The Beige Book – First District The Beige Book – First District

Outlook increasingly optimistic as economic activity expands, though some have inflation concerns Outlook increasingly optimistic as economic activity expands, though some have inflation concerns

April 16, 2021

The Beige Book

The Beige Book is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector.

Boston (First District) Beige Book Report, April 14, 2021

Summary of Economic Activity

Economic activity among First District contacts increased at a modest to moderate pace. Retail sales strengthened in the first quarter at two of three firms, advance travel bookings increased, and sales were either stable or up modestly among contacts in the manufacturing sector and in software and IT services. On a year-over-year basis, more than half of manufacturers and two of three retailers saw robust gains, while air travel remained below pre-pandemic levels as did sales at software and IT services firms and at one retailer. Commercial and residential real estate markets extended their earlier trends, as industrial properties and single-family homes remained in high demand and short supply, and year-over-year gains in home sales moderated. Hiring activity was mixed and wage increases were moderate on balance. The outlook was stable or increasingly optimistic but concerns about inflation intensified at several firms.

Employment and Wages

Hiring activity was mixed and wage increases were moderate. One manufacturer and one travel industry contact laid off large numbers of workers in recent months, but otherwise headcounts were either flat or up. A few manufacturing contacts added significant numbers of employees in 2020 and modest numbers recently, and others were trying to hire new workers with little success. A life sciences manufacturer paused an ambitious hiring plan for 2021 pending the resolution of regulatory uncertainty. Software & IT contacts were engaged in limited to modest hiring activity, following a 20 percent increase in headcounts at one firm in 2020. Hospitality contacts anticipate seasonal worker shortages this summer due to limits on visas. Among contacts in software and IT, manufacturing, and retail, more than half implemented wage increases for 2021 ranging from 3 to 4 percent, one held wages fixed, and others did not provide wage information. One manufacturer raised its minimum wage to $15 to attract more workers, and two retailers also boosted pay for low-wage workers to reduce turnover.


Reports raised the possibility that inflation could increase in the coming months. Most manufacturers and one retailer reported steep input price increases—in the double digits on a year-over-year basis in most cases—for goods such as paper and paper pulp, wood, pollock fish, fabric, foam, plastics, and shipping and transportation services. A furniture retailer had already raised prices (as did their competitors) to pass along increased materials costs, and three manufacturers planned to raise their prices in 2021 in response to cost pressures. Some cost increases were attributed to logistical issues, weather-related disruptions, and/or to higher oil prices, but several contacts also mentioned robust demand as a factor. Based on a recent surge in advance bookings on Cape Cod, one contact forecasted that hotel room and vacation rental rates could reach record levels in the coming months. Among software and IT contacts prices were unchanged but margins increased year-over-year on cost savings from remote work postures.

Retail and Tourism

Retailers reported strong sales throughout the first quarter of 2021. A furniture retailer experienced a record setting March, which was attributed to customers accessing stimulus funds, but also faced extended delays in receiving goods. A clothing retailer said that recent sales were up 30 percent over their pre-pandemic levels on the strength of online sales; the same retailer saw a sharp reduction in post-holiday returns relative to 2020. A home décor retailer reported steady sales across US stores throughout the winter months, but added that sales remained below pre-pandemic levels by low single-digit percentages.

Travel industry respondents continued to report major disruptions related to COVID-19 for air travel. The number of airline passengers through Boston remained down about 70 percent in February and March compared with the same months in 2019, and the decline for international flights was estimated at nearly 80 percent. Contacts expected leisure travel to increase in the coming months as vaccination rates progress, and scheduled flights are already on the rise. Advance hotel bookings and short-term rentals for summer stays on Cape Cod are up dramatically from their typical April levels, and occupancy rates, hotel room rates, and short-term rental rates there are on track to break records this summer.

Manufacturing and Related Services

Most contacts said that sales were roughly stable in recent months, and two reported modest increases. Year-over-year sales results were mixed, as 5 of 8 contacts reported robust increases and others saw moderate declines or flat sales compared with 2020Q1. Firms with double-digit sales increases from 2020 included a manufacturer of membrane materials that said growth was strong across all business lines and all regions of the world, including Europe. Several contacts said that sales were limited only by their capacity. Firms that posted over-the-year declines included a drug company that lost patent protection on a key product, and a toy manufacturer that depends on new entertainment products to boost sales and so was hit hard by the pandemic.

Capital investments were ongoing at most contacts, although only a few had revised their spending plans upward in response to strong sales. Several contacts reported that delays in the delivery of capital goods had reduced capital expenditures in 2020 and that they planned to spend more in 2021 as a result.

All contacts were optimistic for 2021 but most had not changed their forecast in recent months. A frozen fish manufacturer held a cautious outlook because, despite exceptionally strong recent sales, the end of the pandemic was seen as a potential damper on demand for their products. Contacts also expressed concern about rising inflation over the rest of the year.

Software and Information Technology Services

Most contacts enjoyed steady or improved activity in recent weeks but also said that demand remained well below pre-pandemic levels. At two firms, demand for subscription-based cloud computing services extended an upward trend. Most contacts were optimistic for the remainder of 2021. Contacts forecasted that progress in vaccinations and the return of in-person activities would boost consumer and business confidence as 2021 unfolds, translating into stronger demand for their products.

Commercial Real Estate

Commercial real estate conditions in the First District were mostly unchanged in recent weeks. Industrial vacancy rates remained extremely low and rents increased further at a strong pace. Investors and users alike sought to build new warehouses and distribution centers despite high construction costs. A lender to commercial real estate faced increased competition from large national banks on mid-priced deals, as the large banks faced weak demand for larger commercial real estate loans. Construction activity in the life sciences sector remained robust, and extended to the conversion of vacant office space. Retail leasing was better than expected for smaller urban spaces but remained weak for big box stores and malls. The office sector continued to struggle with large quantities of sublease space, and although rents held mostly steady, contacts expect downward pressure on rents to increase moving forward. Reportedly, some landlords were holding office space off the market in anticipation of stronger demand in late summer, although office footprints are expected to stay well below pre-pandemic levels for an extended period. Contacts remained concerned that speculative construction of lab space at current rates could yield a glut by 2023-2024.

Residential Real Estate

Extremely low inventory and high demand continued to characterize the residential real estate market in the First District through January and February. (Vermont reported changes from January 2020 to January 2021, most other areas provided changes from February 2020 to February 2021, and Connecticut provided no data). Closed sales increased in all reporting areas, but by a smaller margin than in recent reports. The Rhode Island contact attributes the slowdown to reduced inventories. Home inventories were down by double digit percentages for all reporting markets except Boston condos, where inventory again posted a year-over-year gain. Some contacts noted that while interest rates increased slightly in February, the increase so far had not blunted demand. Prices increased in all reporting areas. Extending a pandemic-related trend, suburban single-family homes remained the most favored product type. Contacts expected demand to strengthen further moving forward but they expressed concern that low inventories would crimp sales and limit affordability for many potential buyers.


For more information about District economic conditions visit:

All Beige Book content going back to 1996 can be found at the Board of Governors website.

The Minneapolis Fed hosts the Beige Book archives by district, going back to 1970.