State Economic Watch

Manufacturing activity in the Philadelphia area increased in August, but services activity declined according to the two recent surveys from the Federal Reserve Bank of Philadelphia. Its August Manufacturing Business Outlook Survey indicates expansion in regional manufacturing activity, with the top line general business activity index increasing to 47.4 in August from 41.4 in July and, notably, the employee count index rose to 27.9 from 10.0 in the previous month. Similarly, the forward-looking six-month expectations indexes rose significantly with the general business activity index increasing 39 points to 73.6, its highest level since August 1983.  The story was entirely different in the services sector, with the Philly Fed’s Nonmanufacturing Business Outlook Survey registering m/m declines in almost all of its indexes in August. The top line general business activity index fell from a weak +7.4 in July to -10.6 in August. The employee count indexes were barely positive, and t...

  After five consecutive quarters of deceleration in home price appreciation, today’s  release of the FHFA House Price Index (HPI) report for 2Q2026 reflects a modest improvement. The national Purchase-Only FHFA HPI (SA, nominal) increased 2.13% y/y in the quarter compared to 1.88% in 1Q2026 and 2.03% in 4Q2025. Nevertheless, this is a far cry from the index’s most  recent peak y/y growth rate of 6.42% in 1Q2024 and its historic peak of 18.17% in 3Q2021. The states with the strongest y/y growth in house prices were diverse, with Alaska, Vermont, Hawaii, Illinois and West Virginia comprising the top five states. Four states posted y/y declines in their respective HPI indexes led by New Mexico, followed by Washington, Colorado and California. The below exhibit is from the FHFA release. Source: FHFA

The US Bureau of Reclamation’s Final Environmental Impact Statement on the future management of the Colorado River has significant negative implications for the Arizona economy according to a statement by the state’s Department of Water Resources . This is a complex situation as the long term drought in the west has raised concerns about the operations of the Glen Canyon and Hoover dams. The inability of the seven states that draw water from the Colorado to negotiate a new water usage agreement risks the imposition of a federal government solution, which could have significantly impact the economies of Arizona, California and Nevada. This article from the Arizona Mirror provides a good overview of the situation.

Washington State businesses continue to be in a dour mood according to the results of the summer Washington Employers Survey from the Association of Washington Businesses.  According to the most recent quarterly survey, conducted July 8-22, 38% of the state’s businesses view the state’s economy as weak or very weak, compared to 26% in the summer 2025 survey. However, relocation plans are down slightly, with 16% of respondents considering relocating to another state, down from 24% in the spring 2026 survey, and the number of business leaders considering moving their personal residences out of Washington State fell to 45% from 55% in the spring. Similarly, 14% of respondents are considering expanding in Washington state compared to only 9% in the spring survey, while 33% plan to expand their businesses in another state compared to 38% in the spring. The survey respondents continue to cite taxes and government regulations as the principal challenges for businesses in the state. ...

Business conditions in the Texas services sector remained stable in July according to the latest Texas Services Sector Outlook Survey from the Federal Reserve Bank of Dallas. The top line revenue index held steady at 9.5 compared to the 9.8 posted for June. The employment index fell from 8.1 to 2.6, but the company outlook and general business activity indexes both increased modestly. The six-month forward expectations indexes were mixed, with the revenue index unchanged m/m and the employment indexes up slightly.  

Vermont state economists are projecting general fund revenue growth to 2.4% in the current year and 3.2% next year. This is equal to the forecast made in January, but better than the revenue downgrade that was anticipated. The economists point to, among other things, the knock-on wealth effects from rising equity prices and the resultant increases in consumption and tax receipts.