January 14, 2026
Summary of Economic Activity
Economic activity in the Sixth District grew slightly from mid-November through December. Employment levels were flat to down somewhat, with more employers noting head count reductions. Wage growth remained modest, and nonlabor costs and prices rose slightly. Retail sales increased modestly over the holidays, and travel activity grew at a modest pace. Residential real estate activity improved as mortgage rates fell and home prices flattened or even declined, but commercial real estate conditions slowed. Transportation demand remained flat to slightly down, while manufacturing activity was flat to slightly up. Financial institutions reported modest loan growth, with strength in credit cards. Demand for energy was largely flat, and agricultural activity declined modestly.
Labor Markets
Employment levels in the District were flat to slightly down. While a few businesses noted growing head count for expansion, others reported hiring only to backfill vacancies, keeping head count flat. However, an increasing number of firms reported recent or planned reductions in force, including through attrition, because of slowing demand and rising costs. Several contacts described accelerating the use of AI to increase productivity and to manage head count, although some contacts said that any significant impact to staffing levels is "years away." Available labor remained plentiful. Wage growth remained modest, outside of specialized jobs.
Prices
On balance, prices rose slightly over the reporting period. Input costs like steel and aluminum were stable, and other nonlabor construction costs increased minimally. Cost pressures associated with tariffs persisted, particularly as pre-tariff inventories became fully depleted. Retailers described mixed pricing strategies; some pushed through increases with varying degrees of impact on sales volume, while others used promotional discounts to drive demand. Labor, technology, and insurance remained the most frequently cited cost concerns. Many contacts expect to implement price increases in the first half of 2026 to preserve margins, especially those who held prices steady in 2025.
Consumer Spending
Retail sales rose modestly, on balance. Early Q4 weakness tied to the government shutdown and funding cuts gave way to a post-Thanksgiving week rebound, helping many retailers meet budget. Black Friday was a bright spot for some retailers, while others described sales as steady but not exceptional. Auto dealerships and furniture stores continued to face challenges amid high inventories and overall subdued demand. Looking ahead into 2026, contacts anticipate relatively flat sales growth, with tariffs and economic uncertainty continuing to weigh on performance.
Travel and tourism activity grew at a modest pace over the reporting period. Domestic leisure travel was strong while corporate and group bookings were slower to materialize, and recurring Canadian visitors were notably absent. Hotel demand strengthened toward year end, and December was expected to finish on a positive note; however, discretionary spending at properties declined. While risks remained, such as rising cost pressures and a surplus of new rooms, the prospect for major events and conferences in 2026 provided a positive outlook for the year ahead. Cruising activity remained robust.
Construction and Real Estate
Home sales improved marginally as mortgage rates continued to decline. Existing home inventory levels were largely in line with seasonal trends, but delistings trended up as home prices in many District markets either flattened or fell. Demand for move-up and luxury homes was more resilient than for starter or moderately priced homes. Homebuilder sentiment was broadly negative, and a greater number of builders cut prices and offered rate buydowns and other incentives, as a lack of urgency among buyers was noted. The outlook improved somewhat given the prospect of further mortgage rate declines, though builders expressed concerns over rising cost pressures from tariffs and labor.
Commercial real estate conditions eroded slightly, with vacancy rates edging up across sectors. Desire for smaller-sized, more efficient space was noted in both office and retail, and return-to-office stances by firms continued to fuel new construction. Multifamily contacts reported the need to increase concessions amid declining rent levels. Both demand for and supply of industrial space grew over the reporting period, and new construction expanded modestly, particularly technologically-integrated warehousing.
Transportation
Transportation activity was flat to slightly down, on balance, over the reporting period. Railroads noted continued strength in intermodal cargo and total traffic. Air cargo contacts reported double-digit increases in freight tonnage year-over-year. However, the freight recession continued for trucking firms, and ongoing weakness is expected in the new year. Logistics contacts noted that shipments of large home appliances were down significantly as housing starts slowed. Some seaports noted declines in imports from year-earlier levels, but steady increases in container freight in early 2026 are forecasted.
Manufacturing
District manufacturing activity remained flat to slightly up. Demand for beverage producers was strong, especially for value brands. Manufacturers tied to housing reported flat sales year-over-year, and activity for producers of auto-related products was steady. Some firms saw a spike in new orders amid weaker exports, and backlogs and finished goods inventories fell. Forecasts for 2026 were mixed but, on balance, conditions are expected to improve over the next year.
Banking and Finance
Overall loan growth was modest over the reporting period, with the largest increases in the credit card segment. Volumes of auto and other consumer loans declined, which was described as a reflection of consumer uncertainty. Commercial lending was somewhat muted, and construction lending was unchanged since the previous report with continued strength concentrated in data centers and tech-related infrastructure. Delinquencies continued to fall in aggregate, though several financial institutions reported a marginal uptick. Cash to total assets ratios increased moderately on balance, allowing for ample liquidity to meet customers' needs.
Energy
Energy demand was generally flat since the previous report, with some segments reporting a softening and others experiencing robust activity. Petrochemical industry contacts reported moderating demand, particularly for chemicals used in appliances, housing, and automotive sectors. Petrochemical plant expansions and carbon capture projects faced schedule delays attributed to uncertainty. In contrast, utility companies reported strong demand across business segments and power sources, including liquefied natural gas (LNG), wind, solar, and nuclear, largely driven by data center development. LNG export terminal construction remained notably positive.
Agriculture
Demand for agricultural products declined modestly. Weaker soybean and corn exports, along with stronger international competition, put downward pressure on those commodity prices. Milk production increased abroad, reducing demand for U.S. milk. Expectations for more imported beef from South America caused prices to drop significantly before mostly recovering by year end. Demand for timber used in structural wood products, pulp, and paper weakened; prices per ton fell, sales contracts declined, and some mills closed. Transactions for industrial timberlands and rural land parcels were down.
For more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics.