A majority of the New England retailers contacted in July report sales growth at or above expectations in recent months. Labor markets remain tight. While both manufacturers and retailers say selected input costs are rising, they are passing very little on to customers, largely because of offsetting cost savings. Retail Retail contacts in the First District say that sales continue to grow, although they are seeing some evidence of a slowdown. Sales growth was at or above expectations in the building materials, household furniture, and office supply sectors, but below expectations for contacts selling hardware and apparel.
Respondents say that inventories are at desired levels and head counts are mostly holding steady.
Labor shortages have reportedly become somewhat more severe, with contacts increasingly resorting to wage increases in order to retain critical help. Wages are reported to be growing at a 4 to 5 percent rate, up from the 3 to 5 percent range reported over the past couple of years. Most retail contacts say that they are not raising selling prices and that increases in vendor prices are only sporadic. Exceptions to generally stable prices include ongoing declines in prices of technology products and a reported 30 to 40 percent drop in lumber prices from year-earlier. All contacts say that higher fuel prices are adding to costs in the distribution chain, but that profit margins are either holding steady or rising slightly because of productivity improvements.