Beige Book Report: Richmond
October 15, 2025
Summary of Economic Activity
The Fifth District economy continued to grow modestly this cycle. Consumer spending at retail and restaurants grew modestly while reports on travel spending were mixed. Consumers were looking for value and comparative price shopping. Manufacturing activity declined slightly amid customer uncertainty and price sensitivity leading some to adjust product offerings to reduce prices. Additionally, ports volumes increased slightly, reflecting early retail ordering for holiday inventories. Activity in the remaining sectors was generally flat. Employment was unchanged, on balance, with firms both growing and cutting labor based on demand. Wage growth remained moderate. Price growth picked up somewhat in manufacturing, with firms citing tariffs, but overall year-over-year price growth remained within a moderate range.
Labor Markets
Employment in the Fifth District, on balance, was unchanged in the most recent period. A few firms grew their total head count through acquisitions and expansions into new locations. Several other firms, on the other hand, reported reducing their head count to right-size labor with slowing demand. A couple of firms expected cuts to come. For example, a South Carolina home builder reported a decline in demand due to increased prices, which they said would result in imminent layoffs. Additionally, a small jewelry store is contemplating closing due to economic uncertainty and declining demand. Labor availability continued to be a significant challenge for skilled trades. In response, a concrete manufacturer launched their first social media recruitment campaign, hoping to attract a larger pool of applicants. Wage growth remained moderate.
Prices
On balance, year-over-year price growth remained moderate this cycle. According to our most recent surveys, service sector firms reported virtually no change in price growth while manufacturers saw a slight increase in prices received. Firms in both sectors continued to cite tariffs adding to their input costs, some of which have yet to be passed along to customers. A couple of firms said they expected to raise prices once they worked through their pre-tariff inventory.
Manufacturing
Manufacturing activity in the Fifth District declined slightly in the recent reporting period. Contacts reported increased customer price sensitivity. In response, a fuse box manufacturer reconfigured their products to cut costs and lower their prices. An engine-parts manufacturer noted that customers had shifted to cheaper parts or were using existing parts for longer periods. An office equipment manufacturer observed an uptick in customers refinancing their equipment rather than purchasing new ones. Several firms highlighted the negative impact of the housing market on their business, particularly those in the construction and furniture industries. A furniture manufacturer reported increased operational challenges due to decreased demand coupled with tariffs increasing their prices.
Ports and Transportation
Overall volumes at Fifth District maritime ports increased slightly this cycle reflecting a pull forward in retail holiday ordering after some tariffs were delayed. Auto imports remained steady month over month with no uptick in requests for auto storage space as the inventory was moving through the market. Increased carrier capacity to the East Coast and historically low demand has put downward pressure on spot rates, which continued to decrease this cycle. Volumes for freight moving over the road had an unseasonal decline in August, continuing the downward trend that began in the spring. One contact noted a continued deterioration of business levels and pricing offered by competitors in a "race to the bottom until it breaks." Another contact shared that fuel surcharges have helped their daily revenues, but acknowledged that it ultimately "takes a bite out of the household budget" and the firm would rather see fuel prices go down and for cargo volumes to increase.
Retail, Travel, and Tourism
On balance, consumer spending increased modestly in recent weeks. Some small higher-end retailers reported solid growth in sales. Restaurants in the luxury and quick service categories also reported solid revenue growth. In contrast, casual sit-down restaurants reported a softening in sales. A retailer in North Carolina noted that customers were clearly looking for value and comparative price shopping in their stores. Companies tied to new home construction reported soft activity, however a replacement window company reported strong sales, which was attributed to homeowners opting to renovate rather than sell their homes. A furniture store saw less traffic and fewer sales and was concerned that recently announced tariffs would further reduce demand in the near future. Reports from tourism and travel businesses were mixed. Hotels in some parts of the Fifth District saw increased occupancy and revenues and attributed the growth to leisure and sports-related travel. Several hotels in the greater Washington, D.C. area, on the other hand, reported lower occupancy rates as business travel for conferences and worker trainings declined.
Real Estate and Construction
Residential real estate activity was relatively flat, even as inventories improved and prices began to stabilize. A real estate agent from North Carolina reported that "45 percent of listings experienced price reductions due to initial overpricing." In addition, a Virginia agent observed that "pricing is finally feeling right after five years of strong growth." Buyers continue to meet qualification criteria, particularly with added incentives lowering rates for new construction. However, as a Maryland developer pointed out, affordability remains a significant issue. Builders noted that they are completing existing projects and beginning to pull back on new starts as uncertainty and tariff fears continue.
Commercial real estate activity experienced a slight uptick, though a Virginia broker described the situation as "murky." Agents throughout the District stated that retail space and medical offices were performing well, whereas big box and office spaces encountered difficulties. As flight to quality persisted, brokers across the District were concerned about Class B offices and lower-tier properties challenges, potentially leading to receivership. A Maryland broker remarked: "these buildings, in their current condition, won't sell for yesterday's prices." A South Carolina broker echoed concerns, highlighting that the high cost of upfitting is prohibitive and that "the math doesn't work."
Banking and Finance
Financial institutions continued to report stable demand for most loan types, with some institutions noting a modest increase in demand within their commercial loan portfolio. However, one banker did note there is still a "sideline mentality" with many borrowers that are still awaiting more certainty in the overall economy and rates. Deposit levels continued to be stable, but some competition for balances is beginning to creep back into the marketplace. A few institutions observed a modest increase in loan delinquencies, mainly within their consumer loan portfolios, including mortgages and home equity loans.
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. For example, a design firm described their customers as being cautious with any future growth plans. Several staffing firms reported that demand for their services had decreased and that their pool of potential applicants grew. A variety of firms, and their clients, continued to delay plans for expansion until more certainty was found within the economy.
For more information about District economic conditions visit: https://www.richmondfed.org/research/data_analysis.