EconomyxAI · Beige Book Sector Monitor May 2026Released June 3, 2026 · Data through May 27 |
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Conditions index +0.17 avg of 11 sectors, −2 to +2 |
| Outlook index +0.32 sectors with an outlook |
| Districts growing 10/12 per National Summary |
| Positive momentum 6/11 sectors improving |
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This release in brief The read | ■ | Activity rose slightly to moderately in 10 of 12 districts; Philadelphia declined slightly, San Francisco was flat. | | ■ | Manufacturing is the bright spot: up in nine districts on data center and defense demand, with strong orders in New York and robust demand in Cleveland. | | ■ | Energy-driven inflation from the Middle East conflict: prices rose moderately to strongly and input costs outpaced selling prices, squeezing consumer-facing margins. | | ■ | Consumers are bifurcated: high-income spending holds up while fuel prices cut discretionary spending in Kansas City, Dallas, San Francisco and Cleveland. | | ■ | Six-month outlooks show little change; credit is tightening slightly and delinquencies are edging up in several districts. |
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Sector prospects Where the 3–12 month view points Strongest prospects Industrials
XLI
▲ Turning up | +0.54 |
| Financials
XLF
▶ Steady | +0.41 |
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| Weakest prospects Consumer Staples
XLP
▼ Turning down | −0.26 |
| Real Estate
XLRE
▶ Steady | −0.10 |
| Communication Services
XLC
▶ Steady | −0.10 |
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All 11 GICS sectors, ranked Sector scoreboard | # | Sector | −1 0 +1 | Score | Signal | Now | Outlook | Mom. |
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| 1 | Industrials
XLI | | +0.54 | Favorable | +1.16 | +0.51 | ▲ +0.68 | | 2 | Financials
XLF | | +0.41 | Leaning Favorable | +0.47 | +0.54 | ▶ +0.36 | | 3 | Energy
XLE | | +0.36 | Leaning Favorable | +0.51 | +0.00 | ▶ +0.28 | | 4 | Information Technology
XLK | | +0.31 | Leaning Favorable | +0.24 | n/a | ▲ +0.64 | | 5 | Materials
XLB | | +0.22 | Leaning Favorable | +0.14 | n/a | ▶ −0.04 | | 6 | Health Care
XLV | | +0.18 | Leaning Favorable | +0.21 | n/a | ▲ +0.27 | | 7 | Consumer Discretionary
XLY | | −0.03 | Neutral | −0.23 | +0.28 | ▲ +0.28 | | 8 | Utilities
XLU | | −0.10 | Neutral | +0.00 | n/a | ▼ −0.23 | | 9 | Communication Services
XLC | | −0.10 | Neutral | −0.15 | n/a | ▶ −0.01 | | 10 | Real Estate
XLRE | | −0.10 | Neutral | −0.24 | +0.27 | ▶ −0.05 | | 11 | Consumer Staples
XLP | | −0.26 | Leaning Unfavorable | −0.19 | n/a | ▼ −0.28 |
Prospect Score blends current conditions, district outlooks, momentum, a sector-specific macro tilt and margins. Now = weighted current conditions; Outlook = n/a when too few districts gave one; Mom. = change vs the average of the two prior releases. |
National Summary, scored −2 to +2 Macro backdrop | Overall Economic Activity | | +0.50 |
Ten of twelve districts grew slightly to moderately; one declined slightly (Philadelphia) and one was flat (San Francisco). Broader than April, led by manufacturing. | Employment little changed in eleven districts, modest growth in one; low-hire, low-fire; wage growth modest to moderate and in line with inflation. | | Inflation Pressure (higher = headwind) | | +1.50 |
Scored as inflation pressure, not as good news: +1.5 means prices are rising fast. Price growth picked up to moderate-to-strong, driven by energy costs tied to the Middle East conflict and spilling into shipping, packaging, groceries and fertilizer (Chicago and Minneapolis rapid/sharp, St. Louis robust). Through negative sensitivities this lowers the Macro Tilt of 9 of 11 sectors; only Energy and Materials gain. The cost-vs-price squeeze is scored separately on the Margins sheet. | Banking stable overall, but credit standards tightened slightly in New York, Chicago, Dallas and San Francisco; delinquencies rising in Atlanta, Dallas, San Francisco and New York mortgages; St. Louis says rising rates slowed dealmaking; bankers in Boston and St. Louis expect more deterioration. | Six-month outlooks show little change in expected growth; uncertainty and weaker consumer spending weigh. Manufacturers more upbeat (NY, Philadelphia, Cleveland), St. Louis and San Francisco weaker, Dallas tepid. |
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Current conditions in each Fed district District by sector | BOS | NY | PHL | CLE | RIC | ATL | CHI | STL | MIN | KC | DAL | SF |
