Beige Book Report: Atlanta
April 23, 2025
Summary of Economic Activity
The Sixth District economy grew slightly, on balance, over the reporting period. Labor markets were little changed, but some firms noted plans for slight reductions in headcount amid softening demand or rising cost pressures. Wages, nonlabor costs, and firms' prices rose modestly. Consumer spending fell slightly, and travel and tourism activity declined at a modest pace. Home sales rose modestly, home inventories increased, and affordability declined further. Commercial real estate conditions weakened. Transportation activity rose slowly, and manufacturing decelerated. Loan growth was flat. Energy activity grew at a slow pace, and agricultural demand declined somewhat.
Labor Markets
Employment was little changed from the previous report. Many firms reported fairly stable demand for workers and roughly flat headcounts. However, a small but increasing share of contacts noted plans for slight reductions in force as a result of softening demand or mounting cost pressures. Some contacts mentioned concerns about uncertain international trade policy further moderating demand, which could trigger additional downsizing. While not a majority, several firms have seen a drop in labor supply amid tightening immigration policy. Concerns about future labor constraints have grown in several sectors but were especially pronounced in construction and agriculture.
Wages grew modestly since the February report. Most contacts expected 2025 wage increases to be similar to those seen in 2024. Some pointed to the rising cost of living as putting upward pressure on wages, but the bargaining power continued to shift from employees to employers.
Prices
Prices and nonlabor costs increased modestly. Price increases, both realized and expected, were largely attributed to the direct and indirect impacts of trade policy. Many firms raised prices amid higher costs resulting from tariffed inputs, and even some firms not directly impacted cited tariffs and less foreign competition as a trigger for price increases. Most contacts expect to pass through the cost of tariffs, even if it means a drop in sales; however, some consumer-facing firms noted increased price sensitivity among customers has led them to be strategic with targeted pricing. Inflationary trends prevailed across sectors, signaling that the effects of trade policy are spreading and are no longer limited to the goods space.
Consumer Spending
Consumer spending declined modestly. Some retailers noted a decrease in foot traffic, and consumers increasingly opted to eat at home instead of at restaurants. Apparel retailers reported softer demand and expressed concerns about sales falling further amid the added cost of tariffs, since most apparel is imported. Demand for furniture, which was already weak, continued to fall. There were also ongoing reports of consumers trading down to value products or bulk purchases.
Travel and tourism activity declined modestly. Hoteliers noted slight decreases in occupancies, and guests shortened stays and reduced discretionary spending on property. Business travel fell. Live entertainment venues saw declining ticket sales. Large attractions that normally draw international visitors saw a drop in travelers from abroad, particularly Canada, and airports and airlines reported a notable decline in foreign passengers to the U.S.
Construction and Real Estate
Home sales improved modestly since the previous report, in line with seasonal trends. Existing home inventories grew moderately, with some markets, like southwest Florida, rising more sharply. However, most markets continued to see inventory shortages, causing steady upward pressure on housing prices. This, combined with elevated mortgage rates, has driven home ownership affordability to historic lows. Demand for new homes ticked up though was below expectations, and homebuilders continued to offer incentives to promote sales. Homebuilders' optimism waned amid rising costs, labor and lot shortages, and a shrinking pool of buyers.
Commercial real estate activity weakened. Challenges remained in the multifamily segment, though demand accelerated somewhat through expanded concessions amid elevated vacancy rates. Office activity was bifurcated, as newer buildings experienced stronger leasing and sales rates than older properties requiring upgrades or offering fewer amenities. Demand for industrial space was sluggish, and warehousing capacity rose as new properties came online. Widespread uncertainty along with tightened lending standards slowed investment decisions.
Transportation
Transportation activity rose modestly, on balance, over the reporting period. Some ports experienced significant year-over-year increases in container volumes and a rebound in roll-on roll-off shipments following a decline in February. Intermodal rail shipments increased, and total traffic improved from year-earlier levels. Demand was mixed for inland barge carriers, with one reporting steep declines in coal exports and other commodities, and another noting stable freight volumes but an expectation for weakening activity amid growing concerns by exporters over reciprocal tariffs. Freight brokers saw a sharp drop in average loads per day after months of strong demand as importers pulled inventories forward ahead of new tariffs. Lack of clarity around international trade policies was noted as the biggest risk to the outlook.
Manufacturing
Manufacturing activity declined slightly since the previous report. A beverage producer noted softer sales. Contacts in lumber and wood products manufacturing experienced slowing demand amid ambiguity surrounding tariffs—one firm noted having "zero faith in even a 6-month forecast," and that the biggest hurdle to expansion and mergers and acquisitions was not knowing how trade policy will settle out. Conversely, a steel fabricator reported record backlogs with the most strength coming from federally funded projects. Several manufacturers reported slowing or pausing capital expenditures because of economic uncertainty.
Banking and Finance
Loan growth at Sixth District financial institutions was flat, on net, over the reporting period. While there was robust growth in the multifamily lending category, consumer loans, excluding autos and credit cards, contracted sharply. Cash-to-assets ratios saw a moderate decline as cash balances fell and assets held steady. Deposit balances and borrowings declined proportionately, leaving loan-to-deposit ratios unchanged. Banks reported no significant increases in delinquencies.
Energy
Energy activity grew slowly. Liquefied natural gas production remained an area of strength in the oil and gas sector, both domestically to fuel data center expansions and for exports abroad. Utility company contacts reported growth in the commercial and residential segments but noted that industrial activity had slowed. Energy contacts expressed concern over tariffs on imported crude oil and refined petroleum products, as well as equipment and parts used for chemical plant construction. Some firms described uncertainty about economic conditions in the short term, but most remained upbeat about the long term, given strength in energy and power demand.
Agriculture
Agricultural activity declined slightly. Dairy farmers saw demand soften, partially attributed to decreased exports of cheese to Mexico. Cattle ranchers continued to note strong beef sales and higher prices amid limited supply. Demand for chicken was strong. Egg supplies continued to be limited by cases of Avian Flu. Demand for timber remained low. Contacts reported moderating demand for fruits and vegetables. Cotton, grain, and other row crop growers continued to struggle. Farmers were concerned about increasing costs of fertilizer imports given trade policy changes.
For more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics.