January 14, 2026
Summary of Economic Activity
Economic activity has modestly increased since our previous report. The uptick in activity was attributed to the end of the government shutdown and strong late-holiday sales. Employment levels were unchanged. Prices continued to increase moderately. Manufacturing activity slightly improved. District banks reported ending the year with strong growth in loan volumes. Agriculture conditions remain strained, with row crop supply greater than demand.
Labor Markets
Employment levels were generally unchanged since our previous report, and contacts continued to report little demand for additional labor. District job openings as of mid-December were slightly lower than one year ago. A truck dealer is considering suspending hiring for open positions but could easily ramp up hiring if demand picks up. A food retailer anticipates that most of their hiring in 2026 will replace departing workers. A health-care provider noted that voluntary employee turnover has continued to decline. On the other hand, construction contacts reported ongoing challenges attracting labor due to an aging workforce and fewer immigrant workers. Wage growth has been moderate. A truck dealer is budgeting for a 4 percent increase in labor costs for 2026. Agri-business contacts anticipate relief on wages as H2A regulated wages are expected to decline in 2026.
Prices
Prices have increased moderately since our previous report. Auto and truck dealers reported ongoing price pressures associated with import tariffs; however, manufacturers continue to absorb the cost of tariffs by reducing profit margins. One contact mentioned that customers are actively comparing prices on products across retailers and online channels as they shop. A manufacturer noted that they will not change prices mid-year to avoid inconsistent prices across advertising platforms. Restaurant industry contacts reported an inability to pass along higher costs to customers, which is leading to financial strains. A District airport contact reported that airline fares over the past month have ranged from stable to falling.
Consumer Spending
Consumer spending increased moderately, buoyed by stronger-than-expected sales late in the holiday shopping season. A multi-state retailer reported healthy growth in holiday sales: When packing boxes for delivery, the staff "could just feel" that sales were going to be stronger than one year ago. Holiday sales to corporate customers were also particularly strong. A logistics contact reported that holiday purchases skewed later in the season, as customers held off for deeper discounts as promotions drove much of the late activity. One retailer reported that the day after Christmas was one of the busiest days they saw all year. A District airport reported December travel was almost 10 percent higher than one year ago. The contact expects air travel will continue to grow in 2026 but at a slower pace based on the current number of flights scheduled. Retailers pointed out that favorable timing of holidays could boost sales in 2026. For example, Valentine's Day falls on Saturday and should generate stronger sales than last year, as people can shop on the weekend.
Manufacturing
Manufacturing activity has slightly improved since our previous report. A December survey of supply chain managers indicates that manufacturing activity increased slightly in both Arkansas and Missouri. Contacts reported ongoing weakness in new orders and production, as inventories remain elevated. A St. Louis area manufacturing firm expects their capital spending budget to decline in 2026 after major additions in 2025. One manufacturer noted than new orders from smaller customers have declined because of higher prices, which has led to excess capacity. Contacts in plastics manufacturing reported stronger demand, which was attributed to reshoring due to import tariffs.
Nonfinancial Services
Activity in the nonfinancial services sector has been mixed since our previous report. A health-care provider estimated their self-pay population will increase from 2 percent to 12 percent in 2026, which is likely to reduce revenues and bad debt. A warehouse facility in Arkansas noted that their tenants consistently reported better-than-expected performance throughout December. A local government in Southern Indiana noted they are starting to feel the strain from national funding cuts, particularly in childcare and food assistance programs. Government contacts in Southern Illinois noted that aging infrastructure is a major obstacle to new development in the region.
Real Estate and Construction
Residential real estate activity has remained unchanged since our previous report. One developer in Indiana noted that affordable housing development has stalled because of cuts to state and federal funding. St. Louis area realtors reported pending homes sales ended 2025 modestly lower than one year ago. Sales are primarily constrained by low inventories; demand has been holding stable, with average days on the market generally unchanged from one year ago and showings per listing up slightly. Flooring and window suppliers reported an easing in home construction as affordability concerns are holding back buyers.
Commercial real estate conditions have improved modestly since our previous report. Apartment rents stabilized in December after showing modest declines early in the fourth quarter. Apartment occupancy rates ended the year modestly higher in St. Louis, Springfield, Little Rock, and Louisville but were lower in Northwest Arkansas and Memphis. An owner of office and retail properties noted that tenants are becoming more cautious with investments to improve liquidity. An Arkansas commercial realtor noted that most commercial property markets remained solid, with the exception of class B/C office space.
Banking and Finance
Banking activity has increased modestly since our previous report. Overall loan activity among District banks was much stronger than one year ago, particularly among real estate loans and home-equity lines of credit. Commercial and industrial loan growth was modest, while consumer lending was slightly lower than one year ago. Contacts reported meaningfully tighter lending standards on business loans. Deposit growth picked up strongly in December, and overall deposits ended the year modestly higher than one year ago.
Agriculture and Natural Resources
Agriculture conditions have not changed since our previous report, with supply still outpacing demand. Mississippi River water levels continue to remain low, with reductions in barge capacity. However, port contacts reported no meaningful disruptions. Farmers have wrapped up the 2025 row crop season and are still struggling to sell crops they harvested in the fall. Winter wheat crops are fully planted, and crop farmers have begun to prepare for the spring planting. A timber producer reported a large oversupply but expects demand from mills to pick up based on recent announcements.
Visit our Regional Economic Data and Reports page for more information about District economic conditions.