to consumers.
Small businesses are feeling the pinch, and the inconsistency in daily sales is really making it hard for them to budget. But I will say from parts of the Delta to Central Arkansas and even West and Northwest, the entrepreneurial spirit is still strong. Small businesses, like you said, they also remain optimistic. Are you hearing similar trends in consumer spending outside of Arkansas?
Gascon: I really am. Consumer spending is holding steady. Retail is still pretty strong, but probably a little bit below expectations for some retailers. You know, car dealerships in particular, noting that they’re seeing slower foot traffic. But when you move to the tourism and hospitality space, hotels across the district report that their room rates are still pretty steady. Occupancy rates are holding up and their bookings looking are looking pretty strong for the upcoming months as we as we move into the holiday travel season. We had a group of tourism hospitality contacts from the St. Louis area together at the Bank. And their outlook was pretty optimistic. So, I think that’s a welcome development, really consistent with what you were hearing across the state of Arkansas.
Lindo Briggs: A reminder that in this podcast we are sharing the economic conditions collected from outside contacts and reflected in the most recent Beige Book. That report came out yesterday, Oct. 23. You can find it on the St. Louis Fed website under research. Chuck, as I shared, we both have been traveling a lot. Is there anything that has really stood out or concerned you that you would like to discuss?
Gascon: Well, this isn’t necessarily a concern, but inflation still remains top of mind for many households and businesses. And I expect that’s also true for our listeners. Let me take a minute to dive into that a little bit deeper. As I mentioned earlier, inflation continues to moderate. But contacts do report that not all input prices are changing.
But some prices are increasing. And that’s reflecting businesses and suppliers who postpone price adjustments over the last couple of years, now finding themselves in a situation where they’re ultimately raising some of those prices. So, there’s a bit of a stickiness that’s showing up there. Contacts also reported across many different areas that they’re experiencing higher insurance costs, both in and housing and property and liability. And that continues to be a real pain point for many of our contacts. But overall, like I said, inflation pressures remain relatively modest.
Lindo Briggs: Before we wind down, I do want to do some quick hits from contacts we spoke to the last few weeks. As we mentioned, tourism dollars continue to flow in Arkansas and southern Missouri. Parks fared well and contacts say all outdoor activities continue to draw crowds. Manufacturing, it sounds like supply chain overall has gone back to normal, but demand remains down and it’s causing manufacturers to scale back on shifts. Lastly, I want to touch on academia and reports from colleges across Arkansas.
Most of them saw record enrollment across the state, which is just really great to hear. What did you hear when visiting the state last month?
Gascon: A lot of my focus was on the labor markets and understanding what’s going on there. And in that space contacts noted that hiring pressures were easing. They were experiencing lower turnover at their firms. And when they were posting positions, they had more people applying for those positions. So, that does suggest some easing in labor market conditions.
However, in many areas of labor market is still tight and businesses and even state agencies are having a difficult time matching employees to open positions. There’s just some skill mismatch that’s occurring there. For example, hospital contacts reported that the market for nurses and physicians continues to remain tight.
Lindo Briggs: Chuck, hard to believe, but the next time we talk, the elections will be over and consumers will be showing us if they plan to spend big for the holidays. Great discussion today, and thanks for joining.
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 Dec. 4, followed by our podcast Dec. 5.
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.