![]() |
September 11, 2002
Federal Reserve Districts
|
||||
Skip to content
|
The New England economy is moving sideways, on net, with some sectors level to down and others up modestly. Manufacturers report flat revenues; retailers and tourism contacts say business is slow. Commercial real estate markets are depressed in the Boston area and flat elsewhere in the region. Software and IT markets are still "tough." The outlook remains uncertain.
Retail Retail contacts are mostly holding headcounts level, although some are choosing not to fill open positions. Wages are generally steady, but one respondent implemented an increase of 3 percent. Vendor prices and selling prices are mostly flat. New England hotels, restaurants, and tourism companies continue to offer special pricing and package deals. Capital spending remains modest. Many respondents are being cautious, with some scaling back marketing expenses and one putting large-scale IT projects on hold indefinitely. Overall, contacted retailers have low expectations for the remainder of the year. Many hope the upcoming months will be profitable, but few anticipate growth.
Manufacturing and Related Services Selling prices and materials costs are mostly flat to down, and contacts report that they and their customers are bargaining for extended payment terms. Responding firms face ongoing sharp increases in insurance costs and recent increases for steel and plastics. Manufacturers raising their selling prices to cover rising costs say the increases have been less than desired because of competitive pressures. The majority of manufacturers have reduced employment during the past year and expect to make only minor adjustments in headcounts during the remainder of 2002. Some companies lifted pay freezes or reversed reductions at midyear or have plans to do so in 2003. Where they are occurring, pay increases are typically 2 to 3 percent. Responding companies generally report that capital spending remains modest. Most seem reluctant to spend while the economy remains weak or uncertain. The only exception--a company embarking on the largest initiative in its history--is doing so to save on labor inputs. Most contacts believe their sales will be fairly flat over the next six to 12 months and that they will face pressure on net income. A couple of capital goods producers indicate that conditions are unlikely to turn around before late 2003 or sometime in 2004.
Temporary Employment Temp industry profits are depressed as costs for workers' compensation, unemployment insurance, and wages move up while clients maintain downward pressure on bill rates. Both year-round and seasonal labor remain plentiful. Most contacts were overwhelmed with summer job inquiries from students but had few openings for them. Respondents are cautiously optimistic that business will pick up in the fourth quarter; they expect to inch rather than surge forward for the remainder of the year.
Commercial Real Estate Commercial real estate respondents do not anticipate any major changes during the next six months, provided there is no deterioration in overall economic conditions. Boston-area contacts do not see signs that the market will improve this year.
Software and Information Technology Services Producers of human resources software, custom applications development, and program development tools report either flat or 5 to 10 percent growth in employment. All cite significantly reduced turnover rates, with one company claiming one-quarter of the turnover in the past few years. None of the responding firms plan to cut back their capital budgets. While the contacted companies are generally gaining, their senior executives note that sales and profits of some competitors are down by as much as 20 to 50 percent. Thus, they believe the market for IT and software products is still "tough," with the rebound slower than expected. Most respondents express cautious optimism for growth in the next 12 months, but admit that their outlook has either remained unchanged or been revised down since May.
|