Business contacts in the First District generally report slowing economic activity. Retailers and manufacturers are seeing declines or slower growth in sales or revenues than in the last few reports; commercial and residential real estate contacts continue to be downbeat. The exceptions are consulting and advertising contacts, who cite healthy revenue growth. Most respondents mention cost pressures, especially from transportation and energy; manufacturers generally say they are raising selling prices. View the full report.

Manufacturing and Related Services

They are anticipating further hikes in prices for oil derivatives, shipping, and travel. Respondents generally have raised their selling prices in recent months, except for products governed by long-term contracts or subject to intense competition.

Commercial Real Estate

Sentiment was decidedly morose among commercial real estate contacts this cycle.

Sales activity is limited as credit remains very tight and buyers and sellers hold out for their preferred prices. Investment sales and new construction have been hit particularly hard. For example, three major building projects in downtown Boston (office and mixed-use high rises) are said to be currently languishing as they scramble to obtain tenant commitments and financing. As evidence that property valuations have fallen relative to operating incomes, sources report that capitalization rates for commercial property in greater Boston are now approaching 7 percent, up from last summer's estimated 5 percent. Despite enjoying brisk business and high commercial mortgage interest rates, a small Boston mutual bank foresees that it could run up against lending capacity constraints before year's end. Accordingly, lending officers at the bank have been instructed to adopt a "more selective" stance.

Compared with the last report, contacts are less optimistic that market conditions will improve by year's end. One commercial broker is cautioning his clients to be prepared for a long period of stagnation in commercial property values and leasing demand.