Economic activity in the District grew at a moderate pace during the reporting period of early April through mid-May. Overall price inflation was modest, while wage pressures picked up. Sales of retail goods grew slightly, while activity in the consumer and business services sector expanded at a moderate pace. Demand for manufacturing products was largely flat. Activity in the agriculture sector expanded somewhat. Residential and commercial real estate market activity continued to expand at a robust pace. Lending activity grew moderately.
Prices and Wages
Overall price inflation was modest over the reporting period. Strong demand for building materials pushed up their prices and hence overall construction costs, particularly in large cities. Global supply shortages pushed up steel prices somewhat. Price changes varied for pharmaceutical products, with contacts reporting continued growth in the price of branded products and price declines for many generic drugs. Prices for electronic components were flat. In the retail grocery sector, growing competition due to expansion by online retailers held down price growth for most products. Contacts in the apparel industry reported significant price discounting.
Wage inflation picked up somewhat across the District. Contacts reported that minimum wage increases pushed up wages for low-skilled workers in various service sectors, with diminishing ripple effects up the pay scale. Firms in some states with typically lower labor costs reported that a recent influx of business investment has increased the demand for labor and pushed up wages in general. Rising demand for skilled labor boosted total compensation packages in the aerospace and defense sector. By contrast, wage increases in the semiconductor industry have remained modest. On balance, labor shortages in the construction sector increased wage pressures for skilled workers. One contact in the real estate development industry noted that upward wage pressures had moderated in the San Francisco Bay Area relative to earlier this year.
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