Average pay increases remain in the 3 to 5 percent range, with larger increases for information technology workers and increased use of a variety of performance-based pay incentives for a wide range of professional and technical workers. Except for oil-related products, both manufacturers and retailers report little evidence of inflation. While a few manufacturers are raising prices, materials costs and vendor prices are mostly flat and large manufacturers continue to put pressure on their suppliers for price reductions. Recent stock market shifts and interest rate increases are said to be causing modest increases in uncertainty about the outlook. While these sales results are mostly in line with projections, sellers of apparel came in below expectations.
Inventories are at desired levels.
Respondents say that generally tight labor markets and acute labor shortages in selected occupations make it difficult to retain permanent staff and to hire replacements. Most retail contacts report that consumer price inflation is nonexistent and that vendor prices are either holding steady or, in the case of technology products, declining. Gross margins are said to be rising slightly because of productivity improvements. Retail respondents indicate that they plan very little expansion of their operations over the next six months. On the basis of the economy's currently strong fundamentals, most contacts expect steady growth to continue through the year 2000.