Economic Cooling & Localized Risk in San Francisco & Kansas City
Introduction
In our Beige Book blog series, we now turn to the western and central US, specifically the Federal Reserve Districts of San Francisco (Twelfth) and Kansas City (Tenth). These districts span a wide geographic and economic range, from high-tech urban centers to rural agricultural regions. While the macro headline is “slight slowdown,” the underlying signals point to diverging stressors – sluggish consumer demand in tech-heavy areas and growing uncertainty in commodity-dependent communities.
Regional Highlights
- San Francisco (Twelfth District): Economic activity slowed modestly. Retail and services demand softened, while labor markets remained stable. Wage growth moderated, and housing activity cooled further. Technology and professional services firms noted hesitancy in hiring and investment.
- Kansas City (Tenth District): Moderate decline in activity. Retail sales fell, manufacturing contracted slightly, and many businesses expressed uncertainty around future demand. Lending activity slowed, particularly among small businesses.
Key Implications for Community Banks
- Consumer Softness May Hit Early in Tech-Driven Regions – As professional services and tech hiring stalls, local consumer activity is pulling back. Banks in these regions should monitor early indicators of credit fatigue.
- Small Business Lending is Losing Momentum – In Kansas City and surrounding areas, demand for small business loans is slipping. Portfolio managers should reevaluate assumptions around origination pipelines and credit risk exposure.
- Real Estate Activity Remains Cooled – Slowing home sales and continued weakness in CRE activity could weigh on fee income and balance sheet plans.
- Divergent Risks Require Tailored Responses – Institutions serving urban innovation hubs vs. rural agricultural markets will face very different economic dynamics. Risk and compliance teams should adjust monitoring practices and thresholds accordingly.
📌 Next Up: Translating Beige Book Signals to Exam Readiness
In the final post of our series, we will connect these regional signals to areas where examiners may press hardest in the second half of 2025.
Stay with us as we bring this series home and help your team translate economic insight into practical exam readiness.
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