Beige Book Report: Richmond
July 16, 2025
Summary of Economic Activity
The Fifth District economy grew modestly in recent weeks. Consumer spending at retail stores increased modestly as advertised discounts drove up foot traffic and sales. Spending at restaurants and hotels also rose with particular strength reported in higher-end and luxury establishments. Import activity fluctuated with tariff announcements and pauses but volumes were up in recent weeks. Manufacturing activity declined modestly this cycle as higher prices curbed demand for many producers. However, some domestic producers with less international exposure reported growth. Real estate, financial services, and nonfinancial services markets were little changed in recent weeks. Employment rose slightly and some companies reported an increase in candidate pools. Price growth remained moderate on a year-over-year basis. Overall rising costs of living put some upward wage pressure on firms.
Labor Markets
Employment in the Fifth District increased slightly in this period. Several contacts reported an increase in applicants, particularly for professional service jobs. A DC-area post-secondary institution was able to be more selective in hiring for finance positions due to an uptick in applicants. A few firms, however, still faced challenges finding workers for specific roles. For example, a flatware manufacturer reported finding skilled labor was a "unicorn hunt." Many firms reported caution on hiring, though few were cutting back on workers. While wage growth remained moderate, on balance, a civil engineering firm faced pressure to raise wages more substantially as potential new hires turned down offers citing the compensation package didn't align with the cost of housing.
Prices
Year-over-year price growth remained moderate this cycle. According to our most recent surveys, service sector firms reported steady and moderate annual price growth. Manufacturers, however, saw price growth rise from a modest pace of growth to a moderate rate. One manufacturer said that input costs were higher in recent months due in part to tariffs but also from rising regulatory, insurance, and labor costs, including wages and benefits.
Manufacturing
Manufacturing activity in the Fifth District experienced a modest decline in the recent reporting period. Multiple contacts experienced significant challenges to their business due to being unable to maintain stable pricing. A furniture manufacturer was not able to adjust their bi-annual pricing despite increases in input costs, wages, and regulation compliance costs. A laundry equipment manufacturer was uncertain if they would make money on sales due to the long manufacturing production-time coupled with fluctuating input costs. To cover added costs due to tariffs, a couple of manufacturers added surcharges to their sales prices. Manufacturers with less international exposure reported some increased business activity. An aluminum manufacturer reported increased sales due to customers looking for "high-quality, domestically produced" products.
Ports and Transportation
Maritime port contacts reported that import volumes increased in May, flattened in early June, and then increased again towards the end of June reflecting the lagged effects of tariff announcements and pauses in implementation. The increase in import volumes in May was attributed to a pull forward of holiday inventory restocking that would typically occur late in the summer. One contact noted that "the peak season [for shipping] has changed. Nothing is traditional now, there is no normal." With that pull-forward, contacts noted expectations of weakness for the fall and winter months regardless of what happens with trade deliberations. Export volumes remained flat, consistent with the sluggish levels of the last few years; empty containers have begun stacking up at inland ports, and containers at maritime ports have been quickly returned to China, unloaded. Ocean spot prices increased slightly after the tariff pause caused a spike in demand for frontloading, but not to the high levels seen during the COVID-era surge. Tariff frontloading has had little impact on trucking demand, which remained flat at low volumes. Contract rates remained relatively low, but spot rates increased somewhat in the last month. One large trucking firm has observed signs of a demand shift where vulnerability to tariffs has made retail a more difficult segment to grow, and foresees a painful period of adjustment as domestic manufacturing builds up.
Retail, Travel, and Tourism
Consumer spending increased modestly in recent weeks. Retailers generally reported steady sales but gave mixed reports on consumer sentiment and shopping behavior. A few stores said that advertised discounts helped drive up foot traffic and sales. Another retailer said that sales had been volatile as customers try to time any potential tariff induced price increases. Restaurant contacts reported steady sales, particularly at fast casual and higher end sit-down restaurants. A couple of restaurants near central business districts, however, said sales were down due to fewer business or event-driven bookings. Hotel contacts reported a moderate increase in occupancy and a small increase in rates leading to solid growth in revenue, with luxury hotels reporting the strongest growth.
Real Estate and Construction
Residential real estate activity was little changed, on balance. Some agents noted good activity while another agent said, "the phone has stopped ringing, and this is the worst spring market since 2009." Inventory in the District continued to increase while buyers sat on the sidelines due to uncertainty. Most buyers had no issues qualifying and agents were helping to educate those with low credit scores on ways to increase their credit. Additionally, lenders were offering 3-2-1 buydowns or adjustable-rate mortgages to help lower monthly mortgage payments. Builders in the District rushed to complete projects as tariff fears were still looming.
Commercial real estate activity remained the same despite the expected summer slowdown. A few agents across the District mentioned that several tenants were looking to purchase the properties they were currently leasing. An agent in North Carolina stated that owner-occupied buildings were getting better interest rates versus investor property. Uncertainty in the market continued as agents noted deals taking longer to close as buyers ran every analytics model. An agent in South Carolina also mentioned that fears of wire fraud added to the closing process. In also speaking of fraud, a Virginia broker said, "All this does is add time and time kills real estate deals."
Banking and Finance
Financial institutions continued to report steady demand for all loan types. One institution reported that commercial borrowers were being cautious with their capital and were holding back big expenditures at this time. Residential real estate lending continued to slow slightly with both lower consumer confidence and housing affordability noted as reasons for the trend. A credit union noted that consumer credit quality was showing some deterioration as members find ways to access alternative funds. Delinquency rates were noted as being stable with no major fluctuations. Deposit levels also remained stable with a continued easing of competition noted between institutions.
Nonfinancial Services
Nonfinancial service providers reported a stable demand for their services, but a general theme of uncertainty surrounded most of their comments. A design firm noted their clients as being pensive and several of them were stepping away from doing projects just yet. A staffing firm noted that their clients were taking a "wait and see" approach before implementing any new plans. A supplier of cleaning products and services to commercial firms, including universities, schools and hospitals, was using this time to develop more retail clients, but said that it takes time to build these new relationships and lines of business.
For more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis.