April 15, 2026
Summary of Economic Activity
Economic activity has remained unchanged since our previous report. Employment levels were unchanged and wage growth was moderate. Prices have risen moderately, and several contacts expressed concern about escalating energy costs. Consumer spending has remained unchanged and banking conditions remain steady. Manufacturing activity has increased modestly. Overall, contacts maintain a cautiously optimistic outlook for the next six to twelve months yet are attentive to risks to the economy associated with the conflict in the Middle East.
Labor Markets
Employment levels have remained unchanged since our previous report. A chamber of commerce contact reported that labor conditions remained steady with no major recent changes. An electric company reported employment remained steady with a slight increase over the past three months for apprentices and interns. Some contacts reported that while they were not looking to expand their workforce, they would backfill critical positions. Other contacts continued to report slowly reducing head count through attrition. A Memphis health-care provider reported a recent sharp rise in nurse turnover; in Louisville, turnover had stabilized but it was still hard to fill positions.
Wage growth has been moderate since our previous report, with some contacts noting that wage growth had stabilized. A plastics manufacturing firm reported they were facing no major wage pressures, with increases occurring annually at a normal pace. However, an architectural company reported wages rising faster than inflation due to the lack of supply of architects and engineers to meet demand.
Prices
Prices have increased moderately since our previous report. Multiple contacts cited increased fuel costs and expressed concern about further increases. Some contacts reported flat or slightly higher input costs; but for many, overall expenses have grown due to rising costs of utilities, transportation, and insurance. In particular, a manufacturer noted that higher prices from chemical and freight suppliers forced them to pass these higher costs on to customers. Similarly, a transportation company indicated that recent contract renewals reflected an average increase of about 5 percent, primarily driven by elevated fuel prices and depreciation rates. Contacts noted that consumer-facing price increases were being phased-in gradually to preserve customer retention despite sharp increases in input costs over the past year.
Consumer Spending
Consumer spending has remained unchanged since our previous report. A clothing retailer observed that direct-to-consumer orders have remained flat year-to-date; however, the average order amount increased, primarily due to higher prices. Consumers are still active but are showing a marked preference for discounts, which have driven boosts in orders. Similarly, a Memphis restaurant noted that consumer behavior had not softened significantly, but rising point-of-sale and credit card processing fees were indirectly raising costs and shaping purchasing decisions. A contact in Kentucky reported that tourism spending remained robust, with expectations that visitor expenditures would continue to rise throughout the year. Passenger transportation at a regional airport is strong and projected to remain steady, with bookings on a new route outperforming expectations.
Manufacturing
Manufacturing activity has increased modestly since our previous report, with a modest expansion in new orders and production. Metal and recycling manufacturers reported an increase in demand and improving profitability as they have benefited from supply chain shifts due to tariffs. A manufacturer in Kentucky reported that they anticipate more on-shoring or near-shoring as customers seek supply chain security and have not seen a huge disruption in global supply from the conflict in the Middle East.
Nonfinancial Services
Activity in nonfinancial services has remained unchanged since our previous report, with contacts expecting some improvement over the coming months. A transportation business described its current performance as solid and expressed optimism for future growth, attributing this outlook to expected expansion in manufacturing, which is likely to boost their operations. A shipping port contact in Arkansas reported rail volumes were expected to increase, river tonnage was flat due to Mississippi River water levels, and truck volumes were strong. An architectural company reported that demand from its main clients—retail and health care—has held firm compared with last year; however, they were concerned that rising energy costs and lower consumer confidence may hurt business. An electric company stated that business conditions had tightened over the past three months, with sales falling short of expectations. This decline was attributed to tariffs and federal government actions, which prompted a major client to significantly cut spending on construction and technology.
Real Estate and Construction
Residential real estate activity has remained unchanged since our previous report. Residential sales in Little Rock and Louisville have increased modestly compared with a year ago and are expected to continue with this trend over the next month. A real estate contact in Northwest Arkansas noted a significant increase in housing inventory, resulting in homes staying on the market for longer periods—a pattern that is also evident in other metropolitan areas, such as Memphis and St. Louis.
Commercial real estate activity was mixed. Contacts noted ongoing activity across the region, with an engineering firm in Memphis highlighting a robust pipeline of construction projects, particularly those tied to data center development. A contact in Arkansas reported strong investor activity in Northwest Arkansas, including increased involvement from national homebuilders. However, an electric company reported that uncertainty surrounding tariffs had led to reduced construction planning in mid-2025, resulting in lower projects for 2026. Additionally, a chamber of commerce contact in Indiana indicated that state-level uncertainty regarding incentive restructuring had slowed project pipelines this year, further delaying development decisions and influencing overall construction planning.
Banking and Finance
Banking activity has remained unchanged since our previous report. In Northwest Arkansas, a banker noted that the commercial loan pipeline was healthy and showing signs of improvement, largely fueled by opportunities in commercial real estate and ongoing business transactions. A banker in West Tennessee indicated that overall credit quality remained stable, though some early-stage weaknesses had emerged, particularly for small business borrowers whose risk is closely tied to input costs and fuel prices. Another banker reported an uptick in overdraft frequency, signaling that many households are facing tighter budgets and reduced discretionary spending. Some bankers noted that following a brief uptick, the volume of mortgage refinancing loans has declined.
Agriculture and Natural Resources
Agriculture conditions have remained unchanged since our previous report. Contacts reported that the conflict in the Middle East had created significant volatility in the agriculture sector, impacting agriculture equipment sales and resulting in sharp fertilizer cost increases. Bankers lending to farmers reported no significant changes in delinquency rates; however, a banker in Arkansas noted tightening their lending standards for this sector. Some farmers are optimistic about pricing and weather conditions and expect improved financial performance this year, after weak yields last year. But rural bankers remain pessimistic about economic growth for their regions over the next six months.
Visit our Regional Economic Data and Reports page for more information about District economic conditions.