Beige Book Report: Boston
June 4, 2025
Summary of Economic Activity
Economic activity slowed slightly amid persistent uncertainty. Consumers appeared increasingly cautious, evidenced by modest declines in retail and restaurant sales and slight declines in home sales. Manufacturing sales increased by a very small margin, on average. Commercial real estate activity was flat overall, but office leasing expanded modestly in Boston and Providence. Uncertainty led to hiring delays, and employment declined a bit as a result. Prices rose only modestly, but nontrivial price increases were expected to hit consumer goods by summer. The outlook was mostly unchanged and was characterized by a mix of cautious optimism and blunt pessimism. The more optimistic contacts pointed to the possibility that resolution of uncertainty could unlock economic activity moving forward; the more pessimistic contacts, in contrast, emphasized the potential negative impacts on demand from tariffs and other federal policies.
Labor Markets
Employment was down slightly, and wages edged up. Staffing services contacts said that employers across many industries delayed hiring because of uncertainty related to tariffs. Manufacturing contacts echoed that description, reporting that headcounts were down slightly amid cautious hiring. Regarding labor supply, government-sector layoffs brought new jobseekers to the market, while current employees in retail, restaurant, and other industries became less likely to quit or seek new jobs. Wages increased only slightly as a variety of firms delayed planned raises, again because of tariff-related uncertainty. Some manufacturing firms, especially those less exposed to tariffs, proceeded with moderate annual merit increases. Staffing firms said that starting compensation rates were mostly stable but noted that experienced pay rates decreased moderately for selected roles. Contacts agreed that economic uncertainty would probably continue to hold back labor demand going forward, but no major layoffs were planned.
Prices
Prices rose only modestly in recent months, but a growing number of contacts planned to raise prices going forward. Manufacturers' prices increased moderately on average, driven by a partial pass-through of tariff-related cost increases. However, some manufacturers held prices fixed, either because they were not exposed to tariffs or because they stockpiled inventories of foreign inputs in advance of tariffs. Retail prices were stable recently but were expected to rise substantially in the coming months. A clothing retailer, which typically tags items with prices months in advance, took the rare step to retag items with higher prices to cover the cost of tariffs, and those items will hit store shelves this summer. Restaurant menu prices were stable, but tariffs on imported foods could drive menu prices higher over the summer. Hotel prices in Boston increased modestly year-over-year. Staffing firms' billing rates were unchanged, although their insurance costs increased sharply. Pricing plans were mixed, as firms not exposed to tariffs planned to keep prices steady, while firms exposed to tariffs expected to raise prices by moderate or potentially large margins, depending on the eventual size of the tariffs.
Retail and Tourism
First District restaurant sales and retail sales slowed modestly in recent months, while tourism activity was flat. A Massachusetts restaurant industry contact said that, following a very slow winter season, April's sales remained depressed relative to one year earlier, while May's sales so far came closer to last May's levels. A clothing retailer experienced flat sales overall in recent months. A discount retailer reported a modest decline in sales overall, driven by substantial declines at stores along the Canadian border. Airline passenger traffic through Boston increased modestly, with most of the growth coming from international travel. The hotel occupancy rate in greater Boston dropped slightly from a year earlier but remained strong compared with long-run averages. Restaurant contacts remained cautious about the outlook but gained some optimism based on recent activity. Retailers expected tariffs to continue to weigh on cross-border commerce from Canada and, eventually, to hurt domestic demand once pending price increases went into effect.
Manufacturing and Related Services
Manufacturing sales were up slightly on average from the previous quarter, as most firms reported flat sales and only one experienced moderate growth. Firms said that demand for goods and services had slowed in recent months amid uncertainty over the impact of tariffs. Most firms boosted inventories of foreign inputs to get ahead of tariffs. Capital expenditures were largely unchanged; however, one firm considered making additional investments in the U.S. to mitigate the impact of tariffs. The outlook became more pessimistic on balance, as most firms expected sales to slow at least modestly in the coming quarters. The expected weakness stemmed mostly from tariff-related concerns, but a contact in the life sciences industry cited cuts to federal research funds as a downside risk, and a veterinary industry contact pointed to consumer weakness as their main obstacle to growth. Nonetheless, a manufacturer of domestic-made goods with limited exposure to tariffs maintained an optimistic outlook.
Staffing Services
Contacts in the First District experienced somewhat weaker demand on balance. Outcomes were mixed, however, ranging from a moderate increase in demand from one year earlier, to an abrupt decline in revenues from the previous quarter. The composition of staffing demand also varied across firms, with one noting an increase in temporary hire demand and a decrease in direct hire roles, and another reporting the opposite pattern. Contacts noted that hiring activity was constrained by uncertainty surrounding tariffs. The outlook for staffing demand ranged from cautiously optimistic to somewhat pessimistic, in line with firms' respective recent experiences.
Commercial Real Estate
Commercial real estate activity was flat on balance amid mixed reports. Office leasing picked up modestly in Boston and Providence, while in the Hartford area, industrial leasing slowed, and office leasing was stagnant. Policy uncertainty held back greater activity, causing many businesses to delay major decisions. Investment sales were mixed and about flat on average. Contacts noted that deals took longer to close, and one said that foreign investors grew generally skittish about investing in the United States. Construction activity slowed modestly, constrained by rising costs, but demand for multifamily construction remained high. A Providence contact noted a rise in office-to-residential conversions, but Boston-area contacts reported comparatively little such activity. The outlook was marked by elevated uncertainty, and changes in sentiment were mixed. Most contacts maintained a cautious outlook or became slightly more pessimistic; others, however, became more optimistic, in large part because increased return-to-office policies were expected to boost office leasing in the Boston area.
Residential Real Estate
Across the First District, home sales dipped slightly in early spring (March or April, depending on the state) compared with one year earlier, marking the second consecutive report showing declining sales activity. The weakness was concentrated in single-family home sales, which slowed at least slightly in all reporting markets (Connecticut furnished no data) and tapered considerably in the Boston area. Condominium sales performed better than single-family sales, increasing moderately from one year earlier in most markets but finishing moderately lower in Massachusetts. Contacts attributed weak home sales to declining consumer confidence, stock market volatility, and buyer fatigue from limited inventories. However, contacts noted that inventories, while still tight, increased substantially from the previous year, an outcome they hoped would boost sales moving forward. Median sales prices increased only slightly from the previous year, a reflection of weaker demand and stronger inventories.
For more information about District economic conditions visit: https://www.bostonfed.org/in-the-region.aspx.