The Federal Reserve Board eagle logo links to home page

Beige Book logo links to Beige Book home page for year currently displayed May 3, 2000

Federal Reserve Districts

First District - Boston

Skip to content

New York
St. Louis
Kansas City
San Francisco

Full report

Business contacts in the First District remain upbeat. Retailers indicate their sales are in line with expectations and manufacturers report "solid" increases, with revenues or orders for some sectors or products very strong. Average pay increases remain in the 3 to 5 percent range, with larger increases for information technology workers and increased use of a variety of performance-based pay incentives for a wide range of professional and technical workers. Except for oil-related products, both manufacturers and retailers report little evidence of inflation. While a few manufacturers are raising prices, materials costs and vendor prices are mostly flat and large manufacturers continue to put pressure on their suppliers for price reductions. Recent stock market shifts and interest rate increases are said to be causing modest increases in uncertainty about the outlook.

Retail contacts report sales growth during the January through March period ranging from near-zero to double-digit increases from year-earlier. While these sales results are mostly in line with projections, sellers of apparel came in below expectations. Inventories are at desired levels. Respondents say that generally tight labor markets and acute labor shortages in selected occupations make it difficult to retain permanent staff and to hire replacements. Most retail contacts report that consumer price inflation is nonexistent and that vendor prices are either holding steady or, in the case of technology products, declining. Gross margins are said to be rising slightly because of productivity improvements.

Retail respondents indicate that they plan very little expansion of their operations over the next six months. On the basis of the economy's currently strong fundamentals, most contacts expect steady growth to continue through the year 2000. However, in the furniture and apparel sectors, uncertainty has crept into the outlook for the second half of calendar year 2000.

Manufacturing and Related Services
Almost all First District manufacturing contacts report that recent business is up solidly relative to a year earlier. Close to one-half of this month's respondents are experiencing double-digit revenue growth. Companies selling to the semiconductor industry are reporting extremely strong growth in sales and new orders. Manufacturers of computer hardware, automotive equipment, plastics, and medical devices also report vigorous growth. In contrast, makers of industrial equipment continue to indicate that orders are sluggish, although one reports that business from the automotive industry is poised to improve this year. Contacts in a number of industries indicate that foreign sales have accelerated.

Materials costs are largely flat even though many manufacturers are paying more for oil-based products, fuel, and freight. Apart from energy, respondents report few instances of higher quotes and generally they are pressuring their suppliers to hold the line or offer more attractive terms. Manufacturers selling building products, office supplies, plastics products, and selected consumer items have raised prices in the range of 2 to 5 percent. Selling prices are steady or down slightly in the case of information technology companies and those manufacturing equipment related to biotech and semiconductors. Firms making machinery and equipment for the aircraft and automotive industries report continuing pressures to reduce prices.

Except for a few firms that are expanding aggressively to meet rapidly rising demand, most respondents report that employment levels are flat or up slightly. Most employers report average annual pay increases in the range of 3 to 5 percent. However, the average increase is higher at IT firms, and respondents in a variety of industries are reacting to very tight labor markets for professional and technical employees by increasing signing bonuses, stock options, promotion rates, and performance-based compensation. Other responses to tight labor markets include contracting out more engineering and software work (including overseas) and raising expenditures on equipment and information systems.

Various manufacturers mentioned that sharp reductions in stock prices or sharp increases in interest rates could adversely affect the economic climate. However, respondents remain upbeat about their revenue and earnings prospects absent large, unforeseen shocks.

Residential Real Estate
Residential real estate markets in New England are "stable," but contacts in all states complain about lack of inventory. Several respondents stated that "there is nothing on the market," and brokers are "desperate." As a result, both single-family homes and condominiums tend to sell very quickly, and many properties receive multiple offers, some above asking prices. The lack of inventory has led to price increases in some areas. Prices in Vermont increased by 10 to 15 percent over the year ending in first quarter 2000. However, prices in Rhode Island and Connecticut increased only moderately, and Massachusetts contacts report modest rates of price increase in the first quarter compared to the previous year: 6 to 8 percent (annual rate) as compared to 10 to 15 percent earlier. Most contacts expect market conditions to remain stable in the next few months, although changes in the stock market or in interest rates could bring unexpected changes.

Return to topReturn to top

Previous Summary New York Next

Home | Monetary Policy | 2000 calendar
To comment on this site, please fill out our feedback form.
Last update: May 3, 2000