Economic activity in the District grew at a moderate pace during the reporting period of mid-February through the end of March. Overall price inflation firmed somewhat, while upward wage pressures grew at a moderate pace. Sales of retail goods and consumer and business services expanded moderately. Demand for manufacturing products grew modestly. Activity in the agriculture sector picked up, and residential and commercial real estate market activity continued to expand at a robust pace. Lending activity continued to grow at a modest pace.
Prices and Wages
Overall price inflation firmed somewhat over the reporting period. Prices for pharmaceuticals increased in line with higher production costs, with one contact expecting further cost and price increases. Prices in the construction industry grew at a moderate pace as the effects of labor shortages outweighed lower material costs. Contacts in the food and beverage industry expect commodity prices to rise somewhat over the coming months; however, they anticipate having to absorb those increases through lower profit margins rather than passing them on to consumers. Low commodity prices continued to hold down material costs in most sectors, and the prices of some agricultural goods also remained low.
Wage inflation remained moderate overall. Contacts in the hospitality and restaurant industries reported significant wage increases and more upward pressure in general as minimum wage laws began to take effect. Wages for information technology workers strengthened in most industries, particularly in the financial services sector, as firms increased IT spending to help meet regulatory requirements and boost online security systems. In the construction industry, continued labor shortages increased upward wage pressures. Contacts in the food and beverage sector reported that levels of wages and compensation were largely unchanged.
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