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

Business activity down slightly, but most contacts cautiously optimistic for stable activity in 2024 Business activity down slightly, but most contacts cautiously optimistic for stable activity in 2024

January 18, 2024

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, Jan. 17, 2024

Summary of Economic Activity

Economic activity declined slightly on average, employment was roughly flat, and prices increased at a modest pace since the last reporting period. Retail revenues increased slightly, while tourism activity grew at an above-average pace. Software and IT services firms reported stable revenues, while manufacturers experienced slightly weaker sales. Residential real estate sales held steady at very low levels, although the prospect of lower interest rates in 2024 led to increased optimism for the housing market. Commercial real estate activity weakened further modestly, and the outlook in that sector remained mostly pessimistic, despite expected declines in borrowing rates. In sectors aside from real estate, the outlook for 2024 remained cautiously optimistic

Labor Markets

Employment was flat on average, and wage growth remained moderate. Hospitality and retail headcounts increased slightly, while employment was unchanged at software and IT firms. Manufacturing employment was also mostly stable, with the exception that a drug manufacturer carried out further large layoffs based on earlier plans. Hiring became easier on balance, and attrition rates fell to below-average levels. Nonetheless, labor scarcity persisted for auto mechanics and some highly skilled manufacturing workers. A shortage of restaurant help led one Vermont establishment to reduce its hours, but restaurant worker supply rebounded on Cape Cod. Wage growth was generally moderate, but some manufacturers and IT firms enacted above-average wage increases to compensate for price inflation. Contacts were not planning for major changes in employment moving forward, and wage pressures were expected to ease somewhat.


Prices increased at a modest pace on average. Among manufacturers, output prices increased at a slight to modest pace. In contrast, their input prices were mostly flat, except that fish commodities and shipping container costs each fell moderately, and localized flooding created a cost shock in one case. An online retailer continued to shift away from heavy promotional activity in favor of more stable pricing strategies; its average output price increased moderately, while its input prices were stable. Hotel room rates in the Greater Boston area edged up further, maintaining an above-average year-over-year growth pace, while room rates on Cape Cod were down slightly. Automobile list prices were steady, although promotional activity picked up following an increase in inventories. Software and IT services firms reported mostly stable output prices. Across sectors, contacts expected prices to hold steady or face only limited upward pressure in 2024.

Retail and Tourism

First District retail and tourism contacts on balance reported a modest seasonal upswing in sales in late 2023, although reports were quite mixed. On Cape Cod, revenues at retailers and hoteliers were described as "solid" for the fall season. Nonetheless, those revenues, net of typical seasonal fluctuations, were about flat since summer and down modestly relative to the fall of 2022. An online retailer saw modest seasonal growth despite sluggish industrywide performance. New and used automobile sales in New Hampshire were flat on balance despite improvements in inventories. Airline passenger traffic through Boston increased at an above-average pace in recent months, with the result that traffic surpassed its comparable 2019 levels for the first time since the onset of the pandemic. Hotel occupancy in greater Boston also increased at a strong pace, exceeding seasonal norms, fueled in part by robust convention activity. The outlook for tourism and convention activity for Boston in 2024 remained very bullish. In contrast, retailers around the First District were only cautiously optimistic for sales in 2024.

Manufacturing and Related Services

On average, manufacturing contacts reported slightly weaker sales. In one exception, a manufacturer of consumer goods experienced strong seasonal sales growth that was buoyed by promotions. A semiconductor manufacturer attributed weaker demand for their products to a general slowdown in consumer spending on electronics and autos, while a frozen fish producer attributed flat demand to increasing price sensitivity by consumers. Consistent with previous plans, capital spending was set to slow on balance moving forward, as a few firms recently completed significant capital projects and another cited high borrowing rates as an ongoing deterrent. Despite recent softness in sales, contacts were cautiously optimistic that demand would stabilize or improve in 2024.

IT and Software Services

First District contacts in the IT and software services industry experienced stable revenue streams in recent months. Sales increased at a robust pace on a year-over-year basis to the fourth quarter, and those positive results were attributed to offering products and services that met their clients' demands for greater operational efficiency. In response to price increases and cost reductions over the past year, profit margins increased modestly on balance in 2023. Capital and technology spending was flat for most firms but fell slightly at one that cut its reliance on hardware in favor of cloud computing services. Contacts expected demand to remain strong and stable moving into 2024, reflecting increased optimism for their own results and for the economy in general, compared with their forecasts from earlier in the year.

Commercial Real Estate

Commercial real estate activity in the First District weakened further modestly in recent months. In the already-weak office market, vacancy rates increased moderately on average, and Providence in particular saw the exit of a large downtown tenant. Office rents fell noticeably in the Boston area in recent months but were reportedly stable (if low) elsewhere. Demand for life sciences space in greater Boston dwindled further to very low levels. In the retail market, rents and vacancy rates were mostly steady at moderate levels, although lower-end malls continued to see elevated vacancies. Demand for industrial space slowed further at a modest pace, but rents and occupancy rates were described as mostly stable at healthy levels. Projections for commercial real estate activity in 2024 were mixed but remained pessimistic on balance. Some contacts predicted an increase in investment activity driven by declining interest rates. Others remained concerned that office buildings would face rising foreclosure rates even with some decline in interest rates. The industrial property market faced modest downside risks, and the outlook for Boston's life sciences properties deteriorated in response to weak recent demand.

Residential Real Estate

Contacts reported weak but mostly stable home sales in November 2023, net of seasonal patterns. However, contacts from the Boston area noted slightly weaker sales in November, adding that the median home price declined modestly in recent months as a result. Considering year-over-year changes, single-family sales fell by double-digit margins in November in all First District states except Connecticut (for which no data are available); condo sales fell by moderate-to-steep margins in all states except Maine, which posted a slight increase. Nonetheless, the rate of decline in home sales moderated on average from earlier in 2023. Median sales prices increased moderately on a year-over-year basis in all reporting states, a development attributed to persistent scarcity of supply and significant pent-up demand. Changes in home inventories were mixed, and despite modest recent increases in supply in some states, inventories remained historically low. Looking ahead, contacts expressed growing optimism for a resurgence in residential sales in 2024 given the prospect of lower mortgage rates.


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