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| Information TechnologyXLK | · | · | · | +1 | +1 | · | +1 | · | +1 | · | +1 | · | | Health CareXLV | · | · | · | · | +1 | +1 | · | +1 | · | · | · | · | | FinancialsXLF | · | +1 | · | +1 | +1 | +1 | −1 | · | +1 | · | +1 | · | | Consumer DiscretionaryXLY | +1 | +1 | −1 | −1 | +1 | · | +1 | · | · | −1 | −1 | −1 | | Communication ServicesXLC | · | −1 | · | · | · | · | · | · | · | · | · | · | | IndustrialsXLI | +1 | +2 | · | +2 | +1 | +1 | +1 | · | +1 | +1 | +2 | +1 | | Consumer StaplesXLP | · | · | · | −1 | · | · | · | −1 | · | · | −1 | · | | EnergyXLE | · | · | · | · | · | +1 | · | · | · | · | +1 | · | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | −1 | +1 | −1 | +1 | · | −1 | +1 | · | · | · | · | −1 | | MaterialsXLB | · | · | · | · | · | −1 | +1 | · | · | · | +1 | · |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Industrials +2 New York Manufacturing activity grew strongly, with a substantial increase in new orders; manufacturers grew more optimistic. Why it matters: Strongest manufacturing language in the report, paired with a better outlook. | Industrials +2 Cleveland Demand for manufactured goods grew robustly; manufacturers expect demand to rise at a moderate pace. Why it matters: Robust current demand plus a positive outlook in a heavily industrial district. | Industrials +2 Dallas Manufacturing surged in April then moderated; rising demand and building backlogs; data center and industrial construction robust. Why it matters: Backlogs and construction strength support the 3-12 month view. | Information Technology +1 Dallas, Cleveland, Minneapolis, Chicago Strong semiconductor demand from AI infrastructure (Dallas); new AI-expertise roles (Cleveland); electronics backlog from data centers (Minneapolis); data center investment unaffected by uncertainty (Chicago). Why it matters: AI and data center demand is the common thread lifting IT outside San Francisco. | Industrials +1 broad−based Richmond, Atlanta, Minneapolis, Kansas City Data center and defense demand driving manufacturing; robust 3-5 year pipelines (Atlanta), strong electronics backlog (Minneapolis), aerospace expanding rapidly (Kansas City). Why it matters: Forward-looking backlog evidence across districts, not one-off reports. | Consumer Discretionary −1 Kansas City, Dallas, San Francisco, Cleveland Elevated gasoline prices reduced discretionary spending; auto sales softened; consumer-facing firms report margin compression. Why it matters: Energy-driven inflation is hitting discretionary demand and margins at once. |
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Twelve Fed districts District roundup Boston Growing +1.0 Outlook ▶ Activity grew slightly; the outlook was mixed |
| New York Growing +1.0 Outlook ▲ Increased slightly after a sustained period of weakness |
| Philadelphia Contracting −1.0 Outlook ▶ Business activity declined slightly on balance |
| Cleveland Growing +1.0 Outlook ▲ Business activity increased moderately; continued moderate growth expected |
| Richmond Growing +1.0 Regional economy continued to grow modestly |
| Atlanta Growing +1.0 Economy expanded at a modest pace |
| Chicago Growing +1.0 Outlook ▶ Activity increased slightly; little change expected in the coming year |
| St. Louis Growing +1.0 Outlook ▼ Activity slightly increased; outlook slightly deteriorated |
| Minneapolis Growing +1.0 Economic activity increased modestly |
| Kansas City Growing +1.0 Outlook ▶ Activity increased slightly; consumer-facing firms report margin compression |
| Dallas Growing +1.0 Outlook ▶ Activity rose modestly; outlooks tepid amid Middle East uncertainty |
| San Francisco Flat Outlook ▼ Activity largely stable; weak outlook, slightly more optimistic |
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Where the signal is thin or split Divergences to watch | Industrials — strongest on conditions and outlook alike, broad across districts; the only sector with outlook coverage from nearly every district.
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| | Information Technology — conditions improved on AI and data center demand in five districts; San Francisco is mixed (rising IT-services demand, some tech layoffs). No district gives an IT-specific outlook, so it rests on conditions and momentum.
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| | Energy — prices and margins are strong, but producers are holding drilling steady; Dallas and Kansas City outlooks are flat, so higher oil prices are not translating into more activity.
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| | Utilities — falls back to 0 after April's Atlanta +2; this is thin coverage rather than a reported decline, so read its negative momentum with care.
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| | Consumer Discretionary — conditions negative and margins squeezed, yet several districts expect slight spending gains; macro tilt is most negative here because faster inflation hurts it most.
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| | Financials — loan demand still growing, but outlooks split between Cleveland/Dallas optimism and expected credit deterioration in Boston and St. Louis.
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| | COMMUNICATION SERVICES and HEALTH CARE: thin coverage; no outlook statements, scores lean on conditions.
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How to read this. Each Fed district’s report is scored −2 (strong contraction) to +2 (strong expansion) for each GICS sector, then weighted by the district’s share of that sector’s activity. The Prospect Score blends current conditions (25%), district outlooks (35%), momentum (20%), a sector-specific macro tilt (10%) and margin pressure (10%). The Beige Book describes regional activity, not earnings or valuations. Weights and sensitivities are illustrative. This newsletter is for information only and is not investment advice. Source: Federal Reserve Beige Book · Scored by EconomyxAI |