Advisory councils share regional economic insights from first quarter 2026

The Federal Reserve Bank of Minneapolis convened its Community Depository Institutions Advisory Council (CDIAC) and Ninth District Advisory Council (NDAC) to gain on-the-ground intelligence into current conditions in housing, labor markets, credit conditions, inflation, and consumer confidence. Minneapolis Fed President Neel Kashkari engaged with both councils and shared his perspective on the Ninth Federal Reserve District and national economy. Insights from these two councils supplement existing data sources and ensure multiple perspectives are represented in the monetary policymaking process. The following report summarizes the perspectives from CDIAC and NDAC members on March 31 and April 8, respectively.

Council members reported that the Ninth District economy is facing significant challenges centered around housing affordability, labor quality, and widespread uncertainty. The housing market continues to grapple with severe inventory constraints across the region: Council members noted that homes are receiving multiple offers in Minnesota, and there are acute housing shortages in North Dakota’s small towns. Affordability remains a critical issue, particularly in Montana. Mortgage demand surged while rates were lower in January and February, but demand has fallen as rates have increased due to the Iran war and other factors.

The labor market presents a mixed picture across the district, with some areas reporting adequate applicant pools and others struggling to find workers with appropriate skills. Employers consistently note concerns about soft skills and the qualifications of available workers, particularly for specialized roles like truck drivers or others with commercial driver’s licenses. There is evidence of worker migration between industries and locations, creating fluidity in the labor market, but the overall challenge of matching worker skills to employer needs persists. A potential bright spot is the emerging trend of more high school graduates entering vocational training for blue-collar trades than in recent years.

Inflation and its impacts continue to weigh heavily on consumer confidence, which stakeholders describe as “shaky” and “nervous” across the region. Consumers are trading down from more premium products to value categories, even among high-income households. This trend is reflected in brick-and-mortar retail traffic patterns, such as at big box and discount retailers that are seeing more high-end customers. Elsewhere, in-store traffic is down but customers are more likely to buy, suggesting shopping is less recreational and more out of necessity.

The war in the Persian Gulf is causing particular uncertainty and driving up fuel prices, which are squeezing industries like logging and tourism. The agricultural sector is being hit especially hard, with dramatically rising input costs for fuel, chemicals, and feed, along with concerns about the availability of fertilizer at all, even at its surging price. Despite strong balance sheets overall, farmers are extremely nervous about the upcoming season, and some are considering not farming at all this year rather than take the risk of operating at a loss.

Banking conditions across the Ninth District reflect the broader economic caution. Small business lending shows businesses taking a measured approach, with many holding steady rather than seeking loans for expansion, while refinancing requests are common as businesses struggle with uncertainty and high leverage. Commercial real estate presents a mixed picture. Warehouse demand remains strong but construction activity has slowed from labor shortages and a slight softening in retail and investment properties, particularly in Montana. The mortgage market is adjusting to rising rates, with growth in variable-rate products and home equity lines of credit. Rent control policies in St. Paul, Minnesota, are reportedly dampening new investors from entering the rental property market, though existing investors are improving properties in order to help drive higher rents. Consumer lending is moderating in some areas with rising delinquencies for both secured and unsecured debt, though Montana is seeing an uptick in lending to credit-constrained consumers.

Industry-specific insights reveal widespread cost pressures and supply chain challenges. The insurance sector is dealing with increased costs for insuring structures due to rising material and skilled labor costs, while also facing a retirement wave that isn’t being adequately replaced by new workers entering technical fields. In energy, major oil and gas corporations are not yet ramping up production in response to higher prices, though smaller players are expanding, and there’s a surge in automation and high-tech applications. Raw materials and transportation costs are rising rapidly, particularly in North Dakota. The health care sector is experiencing increased demand and making substantial capital investments, but it’s facing supply chain disruptions. Some of these disruptions include a shortage of sterile gloves and an energy cost increase that will take effect in August, both consequences of the closure of the Strait of Hormuz.

The construction sector is facing particularly acute challenges, with industry contacts reporting project declines for the year despite previously robust workloads. The sector is greatly affected by the pullback of legislated infrastructure funding and the stripping of Disadvantaged Business Enterprise provisions from U.S. Department of Transportation contracts. These changes are leading to industry consolidation that favors large firms while small contractors are beginning to disappear. One member noted that construction firms report being at full staff with no hiring plans for the year, reflecting both adequate current staffing and concerns about future project availability. Municipalities are reaching the end of their COVID-19 relief funds, which were largely used for public infrastructure. Municipal budget tightening is expected in the coming year.

The Ninth District economy has some bright spots despite the challenging environment. The biofuel industry is experiencing strong margins that have been accelerated by the Iran war, with robust international growth in Middle Eastern, Asian, and Mexican markets that remain unaffected by tariffs. Data center demand is creating infrastructure opportunities, particularly in North Dakota, where the state is investing in natural gas pipeline infrastructure to support growth. There is also significant investment into agricultural automation. Community development leaders report optimism about increasing collaboration and new funding streams for entrepreneurs despite obstacles. However, the overarching theme across all sectors is one of uncertainty, and multiple stakeholders identify policy volatility as a top business risk. This uncertainty, combined with persistent cost pressures in materials, energy, transportation, and labor, is causing businesses and consumers throughout the Ninth District to adopt a cautious, wait-and-see approach to economic decision-making.