April 15, 2026
Summary of Economic Activity
Economic activity in the Seventh District increased slightly over the reporting period, though contacts expected no change in activity in the coming year. Manufacturing demand rose modestly; consumer spending increased slightly; employment, business spending, and construction and real estate were flat on balance; and nonbusiness contacts saw no change in economic activity. Prices rose moderately, wages rose modestly, and financial conditions tightened modestly. Farm income expectations for 2026 declined some.
Labor Markets
Employment was unchanged over the reporting period and contacts expected a slight increase in hiring over the next 12 months. Contacts overwhelmingly reported stable labor market conditions, with low turnover and a wait-and-see approach to hiring. A contact at a temporary employment agency said demand was up as companies hesitated to hire long-term employees amidst elevated uncertainty. A manufacturer said they had instituted a hiring freeze in anticipation of higher input costs related to the conflict in the Middle East. That said, a few contacts continued to report interest in hiring and some had challenges finding skilled workers. In addition, a contact at a state economic agency noted fewer layoff notices compared with the same time last year. Wages rose modestly and benefits costs were up moderately.
Prices
Prices rose moderately overall in late February and March and contacts expected a similar pace of growth over the next 12 months. Producer prices increased at a moderate rate. Nonlabor input costs rose moderately, with manufacturing contacts highlighting higher prices for raw materials, including steel, copper, and chemicals. Contacts across industries noted higher energy and shipping costs and attributed the increases to the conflict in the Middle East. One contact said that some (typically larger) retailers had not yet seen shipping costs go up because they had locked in prices in prior months. Consumer prices rose moderately. Several contacts noted that gas prices had risen significantly since the start of the conflict in the Middle East.
Consumer Spending
Consumer spending increased slightly over the reporting period. Contacts largely indicated that so far, the conflict in the Middle East had not had a noticeable effect on consumer spending. Non-auto retail spending rose modestly overall. Consumers continued to favor off-price apparel and accessories and increased their share of spending on groceries and personal care items. Durable goods sales were steady, with one analyst noting that replacement demand is present, but there is not much discretionary demand. Leisure and hospitality spending declined slightly on balance. Contacts reported weaker spending at entertainment venues and restaurants. Hotel occupancy was up modestly, but growth cooled from the prior reporting period. New and used light vehicle sales picked up but fell short of expectations for the beginning of tax refund season.
Business Spending
Business spending was unchanged in late February and March. Capital expenditures were flat, but contacts expected a slight increase in spending over the coming year. Demand for truck transportation was steady, and rates increased as higher fuel costs were passed through to customers. Retail inventories were lean overall, including stocks of new and used vehicles, which moved lower. Manufacturing inventories were a little high. A few manufacturers reported shortages of tungsten and some expressed concerns about the potential for chemical shortages due to the conflict in the Middle East.
Construction and Real Estate
Construction and real estate activity was flat on balance over the reporting period. Residential construction decreased slightly. Contacts noted that it was difficult to start new projects in the multifamily space because of high costs for a range of items, including property management services. Residential real estate activity was down slightly and fell short of expectations. Prices and rents were unchanged. Nonresidential construction edged up, led by growth in select industrial categories, like warehouse and distribution, and interior buildouts of existing space. Project pricing increased slightly. One contact reported greater wage pressures for electricians, who were being offered substantially higher wages by data center developers. Commercial real estate activity was unchanged. Many office tenants signing new leases were opting for smaller spaces. Prices increased slightly, while rents and vacancy rates were unchanged.
Manufacturing
Manufacturing demand rose modestly in late February and March. Chemicals, plastics, and rubber production increased modestly, driven by greater demand from the pharmaceutical and semiconductor industries. Primary metals manufacturers reported a slight increase in demand, highlighting growth from the defense sector. Fabricated metals sales grew modestly, with contacts reporting stronger orders from the construction and defense industries. Machinery sales also increased slightly. Auto production edged down, while heavy truck production grew moderately. Many manufacturers reported their businesses hadn't been affected by the conflict in the Middle East to date, but some expected increased orders from the defense industry and some predicted cost increases and shipping delays.
Banking and Finance
Financial conditions tightened modestly overall in late February and March. Bond values decreased modestly, equity values fell moderately, and volatility rose noticeably. In contrast, business loan demand increased moderately on net and several contacts reported a healthy M&A market. One contact noted higher lending to the trucking sector and a few others saw growth from the construction industry. Business loan quality was flat overall, rates fell slightly across the board, and terms were unchanged. In the consumer sector, loan demand was flat overall, and one contact noted that borrowing for discretionary items like RVs was unchanged despite stronger promotions. A few contacts noted higher refinancing and HELOC activity, though the growth rate slowed. Loan quality decreased slightly while rates and terms were unchanged.
Agriculture
Expectations for 2026 District farm income declined overall during the reporting period as input costs rose faster than agricultural product prices. Fertilizer and fuel prices increased, though a substantial share of farmers had preordered fertilizers and locked in pricing prior to the reporting period. Contacts said that some farmers would plant more soybeans and less corn than originally planned because soybeans require less fertilizer. Corn, soybean, and wheat prices increased over the reporting period as did cattle, hog, egg, and dairy prices. Sales of used farm machinery increased. Specialty crop producers that hire H-2A workers expected greater profitability in 2026 after policy adjustments lowered H-2A wage rates.
Community Conditions
Community, nonprofit, government, and other nonbusiness contacts reported stable economic conditions over the reporting period. Some contacts saw signs of softening in the labor market as indicated by significant increases in applicants for open positions. Comments from state government and municipal contacts reflected concerns about rising prices and a weaker job market, as well as uncertainty in light of the conflict in the Middle East. Small businesses continued to observe lower foot traffic along commercial corridors in immigrant communities. For low-income consumers, contacts reported that the higher cost of gas had further stretched household budgets, putting added pressure on other community supports, such as food pantries.
For more information about District economic conditions visit: https://chicagofed.org/cfsec.