Two notable exceptions are lumber prices and hotel room rates, both of which are rising. Weakness in international markets continues to drive down vendor prices, so merchandise purchasing costs are either holding steady or declining. As a result, gross margins are said to be either increasing slightly or holding steady. The explanation offered in both cases is the high cost of hotels in the Boston regional market. Retailers indicate that capital expansion plans have not changed since early this year.
All contacts report significant expansion in the e-commerce area.
Looking forward, most contacts say that economic fundamentals are strong and that they expect steady economic growth to continue for the next six months, barring major policy changes. Most First District manufacturing contacts report that recent business is up relative to a year ago. At the high end, companies cite double-digit growth in demand for medical equipment and related services, pharmaceuticals, telecommunications equipment, integrated circuits, and automotive equipment. A paper company has returned to more normal operations after being severely hurt by the Asian crisis. A manufacturer of residential construction components reports that business was disrupted this spring because of temporary shortages of basic materials such as concrete, drywall, and insulation.