Quarterly Economic Report – Q1 2026

Overall economic activity increased at a slight to moderate pace in seven of the twelve Federal Reserve Districts, while the number of Districts reporting flat or declining activity increased from four in the prior period to five in the current period. Although consumer spending increased slightly on balance, two Districts reported ongoing declines, and many noted that sales were dampened by economic uncertainty, increased price sensitivity, and lower–income consumers pulling back on spending. Districts impacted by winter storms said that retail traffic generally slowed, and one District said immigration enforcement activity negatively affected customer demand in urban areas. Auto sales were mostly down for Districts that reported on them, with many citing continuing affordability issues. Manufacturing activity improved overall since the previous reporting period, with eight Districts reporting varying degrees of growth and two reporting declines. Manufacturing contacts in many Districts reported increases in new orders, and several cited boosts in demand from data centers and, relatedly, energy infrastructure. Transportation activity was mixed across Districts that reported on it, with three reporting contractions and two reporting modest growth. Overall, financial services activity was reported as stable to up, with commercial lending being the primary area of strength. For most Districts that reported on residential real estate and construction, sales and activity decreased slightly, with low inventories and affordability remaining key issues. Nonresidential construction activity was mixed across reporting Districts but increased slightly on net. Among reporting Districts, agricultural conditions were mostly flat, and energy activity grew modestly on balance. Overall, economic expectations were optimistic, with most Districts expecting slight to moderate growth in the coming months.

The Federal Reserve Beige Book, February 2026

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Community Bankers Remain Positive about Their Future Despite Concerns

While community bankers remain optimistic about the future, their outlook on the impact of monetary policies and regulation is waning, according to the Conference of State Bank Supervisors’ (CSBS) most recent quarterly poll. The first quarter Community Banker Sentiment Index (CBSI) slipped one point to 131 from last quarter and two points from its record peak six months ago. The overall index remains well above the neutral level of 100 and continues to signal community banker optimism for the year ahead. The profitability, operations expansion, and franchise value components all increased and remained strongly in positive territory. However, the monetary policy and regulatory burden indicators dropped sharply by 13 points and eight points, respectively. “While bankers have greater uncertainty about national economic conditions, mainly due to potential impacts from the Iran war, they remain optimistic that their loan
portfolios in their local economies will lead to higher profitability and franchise values,” said CSBS Chief Economist Tom Siems. The CBSI surveys community bankers nationwide in the last month of each quarter to capture their thoughts on future economic conditions in seven areas. An index reading of 100 indicates a neutral sentiment. Anything above 100 indicates a positive sentiment, and anything below 100 indicates a negative sentiment. A total of 254 community bankers from 42 states and the District of Columbia responded to the survey. Quarterly results are included in the Federal Reserve Economic Data, the online database maintained by the Federal Reserve Bank of St. Louis, known informally as the FRED. Several community bankers voiced concerns on how the war in Iran might impact the U.S. economy, specifically inflation from higher oil prices, raised recession probabilities, and the possible impact of the Federal Reserve’s
monetary policy decisions. While community bankers still foresee a lighter regulatory environment in the coming year, their optimism has faded somewhat. The regulatory burden indicator, at 122, has remained at or above 100 for six straight quarters, following 15 consecutive quarters—from early 2021 to late 2024—when the indicator was consistently below 30 indicating a much heavier regulatory burden expected. Community bankers expressed concern about regulatory matters, such as deposit flight resulting from the current stablecoin legislation and the risk of lax check fraud controls by the big banks due to rules that limit depositing banks’ liability. The CBSI Uncertainty Index (the “I don’t know/unsure” responses for all seven components) returned to 31 this quarter, indicating more uncertainty than recorded in the previous quarter’s survey.

Conference of State Bank Supervisors. (2026, April 7). Community Bankers Remain Positive about Their Future Despite Concerns/www.csbs.org/newsroom/community

• Keep an Eye Out: Artisan Advisors is on the road! Look for Artisan’s Dan Bagus and Steve Heckhard at the CBAI’s April 23rd Group 1&2 meeting in Naperville – and Artisan co-founder Jeffrey Voss along with Steve, at the June 2nd Group 4 meeting in Kankakee.