Skip to main content

January 2023

Eighth District Beige Book

Summary of Economic Activity

Economic conditions have remained unchanged since our previous report. Contacts reported tight labor markets but continued improvement in their ability to hire and retain workers of all skill levels. Firms continued to report input price increases, but the rate of increases has slowed as supply chain bottlenecks have eased slightly; manufacturing and healthcare firms reported that lead times for key inputs have improved over the past month. Consumer spending was mixed during the holiday season; some retail and hospitality contacts noted that activity was hampered by winter storms across most of the region during the holidays. Homebuying activity has slowed even beyond normal seasonal trends, and banks reported that loan demand slowed moderately.

Labor Markets

Employment has remained unchanged since our previous report. The unemployment rate in the region has remained low, and many companies still reported being understaffed. Organized labor and staffing contacts reported high demand for workers who could fill positions immediately. A retail contact in Memphis noted difficulty in filling open positions and retaining employees. However, several firms reported slightly higher staffing levels and more applicants for open positions.

Wages have grown slightly since our previous report. Staffing shortages persist, and companies are continuing to raise wages to attract and retain new workers. One Arkansas brewery offered loans to employees to help with housing costs and considered buying property to rent apartments to employees. Other firms reported slowing the rate of wage increases. An education contact in Tennessee reported having to find other ways of retaining employees since salaries could be raised only minimally.


Prices have increased modestly since our previous report. Despite continued increases in nonlabor input costs for businesses, multiple contacts reported an inability to fully pass these higher costs on to consumers. Additionally, some manufacturing contacts reported lower nonlabor input costs, stemming from increased inventory availability. A contact in the auto industry reported lower prices for used and new vehicles as inventories grow. Multiple contacts cited higher interest rates as a driver for weaker demand, which in turn caused them to maintain or lower their prices. For businesses that reported increasing prices, the rate at which they were able to do so varied widely, with some contacts passing on only 5% of their costs increases and others passing on 75%. A contact in the home building industry cited labor costs as placing upward pressure on prices.

Consumer Spending

District general retailers, auto dealers, and hospitality contacts reported generally lower business activity and a mixed outlook. A Louisville retail contact reported that Black Friday sales were spread out over a longer time period, which caused buyers to delay purchasing and wait for further discounts. In Memphis, consumer spending on holiday gifts lagged compared with other MSAs throughout the country. Memphis retailers reported weaker than expected sales.

Auto dealers in Little Rock noted that inventories remain too low to meet demand at current prices, especially in used cars, and that they had a surprising surge in foot traffic shortly after Thanksgiving. The winter storm at the end of December forced restaurants in Memphis to close fully or partially, which negatively affected sales on one of the busiest days of the year. St. Louis hospitality contacts noted that business activity was lower in December compared with November, although banquet business exceeded expectations. Hospitality contacts have lower expectations for the upcoming months due to the increase in sicknesses, higher-than-average inflation, and staff shortages.


Manufacturing activity has slightly decreased since our previous report. Firms have reported small increases in production but moderate decreases in new orders. A survey of manufacturing supply managers conducted by Creighton University hints at the early signs of a recession, with 60% expecting such an outcome. Manufacturing indicators have exhibited below-neutral growth in seven of the past nine months. Supply chain congestion has also started to improve for some companies, which is beginning to lower the price growth of manufacturing inputs and return inventories to normal levels. Firms remain optimistic that input prices and delivery times will continue to revert toward pre-pandemic levels in the coming year.

Nonfinancial Services

Activity in the nonfinancial services sector remains stable since our previous report. Air freight and passenger traffic has slightly increased, while public transportation services continued to experience driver shortages and, consequently, route cancellations. A job-matching service in the St. Louis area is expanding services that match disabled job candidates with employers, and a housing-insecurity nonprofit built new homes and secured contracts to expand services.

