Beige Book Report: Richmond
September 3, 2025
Summary of Economic Activity
The Fifth District economy continued to grow modestly in recent weeks. Consumers continued to spend on retail and leisure travel. Additionally, new and used motor vehicle and boat sales increased this cycle. Manufacturing activity declined modestly amid continued cost increases and supply chain challenges due to tariffs. Activity in the remaining sectors was generally flat to down slightly. Employment was unchanged, on balance, with most firms making small changes to have the right headcount for the current level of demand. Wage growth remained moderate. Price growth picked up somewhat in the retail and wholesale services sector, but overall year-over-year price growth remained within a moderate range.
Labor Markets
Employment levels in the Fifth District were largely unchanged in the most recent period. Multiple contacts adjusted headcounts based on current and expected near-term changes in customer demand. For example, a dental implant manufacturer laid off several employees in anticipation of a slowdown in new orders. Policy changes created uncertainty for several firms, specifically affecting their ability to find workers or to make future hiring plans. Multiple construction contacts encountered increased difficulties finding workers due to the available immigrant labor pool, and they were not optimistic about future labor availability. A building materials supplier moderated their hiring plans due to increased economic uncertainty. Wages continued to increase moderately, as noted by a Maryland car lubrication system installer that increased wages to accommodate the rising cost of living.
Prices
Year-over-year price growth increased slightly in recent months but, overall, growth remained moderate. According to our most recent surveys, manufacturers reported growth in prices received remaining in the low three percent range. Non-manufacturers, however, reported an increase in annual price growth that rose from a low three percent range in July to nearly four percent in August. Within the services sector, the firms that reported the largest increases in year-over-year prices received generally had higher exposure to tariffs, such as wholesale and retail sellers of metals, wood-products, appliances, and other imported equipment and machinery.
Manufacturing
Manufacturing activity in the Fifth District continued to decline in the recent reporting period. Many firms have started to increase prices after delaying passing on increased input costs. For example, a compressor manufacturer raised prices after months of resistance. Uncertainty in tariff policy has become a significant administrative burden for multiple businesses, requiring them to allocate resources to understand and track its impacts. Manufacturers not directly affected by tariffs experienced secondary effects. For example, a printer manufacturer that doesn't import products experienced increased costs ranging from 5 percent to 15 percent from suppliers who were subject to tariffs. Additionally, a glass manufacturer reported that tariffs have forced their main supplier out of business and that other suppliers consolidated into fewer plants.
Ports and Transportation
Overall volumes at maritime ports were slightly down this cycle with the exception of auto and heavy machinery imports. Contacts attributed the decline to frontloading and high warehousing levels, though shipping from Southeast Asia did resume during tariff delays. Agriculture exports decreased, which contacts attributed to retaliatory tariffs from China. Ocean freight rates trended lower as carriers returned services and increased capacity to the East Coast. Contacts shared that carriers have been shuffling their vessels and service steams in response to the Chinese vessel tax, but they do not expect the tax to have much impact on volumes. Trucking demand remained flat, with contacts reporting a continuation of low volumes and low revenue. One Fifth District trucking firm acquired a company that, while still profitable, chose to sell because of slim profit margins and persistent market malaise.
Retail, Travel, and Tourism
Consumer spending continued to increase at a modest rate this cycle. Most retailers reported steady sales and foot traffic with some seeing big ticket sales go up. For example, a residential building products seller saw an increase in sales that were attributed to homeowners using savings and home equity loans to fund home improvement projects. Auto, motorcycle, and boat sales all increased in recent weeks. Travel and tourism activity picked up modestly this cycle, on balance. Hotel contacts reported modest growth driven by leisure travel to drive-to destinations like beaches and mountain resorts. Sport-related travel was reportedly performing well. In contrast, business travel was down, particularly around in the greater Washington D.C. area with fewer conferences and training events being held in recent months.
Real Estate and Construction
Residential real estate activity saw a slight decrease as expected during the summer. A North Carolina agent said, "it feels like we are living in two markets, those listing at the right price or those listing like it is 2021." Buyers continue to qualify, especially with rate incentives for new construction. The issue for many potential home buyers, according to a Virginia broker, is that "monthly payments aren't realistic with today's rates." A Maryland agent fears the "golden age of renting" will stay as it can cost more to buy versus rent. Multiple builders in the Fifth District noted their concerns regarding tariffs, zoning regulations, an aging workforce, and immigration policies leading to higher construction costs.
Commercial real estate activity remained unchanged, on balance. A Virgina broker noted investors and tenants were slowly "getting off the sidelines" despite economic uncertainties. A couple of agents noted "The Big Beautiful Bill" but were uncertain of its effects. With continued uncertainty, deals were taking longer, making them more susceptible to falling through. Brokers in Virgina, Maryland, and D.C. noted that office space was in "modern turmoil" as companies work through return to office mandates. In some cases, outdated office buildings were being torn down and sold for land value.
Banking and Finance
Financial institutions continued to report steady demand for all loan types, with a number of institutions reporting a slight increase in demand for residential mortgages and auto loans. One institution noted this uptick in demand was due to some softening in interest rates for these loan types, driven by an increase in competitors within the marketplace. Commercial borrowers continued to be cautious, but loan pipeline levels remained steady as well. Deposit levels continued to be stable with a continued easing of competition within the marketplace. Loan delinquencies remained stable among respondents with no meaningful change in the creditworthiness of borrowers.
Nonfinancial Services
Nonfinancial service providers continued to report stable demand for their services, but uncertainty continued to be a common thread throughout most of their comments. A digital marketing and consulting firm noted that their clients were hesitant to invest in their services until they have more clarity around the current economic environment. A business advisory firm also reported that they have observed a trend of fiscal conservatism with business owners that has evolved, forcing firms to defer investment and growth plans until the current economic picture becomes clearer and more defined.
For more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis.