Labor market tightness, however, is not translating into higher wages. Wages are said to be increasing at a 3 to 5 percent annual pace. Contacts say that they are not offering wage premiums to attract labor, with the exception of computer systems professionals. Respondents report that competitive pressures continue to constrain their ability to raise prices. Materials costs are holding steady.
Most contacts say that profit margins are unchanged or increasing slightly.
Increases in profit margins are attributed to efficiency improvements such as better inventory control, automation, and purchasing efficiencies. All respondents say that capital expansions are currently under way and will continue for many months. Looking forward, retailers expect steady, sustainable growth with low inflation through the first quarter of 1998. Manufacturing Three-quarters of the First District manufacturers contacted report that recent revenues are up from a year ago. Aircraft parts, computers and other business equipment, and furniture are showing the most rapid growth.