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, April 23, 2025

Summary of Economic Activity

Economic activity increased slightly, about the same as in the previous report. Concerns over the impact of tariffs intensified but mainly affected the outlook. Prices rose modestly in recent weeks on average, despite larger increases in selected input prices. Employment edged up, but many firms planned to pause or limit hiring going forward because of policy uncertainty. IT services firms reported strong revenue growth. Revenues, led by moderate growth in auto sales, increased slightly for retailers but were flat for manufacturers. In the tourism sector, overall revenues rose slightly, but tourism from Canada slowed considerably. Commercial real estate activity picked up slightly in recent weeks. Home sales softened a bit from one year earlier, partly reflecting bad weather. The outlook became considerably more uncertain and more pessimistic, as contacts emphasized risks of rising inflation and weakening demand linked to tariffs and other federal policies.

Labor Markets

Employment increased slightly, and wages rose at a modest pace. Headcounts increased modestly for IT services firms, which mostly sought to fill technical support and software development roles. Among manufacturers, hiring activity was mixed, and employment increased slightly on average. Retail and tourism employment was roughly unchanged, although contacts reported increased ease of hiring and slower attrition. In contrast, immigrant labor supply, specifically of health care workers, declined noticeably on Cape Cod. Wages increased modestly on average. Concerning the outlook, a few firms expected to engage in moderate hiring activity in the coming months but most planned to limit or even pause hiring because of elevated uncertainty and/or weak demand. No significant layoffs were planned.

Prices

Prices rose modestly on average, but contacts said that prices could start to rise more rapidly in the coming months. IT services prices rose at a slight pace over the quarter, and hotel room rates in the Greater Boston area increased modestly on a year-over-year basis. Retail prices were roughly flat in recent months, including those of autos. On a year-over-year basis, wholesale seafood prices declined moderately, while prices of certain metals imported from China increased sharply. Prices for energy and production tools increased moderately over the quarter. Manufacturers posted only slight output price increases in the most recent quarter. Looking ahead, retail and manufacturing contacts alike cautioned that cost increases linked to tariffs, although still to be determined, could result in significant passthrough to their output prices. Expected passthrough rates were substantial, with half of manufacturers projecting a complete passthrough, mostly without lags. One manufacturer shortened the duration of its price quotes to 30 days in anticipation of the need to adjust prices rapidly.

Retail and Tourism

First District retail and tourism contacts reported mixed results in recent months, with revenues increasing slightly on balance. Excluding automobiles, retail sales weakened moderately in the first quarter of 2025 compared with the fourth quarter of 2024, falling short of expectations. Auto dealers in New Hampshire reported moderate sales increases throughout March and early April, and winter sales of snowmobiles and plows in the state were quite strong. Cape Cod restaurant owners experienced a first-quarter slowdown, and hotel bookings on the Cape for summer were running somewhat below recent years. Airline passenger traffic through Boston increased moderately year-over-year. Hotel occupancy in greater Boston increased modestly, boosted by two international sporting events. However, travel from Canada declined noticeably, and contacts feared that summer travel from Europe and China could suffer as well because of negative reactions to U.S. tariff policies. More broadly, tourism contacts expressed concerns that declining consumer confidence could hurt leisure spending. The retail outlook also turned decidedly more pessimistic, though the outlook for convention activity remained solid.

Manufacturing and Related Services

Relative to the previous quarter, manufacturing sales were flat on average, although reports varied across contacts and even within firms across business lines. A frozen food manufacturer experienced healthy growth in retail sales despite the growing weakness in food services demand. A materials producer reported a pronounced drop in sales over the quarter to automotive industry clients but said that demand from other sources increased modestly from a year earlier. Capital spending stayed within firms' forecasts, increasing modestly from a year earlier. Projects included a new production facility and upgrades to automation and productivity. Several contacts expressed concerns that tariffs might require them to raise output prices and/or absorb cost increases. Consequently, the outlook turned more pessimistic and uncertain, with some firms marking down their revenue growth forecasts and others perceiving greater downside risks for the economy in general.

IT and Software Services

IT contacts in the First District reported strong revenue growth, driven in part by acquisition activity, although one firm said that real transactions volume was about level with a year earlier. IT contacts expected no direct impacts from tariffs and cautioned that it was too early to tell how tariffs would affect their clients. Capital spending continued to drift downward. Contacts expected demand for their services to stay strong or improve further in the second quarter, based on the strength of recent bookings and confidence in their business models. One firm forecasted growing demand for its automation products. However, one contact expressed increased pessimism for the economy as a whole, and another pointed to downside risks to client demand associated with cuts to federal research funding.

Commercial Real Estate

Commercial real estate activity in the First District picked up slightly on balance, but contacts emphasized that uncertainty had put a damper on decision-making. Vacancy rates and rents were largely unchanged, and office leasing activity increased a bit. Life sciences buildings in greater Boston, already facing high vacancy rates, saw demand slow further from expected cuts to research funding and an ongoing pullback of private equity. Several office buildings in Boston and Providence were reportedly headed for auctions as their debt matured. At the same time, financing flowed more freely to certain (non-office) properties, owing to an increased interest from private debt funds. The outlook was marked by uncertainty, stemming mostly from tariffs, and became slightly more pessimistic. Contacts were concerned that tariffs could blunt construction activity, raise energy costs, and dampen demand for warehouse space, adding that just the uncertainty surrounding tariffs was having a chilling effect on economic activity. One contact noted, however, that the onshoring of manufacturing could yield offsetting benefits. Most respondents expected demand for multifamily housing and grocery-anchored retail to remain strong but held mixed opinions regarding the outlook for office and industrial properties.

Residential Real Estate

Across the First District, home sales declined slightly in February and March compared with twelve months earlier. Those results contrasted with strong year-over-year sales increases recorded for January, as several contacts perceived that inclement weather held back activity relative to seasonal norms. On the brighter side, pending sales rose by moderate to large margins from one year earlier in Massachusetts, New Hampshire, and Maine, and inventories increased considerably in most reporting states, except for Massachusetts where inventories declined moderately. Home prices increased at a moderate pace from one year earlier, less rapidly than in the previous report, with Massachusetts' home prices declining slightly in recent months. Contacts were hopeful that spring would bring a robust seasonal upswing in sales but cautioned that inventories remained a limiting factor.

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.

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