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March 17, 1999
Federal Reserve Districts
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Economic activity continues to expand in the First District. Retailers see ongoing strong consumer demand, while manufacturing results are mixed. For the most part, prices are said to be steady and wages growing moderately.
Retail
Employment is said to be holding steady on a same-store basis, increasing only with store expansions. Wage growth is reported to be in the same 4 to 6 percent range that characterized most of 1998. Most respondents say that prices continue to hold steady, primarily because of competitive pressures. Supplier prices are reported to be level, except for imported goods, for which prices are falling on account of the Asian slump, and lumber prices, which are said to have increased dramatically because of very strong U.S. residential construction activity. Gross margins are unchanged. Contacts say that moderate increases in operations are planned for 1999, with heavy investments being made in information technology. Looking forward, respondents express optimism about the economic outlook for the rest of 1999, but do not expect consumer spending to continue growing at its current pace.
Manufacturing
Manufacturers indicate that materials costs continue to be flat or down. The majority report steady selling prices. One-quarter report some small increases, partly reflecting a pass-through of higher labor costs. Apparel textile makers indicate somewhat lower selling prices, and some equipment manufacturers say customers are pressuring them for reductions. Most contacts report little change in the size of their domestic workforce compared to either a year ago or a few months ago. However, several companies have laid off some production workers. Most new hiring is concentrated on sales, marketing, and service positions. Manufacturers mostly report that overall pay is increasing 3 to 5 percent, which some contacts note provides workers comfortable increases in real compensation. In general, wage pressures do not seem to be on the rise, although information technology personnel continue to command large increases. Over half the contacts plan higher capital spending this year. The increases are primarily to introduce new technologies for production, product design, distribution, or information processing. Several firms also intend to expand overall capacity. Most manufacturers have positive expectations for 1999. However, some mention the need to remain cautious or flexible in light of economic uncertainties.
Temporary Services
Commercial Real Estate
Hartford is said to be undergoing a "renaissance," caused in part by the upcoming construction of the Patriots' football stadium. Office and industrial vacancy rates have declined in Hartford, and several new construction projects are planned. Rhode Island, Maine, and Vermont contacts describe their commercial markets as "flat" and "steady." Outside a few pockets of increased rental activity, the markets in those states have been stable. Most contacts anticipate market conditions to remain unchanged during the next few months.
Nonbank Financial Services - Insurance
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