Beige Book Report: Boston
July 16, 2025
Summary of Economic Activity
Economic activity was roughly flat overall, but signals varied across sectors. Uncertainty continued to be mentioned as a factor holding back activity, albeit less frequently than in May. Consumers continued to rein in spending on certain fronts, as retailers reported modest declines in sales, and tourism revenues declined slightly. At the same time, home sales increased modestly, following a period of declining sales. Manufacturing sales were mixed and about flat on average, while revenues for software and IT services firms grew at a moderate pace. Commercial real estate activity was roughly unchanged. Prices increased modestly on average, although tariffs led to moderate-to-large price increases in a few cases. Employment increased slightly, and wage growth was modest. The outlook was mostly stable and cautiously optimistic on balance.
Labor Markets
Employment expanded slightly, and wages increased modestly. Hiring proceeded cautiously in part because of ongoing policy uncertainty and was concentrated among select manufacturing and IT services firms. Employment at retail and hospitality establishments was mostly stable. Hospitality contacts noted that domestic labor supply had improved but that some business owners still struggled to find enough workers, as foreign-born labor supply was down in some areas. A growing number of employers, across diverse industries, sought to increase labor productivity using AI and other technologies, reducing the need for hiring. Wages increased moderately among firms making annual adjustments and were otherwise unchanged, leading to modest wage growth on average. Aside from one IT firm that planned to ramp up hiring to satisfy a recent surge in demand, no other contacts (in any industry) expected to engage in either significant hiring or significant layoffs going forward.
Prices
Prices increased modestly on average amid varied reports. Hotel room rates in greater Boston increased slightly (year-over-year), and prices at selected specialty food stores and restaurants rose moderately in response to tariffs—but otherwise retail and tourism contacts reported steady prices. Manufacturing firms not exposed to tariffs reported flat input and output prices, while other manufacturers experienced modest to moderate cost increases from tariffs and raised prices by above-average margins to account for infrequent price adjustments. Utility prices increased modestly to moderately around the First District. Most contacts expected to hold their own prices steady for the rest of the year, as some perceived strong consumer resistance to further price increases. Tariffs were expected to drive seafood prices higher going forward, but risks of rising inflation were mentioned less frequently than in the previous report.
Retail and Tourism
First District retail contacts reported modest declines in revenues, and tourism contacts reported slight declines in hospitality revenues on balance despite pockets of strength. Contacts from various parts of the District reported declines in retail and restaurant sales—ranging from slight to substantial—that were attributed to a significant slowdown in visits from Canada and a series of rainy spring weekends. Even in places that reported foot traffic on par with last year's, spending per customer was down modestly. In a city near Boston with a large foreign-born population, deportation fears reportedly drove retail and restaurant sales sharply lower. Hotel contacts on Cape Cod said that sales were flat or down modestly at budget and mid-market establishments, while revenues increased moderately for high-end lodging. Greater Boston hotel contacts reported slight revenue growth from a year earlier, supported by solid convention and visitor activity. The outlook was mixed, however, as contacts in greater Boston expected tourism activity to remain strong, while contacts in some other areas worried that retail spending might soften further, especially among lower-income consumers and in immigrant communities. Contacts expected visits from Canada to remain well below normal levels, and businesses in northern New England were likely to bear the brunt of that trend.
Manufacturing and Related Services
Manufacturing sales were flat in recent months, on average, although performance was mixed. One contact said that sales had bounced back recently, following a period of soft sales in May. Even firms that reported flat overall sales noted certain bright spots, including two that experienced stronger retail sales of their consumer products. Sales to businesses, in contrast, slowed modestly, in one case driven by weakness in the fast-food industry. Capital expenditures rose slightly on average compared with last year, although one firm postponed large capital outlays, while awaiting resolution of tax policy uncertainty. The outlook was positive on balance, as firms expected to meet or exceed their revenue projections for the year. At the same time, selected contacts said that policy uncertainty made planning difficult.
Software & IT Services
First District software and IT contacts reported moderate revenue gains on average. The increase in revenues derived mostly from a single firm that experienced an atypically large business transaction. Other firms said that demand and revenues were either stable at very healthy levels or up modestly from a year earlier. Contacts reported increased demand from client firms for data services that facilitated usage of AI. Costs and prices were mostly unchanged, and profit margins were stable. There were no meaningful changes in capital and technology spending. The outlook was mostly optimistic based on the recent strength of demand, but some contacts nonetheless worried that uncertainty could cause their clients to defer investments.
Commercial Real Estate
Commercial real estate activity was flat on balance. Office leasing increased slightly but was still described as sluggish. One contact said that return-to-office policies had not picked up as much as expected. Office rents were said to have stabilized at very low levels, resulting in thin profit margins and leaving owners with little incentive to invest in improvements. Loan distress remained a significant concern in the office market. Contacts said that uncertainty surrounding tariffs had led firms to pause business plans, dampening industrial leasing and putting the brakes on rent growth in that market. Nonetheless, investment demand for industrial space remained healthy. Retail leasing remained solid, with modest rent increases and stable vacancies. Multifamily leasing and sales activity were stable at healthy levels, but one contact said that apartment rent growth had tapered off recently. Overall, contacts became slightly more pessimistic, with some expecting the office recovery to take longer than previously forecasted, and others worried about risks to property leasing and investment related to emerging federal policies.
Residential Real Estate
Across the First District, home sales increased modestly on average from May 2024 through May 2025, with somewhat stronger results for single-family homes than for condominiums. Sales were mixed across states: New Hampshire and Massachusetts both reported slight to moderate decreases in sales from the previous May, while other New England states experienced modest to strong growth in sales. (Connecticut reported no data.) Inventories of single-family homes and condominiums increased from one year earlier by very large margins in most markets, contributing to the reports of increased sales. Median sale prices increased moderately from a year earlier on average, with larger increases for single-family homes than condos. Looking ahead, one contact was optimistic that inventories would rise further, leading to moderation in home prices and, potentially, stronger sales.
For more information about District economic conditions visit: https://www.bostonfed.org/in-the-region.aspx.