Public sector reports were mixed. Public safety services are expected to decrease with the elimination of vacant positions in response to budget deficits in the St. Louis area, and water distribution services struggled to provide necessary maintenance and repairs due to revenue concerns. In northern Arkansas, parks and recreation services are expected to increase with staffing additions and a new proposal for expanded services.

Real Estate and Construction

Activity in the residential real estate market has continued to slow since our previous report. In November, month-over-month median rental rates on new leases fell in all four major District MSAs for both one- and two-bedroom apartments. Rates continued to slow or remained the same in all four major District MSAs during December. Building permits in the Midwest and South have continued to fall sharply since our previous report, even after accounting for seasonal factors. However, construction contacts continue to work through backlogs. Across the District, total home sales have dropped 4.2% since our previous report, and inventory has slowly started to increase—up 2.75%—during that time. Average time on the market for residential housing has also increased during the fourth quarter.

Banking and Finance

Banking conditions and lending activities in the District continued to soften but remained strong. Total loan growth saw only an uptick since our previous report, showing signs of slowing down from its steady and relatively fast increase between late 2021 and mid-2022. This is in line with the cooldown in loan demand that banking contacts observed toward the end of 2022. Commercial and industrial loan growth increased slightly, while consumer loan growth decreased moderately. Commercial real estate loans, however, still showed moderate growth compared with our previous report. Total deposits growth decreased moderately, but a Memphis contact noted that deposit rate competition has picked up among banks. Credit quality remains strong despite interest rate hikes, and the number of past-due loans is still low.

Agriculture and Natural Resources

District agriculture conditions are favorable and have remained largely unchanged since our previous report. The percentage of winter wheat in the District rated fair or better decreased slightly from the end of November to the end of December. Rising commodity prices have pushed inflation-adjusted farm incomes to a near 50-year high, leading to an optimistic outlook for the upcoming year. However, input costs are on the rise as well, raising uncertainty on the overall effect on farmers' margins for 2023.

Highlights by Zone

The Beige Book report provides an overview of economic conditions in the Eighth District based on information received from business contacts. Because aggregating zone data to the District level sometimes masks variations in conditions within the District, the summaries below are by zone: The headquarters office is in St. Louis and the branch offices are in Little Rock, Louisville, and Memphis.


Little Rock Zone

Economic conditions in the Little Rock zone have seen little change since our previous report. Labor shortages in the healthcare and retail sectors remained key issues. 

Commercial banking contacts noted that lending to small businesses has slowed in recent months. As conditions tightened, businesses have expressed more concern about cash flow and capital spending.

Contacts reported slight improvement in supply chain bottlenecks, but noted that businesses continued to struggle to secure key inputs. Some firms sought to buy in bulk whenever possible, with the belief that they could offload unwanted inventory in the future.

Agricultural contacts reported strong sales and few trade disruptions despite global uncertainty. One contact noted new plans to sell the waste from rice processing to a foreign firm for fuel.

Louisville Zone

Economic conditions in the Louisville zone have seen little change since our previous report. 

A retail contact noted that sales over the holidays were slightly below expectations, but was optimistic about expected activity over the next few months.

While home construction remained slow, contacts noted continued activity in the commercial and multi-family sector. A large mixed-use project recently broke ground in downtown Louisville, and plans continue to move forward on major industrial and retail projects in the metro area.

Memphis Zone

Economic conditions in the Memphis zone have seen little change since our previous report.

A real estate contact reported that demand for housing has not slowed meaningfully in recent weeks, and inventory remains the primary bottleneck for the housing market.

An auto dealer contact reported that used car prices are volatile, as some dealers are slashing prices to offload inventory due to fear that prices will continue to fall significantly in the future.

A high-end home appliance manufacturer reported a slowdown in orders and plans to slow hiring and capital spending as a result.

St. Louis Zone

Economic conditions in the St. Louis zone have seen little change since our previous report.

An auto dealer contact noted that an increase in average vehicle age on the road has raised demand for service operations, but inventories are expected to increase in the coming months.

A financial services firm noted that wages have begun to flatten as the wage increases used to attract workers during the pandemic have slowed.