The Federal Reserve has reported that the regional economy experienced modest growth in recent weeks. Consumer spending on retail, restaurants, and leisure travel increased, although new vehicle sales saw a slight decline. Import activity surged due to natural growth and cargo diverted from Baltimore. The Port of Baltimore recently opened a limited access channel allowing most container ships to enter the harbor.
Residential real estate activity showed signs of improvement, as did some commercial real estate leasing; however, few new commercial construction projects were initiated. Labor markets improved but remained tight in terms of labor supply. Price growth was moderate overall.
Employment in the Fifth District grew at a moderate pace during the latest reporting period with mixed labor availability. A chartered bus company noted an improvement in finding quality candidates, nearing “normal” conditions. Conversely, a quick-service restaurant continued to face significant staffing challenges. Many firms highlighted the need for “quality” workers, and a seasonal outdoor recreational company struggled to recruit due to a lack of affordable housing.
Price growth slightly increased but remained moderate year-over-year. Service providers reported elevated price growth around 4 percent compared to approximately 2.5 percent for manufacturers. Businesses across sectors faced rising input and labor costs, with some unable to pass these increases onto customers fully.
Fifth District manufacturing activity remained unchanged recently, with companies citing margin pressures due to global competition. A precision metal fabricator reported halted work unless new projects could meet or beat international pricing standards. Similarly, a dental implant manufacturer faced increased labor costs and competition from cheaper global alternatives.
Ports in Virginia and South Carolina experienced strong import increases beyond additional volumes from Baltimore cargo diversions. While exports of textiles and apparel rose, agricultural goods exports leveled or decreased. Freight rates fell but ocean carriers continued adding surcharges for distance and hazards.
Rail demand at inland ports maintained record levels this year as manufacturers favored rail transport for its lower carbon emissions and reliability in supply chains. Trucking volume slightly increased while spot rates declined due to market oversaturation.
Consumer spending on retail and travel saw moderate increases despite tighter profit margins for retailers facing rising input costs they couldn’t fully pass on to customers. Spending on restaurants and leisure travel was driven by consumers with discretionary income; meanwhile, low-to-moderate income consumers reduced their spending or opted for less expensive goods due to higher costs impacting household budgets.
Residential real estate activity modestly picked up with an increase in closed sales and more homes entering the market compared to previous months though still below pre-pandemic levels of supply. Average sales prices rose modestly with quicker sales rates particularly for low- to mid-priced homes.
Commercial real estate activity also saw slight increases this period; retail leasing picked up while office leasing varied by property class—class A space saw slight increases whereas class B and C properties experienced declines leading to higher vacancy rates.
Financial institutions observed modest softening in loan demand primarily within commercial real estate and business loans attributed mainly to higher interest rates which also affected deposit levels leading them into modest decline amid high competition for available balances.
Nonfinancial service providers reported stable demand for services despite challenges in finding qualified applicants for positions as noted by staffing firms who cited higher interest rates limiting new capital expenditures along with inflationary pressures affecting business expansion confidence overall showing signs of stabilization concerning wages and workforce issues.
For more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis.
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