The Federal Reserve reported that the Fifth District economy showed mild growth recently, though the region faced challenges across various sectors. Reports on consumer spending varied, with some businesses experiencing an uptick in sales due to improved weather. Yet, others faced a decline linked to consumer confidence and job security concerns among federal workers. Manufacturing and financial services maintained steady demand, while nonfinancial services experienced a modest decline due to increased client uncertainty. Residential and commercial real estate activity increased slightly.

The Fifth District's employment levels, in general, were unchanged. Many federal workers have been laid off or placed on administrative leave. This reduction in the federal workforce has impacted district businesses. Federal contractors also laid off staff following spending adjustments. A research organization outside the DC region and a Northern Virginia consultancy reduced headcount by 25% due to contract losses. Employers outside the government sector reported improved labor availability and moderating wage pressure, though manufacturing and skilled trades still highlighted skill availability as a concern.

Price growth edged up recently, staying moderate over the year. Some firms raised prices due to tariff-induced cost increases, affecting investment decisions. Manufacturing activity remained unchanged but was expected to decrease soon due to uncertainty and tariffs. A sheet metal fabricator expressed concern over future orders due to steel tariffs. Similarly, several manufacturers paused investments amidst market uncertainty.

Overall cargo volumes decreased slightly, with variations between ports. February saw a brief return to normalcy after resolving labor agreements, but recent weeks saw volatility tied to tariff announcements. Notably, farm and construction equipment saw declines after steel and aluminum tariff enactments. Loaded exports decreased significantly, with one port noting a 25% month-over-month decline. There was concern over the proposed port call tax on Chinese vessels, which could raise cargo handling costs significantly. Multi-million-dollar tariff bills on Chinese cranes already en route also emerged as an issue.

Consumer spending remained flat, though reports were mixed. Some retailers saw improved sales as the weather became more favorable. Others, particularly in Virginia and Maryland, reported declines due to consumer sentiment linked to federal job uncertainties. Travel and tourism contacts similarly offered mixed reports. Residential real estate activity increased slightly, with more homes available and buyer traffic down. Homebuilders and brokers voiced concerns over tariffs impacting raw materials and housing affordability. However, high-end homes continued to sell.

Commercial real estate saw slight growth despite sector hesitations. Multifamily construction persisted for ongoing projects, but fewer new undertakings received the green light. Retail and restaurant space demand remained strong. Despite some major retailers closing, office space vacancies decreased as more companies brought workers back. Financial institutions noted steady loan demand overall, though commercial real estate loans experienced a slight decline.

Nonfinancial service providers forecasted ongoing modest demand reduction. An architectural firm reported a robust start to the year, but tariff threats and economic uncertainty have impacted their business outlook. Several service providers connected to federal funding expressed concern, indicating potential workforce reductions and seeking alternative revenue streams.

For further details on economic conditions in the district, interested parties can visit the Richmond Fed's website.