Current Release

January 2026

Summary of Economic Activity

Economic activity in the Seventh District was little changed over the reporting period and contacts expected a slight decline in activity over the next year. Consumer spending and construction and real estate demand rose slightly; employment was flat; nonbusiness contacts saw no change in economic activity; business spending fell slightly; and manufacturing activity declined modestly. Prices rose moderately, wages were up modestly, and financial conditions loosened modestly. Net farm income in 2025 was similar to 2024.

Labor Markets

Employment was flat over the reporting period, but contacts expected a slight increase over the next 12 months. Contacts frequently reported hiring only to replace departing employees, including retirees. Among those hiring, there was little change in worker availability, with very few contacts indicating difficulty finding workers. Employment placement agencies reported no change in demand on balance, with increased hiring by the hospitality sector offsetting further decreases in manufacturing. However, some contacts in fabricated metals manufacturing again reported a need for more skilled workers and a few contacts across a range of industries indicated some desire to increase employment. Wages were up modestly. Benefits grew moderately, with continued reports of higher health insurance costs.

Prices

Prices rose moderately on balance in late November and December and contacts expected a similar pace of growth over the next 12 months. Producer prices rose moderately. Nonlabor input costs rose moderately, with contacts highlighting higher costs for energy (particularly electricity) and raw materials. Manufacturing contacts continued to attribute some increases in raw materials prices to tariffs, while a few construction contacts reported little effect of tariffs on their operating costs. Consumer prices rose moderately, and one retail industry analyst said that to date about half of tariff-related cost increases had been passed through to consumers.

Consumer Spending

Consumer spending increased slightly overall over the reporting period. Non-auto retail spending was up modestly. Holiday sales came in largely as expected, though spending growth was stronger in November than in December. Sales growth was driven by promotions as retailers carefully managed their inventory, with the intensity of promotions similar to last year. Categories with notable growth were computers, software, and apparel while categories with lower spending included furniture, appliances, and jewelry. Leisure and hospitality spending was unchanged on balance; while spending at restaurants increased slightly, most travel-related categories were down. However, contacts reported improved hotel occupancy trends in December for Chicago properties and stronger event bookings for 2026. New light vehicle sales rose slightly, although dealers noted that consumers were opting to keep vehicles for longer before trading in. Used vehicle sales were steady, though some dealers in markets with large Hispanic populations reported noticeably weaker sales.

Business Spending

Business spending declined slightly in late November and December. Capital expenditures fell a bit, but contacts expected a slight increase in the coming year. Demand for truck transportation was flat on balance and rates continued to be soft. One consultant for the freight transportation industry expected that low profits could lead some small fleets to go out of business in the coming year. Retail inventories were a little lower than normal for a post-holiday season. Stocks of new vehicles were comfortable, but low for used vehicles. Manufacturing inventories were a little high.

Construction and Real Estate

Construction and real estate activity increased slightly on balance over the reporting period. Residential construction declined slightly, with demand remaining soft for larger remodeling projects. Residential real estate activity edged down. Inventory levels rose while prices and rents were little changed. Nonresidential construction was flat. Construction remained strong for public projects, notably schools, and select sectors such as senior housing and data centers. However, new construction continued to be constrained by relatively high material and labor costs. Commercial real estate activity increased modestly, and developers noted that robust demand for data centers was contributing to strong competition for industrial-zoned land. Vacancy rates decreased slightly, with one contact highlighting a decline at retail centers. Prices and rents both edged up.

Manufacturing

Manufacturing demand decreased modestly overall in late November and December. Steel sales edged down. Fabricated metals orders declined moderately due to lower demand from a variety of industries. Machinery demand decreased. Auto production was up slightly, while heavy truck production decreased slightly. Some manufacturers noted longer lead times or shortages of raw materials, including of metals and rare earth minerals.

Banking and Finance

Financial conditions loosened modestly in late November and December. On balance, bond prices were flat, equity values rose slightly, and volatility fell modestly. Business loan demand was flat on net. Business loan rates fell modestly across the board but terms tightened slightly. Business loan quality fell slightly overall, with a few contacts noting a decline in quality for commercial real estate loans. In the consumer sector, loan demand increased modestly on net, in part due to increases in auto loans. One contact reported a small increase in bridge loans for homeowners. Loan quality increased slightly, with one contact noting improved quality for home equity loans and another for auto loans. Consumer loan rates fell modestly but terms tightened slightly.

Agriculture

District net farm income for 2025 was about the same as in 2024 and was higher than previously expected after corn and soybean prices rallied in the fourth quarter despite a large harvest. Most livestock operations maintained their profitability. Contacts were “cautiously optimistic” about the recent announcement of federal government financial support. Still, with input costs elevated, contacts expected tight margins for crop operations in 2026, with some concerned that input costs could be boosted further by demand generated by government support. Farm borrowers felt some relief from lower interest rates. Specialty crop yields varied in 2025 but were mostly lower, with contacts citing labor costs and availability as major challenges. Cattle prices increased while hog and dairy prices declined. Egg prices were down modestly despite minor outbreaks of avian influenza. Contacts again mentioned trade concerns as uncertainty about tariff negotiations lingered and South American growers were on track for a large crop of corn and soybeans.

Community Conditions

Community, nonprofit, and other nonbusiness contacts described stable economic conditions overall, though with continued softening in the labor market and increased pressures from inflation. State and municipal government contacts reported stable conditions while noting some uncertainty about the impact of weaker labor markets on consumer spending. Small business contacts were feeling the impact of federal policies, including tariffs and changes to small business support programs. Leaders of social service organizations were relying on collaborations to sustain service delivery in the face of funding changes. High utility costs were straining household budgets, resulting in high demand for food assistance and other supports, like housing and transportation.