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, October 15, 2025

Summary of Economic Activity

Economic activity ticked up overall, led by modest increases in consumer spending and manufacturing sales. Commercial real estate activity increased slightly, beating expectations. Software and IT services firms reported small increases in revenues and strong demand. Home sales were flat, while housing inventory increased notably. Employment was unchanged, but layoffs became more common, and wage increases remained modest. Prices rose at a moderate pace, as contacts mentioned tariff-related and other cost pressures. The outlook among business contacts brightened somewhat overall, with most now either neutral or cautiously optimistic. Non-business contacts, in contrast, expressed growing concerns about the economic security of lower-income households.

Labor Markets

Employment was flat overall, as both hiring and layoffs increased modestly. Manufacturing employment was unchanged on balance, as some firms added workers to meet demand, some kept head counts steady because of uncertainty, and one shed workers to offset tariff-related cost increases. Cuts to federal grant funding contributed to layoffs in the education and health-care sectors. Employment in IT services increased modestly, with hiring in sales and technical positions. Retail and tourism employment was unchanged, as contacts noted modest improvements in worker availability but worried about next summer's labor supply given expected reductions in seasonal visas. Contacts in Maine and Vermont said labor market slack in those states increased, even though certain hiring challenges persisted. Wages rose at a modest pace on average, and some contacts described wage pressures as more muted compared with a year earlier. Manufacturing wages were mixed, but up modestly on average. Salaries at IT firms were unchanged, with moderate annual increases expected at the turn of the year. With isolated exceptions, hiring plans remained limited, owing to rising cost pressures and elevated uncertainty. No major layoffs were expected in the near term, but the longer-term outlook was less secure.

Prices

Prices rose moderately on average, as certain cost pressures increased. Construction costs, energy prices, and wholesale food prices all increased by at least moderate margins, and liability insurance rates rose sharply. Restaurants' profitability declined in response to rising costs, as menu prices were mostly unchanged. Average hotel prices declined modestly in August from a year earlier, and prices for IT services rose moderately over the same period. Manufacturers' output prices increased modestly on average, with contacts noting increases in the prices of copper and certain tools. Smaller manufacturers passed through a larger share of tariff-induced cost increases to customers. Most contacts expected to face at least modest further cost pressures moving forward, and some were concerned about a possible acceleration of prices in 2026.

Retail and Tourism

First District retail and tourism contacts reported modest increases in activity on balance. Tourism contacts noted a widening gap in demand between luxury and budget-friendly accommodations, where overall growth was fueled almost entirely by the former. Hotel occupancy rates for greater Boston and Cape Cod increased slightly in August from a year earlier. Retailers and restaurants across Cape Cod, coastal New Hampshire, and Maine reported that summer spending totals rose moderately from the previous year owing to an increase in the number of day trips. The number of Canadian travelers to New England remained down sharply from the previous year, and certain parts of Cape Cod and Maine experienced weaker summer tourism activity (from the previous year) as a result. Nonetheless, tourism-related spending increased modestly overall, as domestic and other international travel compensated for the decline in Canadian visitors. Auto sales in New Hampshire increased modestly from last month, driven by the rush to purchase electric vehicles before the expiration of tax credits. The outlook shifted from pessimistic to neutral among retail and tourism contacts, although contacts said that considerable uncertainty remained.

Manufacturing and Related Services

Manufacturing sales rose modestly since the last report, on average. One firm's revenues declined slightly from a year earlier but nonetheless exceeded projections made at the start of 2025. Various contacts reported increased demand coming from medical, retail, wholesale, and/or restaurant market segments. Capital expenditures were unchanged. Uncertainty remained elevated, presenting challenges for some in making pricing, production, and/or advertising plans. Contacts were mostly optimistic about their prospects through the end of the year, but the outlook for 2026 was slightly weaker on balance, with headwinds related to tariffs, inflation, and uncertainty.

Software and IT Services

Demand for software and IT services remained strong among First District contacts; revenues rose slightly from last quarter on average, and one contact reported very strong revenue growth from a year earlier. Contacts attributed the strong demand to the increasingly essential nature of the services they provide, as well as to spillover IT investments related to AI adoption. Firms' prices increased moderately from the previous year on average, and costs were stable, resulting in higher profit margins. Capital and technology spending was unchanged. Contacts were quite optimistic, expecting further healthy revenue growth in the coming months.

Commercial Real Estate

Commercial real estate activity was up slightly net of seasonal factors. Contacts were encouraged by the seasonal uptick in leasing activity after Labor Day, as some were not sure it would materialize, and the Boston market was buoyed by some large office deals. Nonetheless, office rents were flat, while operating costs continued to rise. The retail sector experienced stable leasing activity, with modest rent growth and low vacancies. Industrial leasing and sales activity were stable. Apartment rents rose only slightly, representing a slowdown from earlier in the year. Construction costs continued to face upward pressure from tariffs and labor shortages, and construction activity remained limited. The outlook was cautiously optimistic on balance, representing an improvement from the summer. Contacts expected that more widespread return-to-office policies would boost office leasing going forward, and the recent reduction in the federal funds rate lifted sentiment somewhat. Still, pessimism lingered concerning rents.

Residential Real Estate

Closed sales of single-family homes were flat or down slightly overall (as of August), despite rising by modest to large margins in the northern New England states, all compared with the previous August. Condo sales increased slightly across the First District on average, but results varied widely across states. House prices rose moderately on average from a year earlier, representing somewhat slower growth than in the previous report, and condo prices fell modestly in some areas. Inventories increased sharply from the previous August, extending a trend that began earlier in the year. According to a Massachusetts contact, buyers became increasingly selective and patient, especially in the condo market. Contacts were hopeful that mortgage rates might fall in the coming months, potentially improving affordability and sales.

Community Perspectives

Contacts expressed increased anxiety and uncertainty regarding the economic situation of low- and moderate-income households in the First District. The prevalence of economic precarity increased in many communities, as evidenced by greater food pantry use and increased difficulty paying rent, utilities, and other bills. Consumers increasingly used savings to cover basic needs and took steps to reduce spending where possible. Planned cuts to SNAP and Medicaid, as well as further increases in consumer prices linked to tariffs, posed additional risks to low- and moderate-income households going forward. New England continued to face workforce housing shortages, and rising construction costs pushed against further development of such housing.

For more information about District economic conditions visit: www.bostonfed.org/regional-economy.

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.