The Federal Reserve Bank of St. Louis reported Wednesday in its latest Beige Book that overall economic activity in Arkansas and the surrounding region has increased modestly, driven by strong late-holiday sales and the end of the government shutdown.
The St. Louis Fed represents the Eighth Federal Reserve District, which includes all of Arkansas and parts of Missouri, Kentucky, Tennessee, Mississippi, Indiana and Illinois.
Prices continued to rise moderately since the bank’s last report in November. Auto and truck dealers cited ongoing price pressures tied to import tariffs, though manufacturers reported absorbing many of those costs through reduced profit margins. Restaurants reported difficulty passing higher costs on to customers, leading to financial strain, while airline fares were reported as stable to slightly lower.
Employment levels across the district were largely unchanged, and contacts reported limited demand for additional workers. Wage growth remained moderate, though some employers are budgeting for higher labor costs in 2026, while agri-business contacts expect some wage relief as regulated H-2A wages decline.
Consumer spending increased moderately, buoyed by stronger-than-expected sales late in the holiday season. Retailers reported particularly strong post-Christmas activity, and a district airport reported December travel was nearly 10% higher than one year ago. Contacts said shoppers delayed purchases to seek deeper discounts, with promotions driving late-season sales.
Manufacturing activity improved slightly, with a December survey showing modest gains in Arkansas and Missouri. However, contacts reported ongoing weakness in new orders and elevated inventories. Some manufacturers reported excess capacity due to declining orders from smaller customers, while plastics manufacturers cited stronger demand tied to reshoring efforts driven by tariffs.
Nonfinancial services activity was mixed. A warehouse facility in Arkansas reported that tenants consistently exceeded expectations throughout December. Health care providers, however, warned of growing financial pressure, with one estimating a sharp increase in self-pay patients in 2026, which could weigh on revenues.
Residential real estate activity was largely unchanged. Realtors reported stable demand but constrained sales due to limited inventory, while suppliers noted easing construction activity as affordability concerns deter buyers.
Commercial real estate conditions improved modestly. Apartment rents stabilized late in the year, and occupancy rose in Little Rock, though it declined in northwest Arkansas. An Arkansas commercial realtor reported that most commercial property markets remain solid, except for Class B and C office space, as tenants grow more cautious with investments.
Banking activity increased modestly, with district banks ending the year with strong loan growth, particularly in real estate lending and home-equity lines of credit. Commercial loan growth was modest, while consumer lending declined slightly. Contacts reported tighter lending standards for business loans.
Agriculture conditions remain strained, with supply continuing to exceed demand. Arkansas farmers are struggling to sell harvested row crops, and low Mississippi River levels have reduced barge capacity, though port contacts reported no major disruptions. A farmer reported that financial pressure remains elevated across the sector as producers prepare for the spring planting season.
Contacts in the timber and protein sectors, however, expressed cautious optimism, citing expectations for stronger demand in the coming months.
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