Chicago Fed: Economic Activity Edges Higher in Seventh District


   
Miguel E. Andujar
DTN Refined Fuels Market Reporter

   DAVENPORT, FL (DTN) -- Economic activity in the Federal Reserve's Seventh 
District, which includes Illinois, Indiana, Michigan, Wisconsin and Iowa, 
increased slightly in recent weeks, according to the May Beige Book released by 
the Federal Reserve Bank of Chicago.

   Manufacturing demand rose moderately during April and early May, while 
consumer spending, employment and construction and real estate activity 
increased slightly. Business spending was flat overall; nonbusiness contacts 
reported little change in activity, and contacts expected little change in 
economic activity over the coming year.

   According to the report, employment increased slightly during the reporting 
period, and contacts continued to characterize labor market conditions as 
low-hire, low-fire. Wages and benefits of costs increased modestly, while some 
manufacturing contacts reported difficulty hiring skilled workers.

   Business spending was unchanged overall during April and early May. Capital 
expenditures were flat, although contacts expected a slight increase over the 
coming year. Demand truck transportation declined slightly, while freight rates 
rose significantly in line with rapid increases in fuel prices, and many 
contacts reported suppliers introducing freight surcharges.

   Manufacturing demand increased moderately during the reporting period. 
Chemicals, plastics and rubber production increased slightly, while primary 
metals wholesalers and manufacturers reported a modest increase in demand 
supported in part by defense activity and customers tied to data center 
construction. Machinery sales rose moderately, while auto production was flat 
overall, and heavy truck production increased slightly.

   Across the district, contacts reported prices rose rapidly in April and 
early May, led by higher nonlabor input costs tied to supply chains linked to 
the conflict in the Middle East. Contacts highlighted increased prices for 
energy, shipping and raw materials including steel and chemicals. Consumer 
prices also increased rapidly, with many contacts citing higher gasoline prices 
as the main driver.

   In the agricultural sector, contacts said expectations for 2026 District 
farm income were little changed during the reporting period. Planting remained 
largely on schedule across the district despite varying weather conditions, 
while fertilizer and fuel prices stayed elevated. One contact reported buying 
diesel "hand to mouth" instead of by the truck load due to elevated prices and 
uncertainty about future prices. Corn, soybean and wheat prices increased 
during the reporting period.




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