Beige Book report shows slow economic growth in Missouri's Fed districts as costs rise

Both Missouri Federal Reserve Bank districts registered slight economic growth in late May and June, while businesses reported climbing costs and tighter profit margins, according to the latest Beige Book report released on Wednesday.

The Beige Book report is published by the Federal Reserve eight times a year, with anecdotal information on the economic conditions from a variety of sectors across the 12 Fed districts.

St. Louis District

In the Eighth District, economic activity increased "slightly" compared with the previous report. Employment was unchanged overall, and wages grew at a moderate pace. Prices, however, increased at a "robust" rate across many types of businesses.

The outlook is essentially flat, as respondents pointed to ongoing uncertainty and elevated fuel costs tied to the Middle East conflict as key drags on overall business sentiment.

Manufacturing showed a mixed picture. A food-processing company said it plans to close a local plant for technology-related reasons, while some Missouri manufacturers have paused hiring as rising operational costs and tariffs reduced profit margins.

Cost pressures appeared across industries. An electricity provider reported sharp increases in the price of energy-infrastructure materials due to supply-chain shortages. A large retailer said broad increases in nonlabor input costs led it to plan price increases for customers soon, while an agribusiness contact said fertilizer-driven cost pressures are expected to persist through 2027.

Consumer spending mostly remained unchanged. A large retailer said customers are making more frequent trips but buying less. A St. Louis social-service nonprofit reported that demand for meals has jumped about 30% over the past two months, which it attributed to declining purchasing power and cuts to Supplemental Nutrition Assistance Program benefits.

Real estate activity was also mixed. A St. Louis-based agent described a very active local market, with buyers making cash offers and waiving inspections, while demand for higher-end homes eased in other parts of the district. Banking activity was stable to slightly weaker, with some lenders reporting rising delinquencies among lower-income borrowers and small businesses.

Kansas City District

In the Tenth District, economic activity expanded slightly. Manufacturing activity continued to improve, with higher shipments and production, even as firms continued to struggle to find skilled workers, particularly machine operators and welders.

An employer said employees have become increasingly willing to change jobs for as little as a one-dollar-per-hour pay increase. Some workers are even willing to commute up to 45 minutes for slightly higher wages. On the whole, firms expect slight employment growth over the next six months.

Prices increased moderately within the Tenth District. Inflation continued to squeeze profit margins despite improvement in business activity. Many companies responded by selectively raising prices and investing in cost-saving technologies.

Consumer spending remained flat overall, as modest declines in auto sales and general retail were offset by continued strength in travel, tourism, restaurants and drinking establishments. Bankers noted early signs of increasing household financial stress.

Capital spending improved as firms pursued facility expansions and relocations to take advantage of enhanced investment expensing provisions.