November 26, 2025
Summary of Economic Activity
Economic activity has remained unchanged since our previous report, with contacts continuing to report a slowdown in demand. Employment levels have remained unchanged. Prices have increased moderately, with contacts expecting price growth to increase over the next six months. Contacts reported that the federal government shutdown disrupted operations and has contributed to lower demand. Automobile manufacturing continues to be negatively impacted by supply chain disruptions from an aluminum plant fire in September. The outlook has slightly deteriorated and can be described as pessimistic because of increased risks of higher inflation and slower activity.
Labor Markets
Employment has remained unchanged since our previous report. Most contacts reported no change to employment levels, noting they are not hiring because of softening in demand. For example, a District manufacturing firm reported that demand was down and that this was affecting their hiring plans, a health services provider reported lower-than-expected volume, leading to lower employment and hours, and a staffing firm in Missouri reported delays in hiring.
Wage growth has been moderate. Some contacts noted that the lack of immigrant workers was putting slight upward pressure on wages. Contacts in the manufacturing, retail, and agriculture sectors reported ongoing wage pressures, while real estate contacts reported relatively weaker growth in wages.
Prices
Prices have increased moderately since our previous report. While inflation pressures have eased slightly compared with the previous quarter, a greater share of contacts expect price increases over the next six months. Firms continue to absorb a significant share of their cost increases and are only passing some price increases to customers because of softer demand. Similar to previous reports, contacts attribute the cost increases to tariffs, but also to insurance and utilities. One contact described their cost pressures as stemming from "inflation catching up from the past."
Consumer Spending
Consumer spending has declined modestly, with contacts attributing the slowdown to uncertainty and tighter budgets. Auto dealers reported that sales had fallen short of expectations as consumers were cautious with spending and some customers were also more credit challenged. Additionally, contacts noted that the elimination of the EV federal tax credit has negatively impacted EV sales. A retailer in Kentucky reported that they were experiencing a little rebound versus the beginning of the year; however, sales were down about 20 percent from the same time the previous year. Another retailer reported that they were scheduling employees for fewer hours because of lower sales and that they had ordered less inventory in anticipation of a slower year. Many hospitality contacts across the District noted that sales had not met expectations. A restaurant owner reported seeing fewer customers and declines in spending per visit. Another restaurant contact noted their daily regulars were now coming in just two or three times a week and not ordering full meals like they used to.
Manufacturing
Manufacturing activity was mixed; however, several firms reported that sales had fallen short of expectations. Food and beverage manufacturers reported solid sales. Automotive parts manufacturers reported slower activity in the past four weeks due to supply shortages from an aluminum plant fire in September; however, they expect activity to resume gradually as alternative suppliers become available. A St. Louis-based manufacturer reported that total sales had increased slightly but that this was due to price increases, as volumes were stagnant or a bit lower. Contacts' expectations for the next quarter were mixed. A Louisville manufacturer expects some pick-up in the next quarter, while a firm in Memphis expects a seasonal drop that will be worse than previous years.
Nonfinancial Services
Activity in the nonfinancial services sector has been generally unchanged since our previous report. Logistics companies reported continued changes in the shipping strategies of businesses. A Kentucky-based transportation firm reported slower-than-expected demand. Passenger transportation was mixed, and airport contacts reported delays and disruptions due to the government shutdown. A hospital in St. Louis reported continued growth and consistent operational improvement over the past several months. Professional services firms reported a slight decline in sales. Several businesses in St. Louis reported that sales had fallen short of expectations because business-to-business demand decreased and clients were hesitant to invest in non-essential services. Nonprofit organizations reported that demand for food had at least doubled since the government shutdown and that in many cases they were not able to meet the demand, having to turn people away.
Real Estate and Construction
Residential real estate activity has remained unchanged since our previous report. Real estate agents across the District reported that while sales had slightly improved relative to a year ago, they have not met their expectations. One contact reported housing inventory, while increasing, was still not at desired levels. Another contact noted that despite existing homes staying on the market longer, house prices were holding firm. A contact in Kentucky reported that in some cases people were building rather than buying older homes, as the cost of new construction was comparable to buying an existing home. However, the overall construction of residential properties remains low.
Commercial real estate contacts reported that the government shutdown and uncertainty were slowing sales and leasing activity. A construction business in St. Louis reported that work had slowed as there were fewer construction projects to bid on and that clients were less busy. An Illinois firm expects continued declines due to the lack of construction starts. However, others have noted an uptick in demand for industrial and retail space while having capital on the sideline waiting for lower rates.
Banking and Finance
Banking activity has remained unchanged since our previous report. Contacts reported that overall credit conditions remain strong. Loan demand has slightly declined, but bankers expect demand to pick up next quarter, especially for commercial real estate. Contacts also continue to note that consumer past dues and delinquency rates have been steadily increasing over the past few months, and they expect this trend to continue as many household finances are stretched and savings account balances are depleted. Bankers reported continuing to tighten their lending standards. An Arkansas banker reported that underwriting is expected to be tighter across the board.
Agriculture and Natural Resources
Agriculture conditions have remained strained but are slightly improved since the previous report. Recent low water levels in the Mississippi River have caused significant reductions in barge capacity and efficiency, resulting in further cost increases. A farmer in Mississippi reported that farmers are storing their crops and waiting for market movement to unload products, as supply is significantly above demand. Another farmer in Mississippi reported that conditions are starting to trend better, noting a slight increase in commodity demand.
Visit our Regional Economic Data and Reports page for more information about District economic conditions.