Beige Book Report: Atlanta
June 4, 2025
Summary of Economic Activity
The Sixth District economy grew slightly from mid-April through May. Labor markets remained steady, but some firms cited caution around hiring. Wage pressures eased. Prices increased at a moderate pace. Firms that reported paying more for inputs because of tariffs also looked for ways to cut costs to help offset what they could not pass through to customers. Nonprofits reported that cuts to federal funding were constraining organizations' abilities to provide services. Consumer spending was flat, and travel and tourism activity declined modestly. Home sales grew slightly, attributed to stabilizing mortgage interest rates. Commercial real estate conditions were steady. Demand for transportation services increased modestly. Loan growth and deposits slowed at District financial institutions. The energy sector saw moderate growth.
Labor Markets
Employment levels remained flat over the reporting period. Many firms held headcounts steady and expected relatively stable staffing levels in the coming months. However, some contacts reported caution around hiring given economic uncertainty, and some firms developed contingency plans, including workforce reductions through layoffs, in the event conditions do not improve. Most firms reported that labor was readily available, and turnover was down. Hospitals and healthcare providers continued to hire robustly. A few firms shared concerns about labor supply constraints resulting from tightening immigration policy, particularly in agriculture, construction, hospitality, and manufacturing; however, this did not appear to be restricting the current availability of labor in a significant way.
Firms reported less wage pressure amid decreased turnover and increased labor availability. Wage growth was generally lower than a year ago, and many firms held wages flat or delayed wage increases.
Prices
Prices rose moderately since the previous report. Inflationary concerns related to trade policy were reported by firms across sectors, geographies, and firm sizes. More businesses began to raise prices, often through flexible measures such as tariff surcharges. While demand was reportedly softening, some firms increased prices, sacrificing volume to cover added costs. Many contacts cited a multi-pronged approach to managing tariffs, including pushing costs back to suppliers, reconfiguring supply chains, absorbing costs in margins, and passing costs through to customers.
Community Perspectives
A broad range of nonprofit and philanthropic contacts said that current and potential federal funding cuts threatened the ability of social service providers to meet community needs or continue operations, as other funding sources are generally insufficient to replace federal dollars. Contacts in the sector reported taking action to shore up their financial positions, including reductions in staff and building reserves.
Consumer Spending
Consumer spending was little changed since the previous report. Some retailers noted a modest spike in durables sales, particularly big-ticket items such as autos, as consumers rushed to front run tariffs. Overall, however, retailers noted some evidence of softening consumer demand that is expected to dampen future sales. Some retailers noted they were still working through previously acquired inventories and thus had not raised prices. However, they believe that consumer price sensitivity will remain high and expect a drop in sales when tariff-related price increases are enacted.
Travel and tourism activity, including hotel bookings, declined modestly. Room rates were flat or rose slightly, and some hotels offered increased incentives such as an additional night free. Contacts reported a slowing of international travelers to the U.S., and while previously concentrated among Canadian visitors, the slowdown recently expanded to visitors from Asia and Europe. Domestic leisure travel was flat. Declining consumer confidence slowed leisure travel for lower income consumers but also caused more higher-income Americans to vacation in the U.S. instead of abroad. Business travel was down slightly as government agencies and contractors restricted travel. Group travel dipped in recent weeks but seemed to be recovering based on forward-looking bookings.
Construction and Real Estate
Home sales increased slightly over the reporting period, boosted by the stabilization of mortgage rates. Home prices remained steady, though in some geographies, increased inventory created a drag on prices. Existing home inventory levels rose sharply in most areas of the District, but stronger demand over the past month absorbed much of that growth. Demand for new homes remained below seasonal norms, and homebuilders noted the need for increased incentives, particularly for first-time home buyers. Some builders reported pulling back on lot purchases in anticipation of further declines in demand.
Commercial real estate activity was stable, on balance. Vacancy rates in office space fell slightly and sales prices rose, but the strain on the sector continued, resulting in rising delinquencies. Industrial capacity continued to increase, driving up vacancies in a sector already experiencing elevated uncertainty due to tariff impacts. Multifamily conditions remained largely unchanged, but new developments slowed moderately, attributed to rising construction costs, even as small pockets of growth in demand and of rising rents emerged throughout the District.
Transportation
Demand for transportation services rose modestly. Railroads reported healthy year-over-year increases in intermodal freight volumes and total traffic. Some logistics contacts indicated that warehouses remained relatively full as firms had pulled ahead inventories in the first quarter; however, volumes were described as dwindling. District ports continued to see robust container traffic. Some trucking firms noted that volumes were below normal seasonality over the reporting period. Contacts expressed concerns about a dearth of capacity over the short term in rail, warehousing, trucking, on ships and at ports, as a surge in imports is expected amid the pause on higher tariffs on Chinese goods.
Manufacturing
Manufacturing activity declined moderately. Several firms noted a contraction in production, new orders, backlogs of work, and finished goods inventory following a robust first quarter during which consumers and firms tried to get ahead of tariff-related price increases. According to the Atlanta Fed's April Business Inflation Expectations Manufacturing Sector Report, firms reported that unit sales levels were significantly lower than normal. The manufacturing outlook for the next 12 months was mostly negative, and contacts who were concerned about a potential recession in the U.S. overwhelmingly listed trade policy as their top concern, along with inflation, consumer demand, geopolitical risks, interest rates, and the equity markets.
Banking and Finance
Loan balances at District financial institutions decreased across all lending categories, with construction/land development and mortgages/home equity lines experiencing the largest declines. Community banks noted tighter standards for commercial lending, particularly in industries affected by tariffs. Both loan originations and deposits slowed moderately, leaving loan-to-deposit ratios unchanged. Delinquencies and loan loss allowances ticked up, but contacts reported continued strength in the credit quality of loan applicants and customers.
Energy
Energy industry contacts reported moderate growth across most sectors. Liquefied natural gas production, exports, and overall global demand remained an area of strength. While domestic demand for U.S. crude oil was steady, global demand softened. Utility companies described robust residential power demand, modest growth in commercial, and some slowing in industrial. Although utility sector contacts reported growth opportunities linked to data center development, some noted a slight deceleration in activity, attributed to concerns over potential tariffs increasing the cost of power infrastructure and impeding investment. Offshore wind contacts reported a significant decline in demand, resulting in downsizing.
For more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics.