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Banks (Finance)

Economic Activity in the Tenth District Remains Subdued Amidst Volatility in Oil Prices and Consumer Spending

Strategic Insights

— 2 min read

The Federal Reserve Bank of Kansas City's Beige Book report for July 2025 shows that economic activity in the Tenth District was mostly unchanged, with some rebound in consumer spending and financial activity following declines in prior months. Job gains were subdued, and wage pressures were expected to diminish. Labor availability was reportedly much higher, with the notable exception of the skilled trades, which experienced a significant shortage of workers. Credit quality was mostly stable, despite some deterioration in consumer segments and declines in repayment rates on agriculture loans tied to crop farming.

Key Takeaways:

  • Economic activity in the Tenth District remained subdued, with some rebound in consumer spending and financial activity following declines in prior months.
  • Job gains were subdued, and wage pressures were expected to diminish, with mid-year wage adjustments being negligible.
  • Labor availability was reportedly much higher, with the notable exception of the skilled trades, which experienced a significant shortage of workers.
  • Credit quality was mostly stable, despite some deterioration in consumer segments and declines in repayment rates on agriculture loans tied to crop farming.
  • Oil and gas activity declined as prices fell, but recent fluctuations in oil prices led to an increase in hedging activity, providing some support to profitability.
  • Prices grew at a moderate pace, with reported expectations for acceleration in price growth during the second half of the year.
  • Consumer spending rebounded slightly, led by travel spending, but expectations for consumer spending over the next six months worsened in recent weeks.
  • Community college and certificate program contacts reported strong job placement, with many programs having more jobs available than graduates.
  • Manufacturing activity was mostly unchanged, with small contractions offset by a small rebound in activity at professional and consumer services firms.
  • Mergers and acquisition activity reportedly began to thaw, with companies selling AI-related technologies being acquired at significant multiples of their revenues.

Statistics:

  • Employment levels grew slightly over the past month, with a modest increase in the number of employees in service contacts.
  • Wages grew at a moderate pace, in line with contacts' expectations, with mid-year wage adjustments being negligible.
  • Consumer spending rebounded slightly, with travel spending leading the recovery.
  • Oil and gas activity declined as prices fell, with the number of active rigs in the District falling.
  • Profits decreased due to falling revenues combined with increased drilling and completion costs in the oil and gas industry.
  • Loan demand was stable, with a modest increase in demand for commercial real estate and agricultural loans.
  • Deposit levels remained relatively stable.
  • Agricultural credit conditions deteriorated slightly, with prices of major row crops remaining low and profit opportunities narrow for most producers.
  • Farm loan repayment challenges increased slightly compared with the previous year, with weakening in repayment more pronounced in areas most heavily concentrated in crop production.

Sources:

  • Federal Reserve Bank of Kansas City, Beige Book, July 15, 2025
  • https://www.federalreserve.gov/monetarypolicy/beigebook202507-kansas-city.htm

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