Beige Book Warning for Consumers: Get Ready for Prices “to Rise Substantially in the Coming Months”
Economic uncertainty revealed itself in numerous ways over the last month: New Englanders are spending less at stores and restaurants, employers are pausing hiring and declining confidence among prospective homebuyers has meant weak home sales, the Federal Reserve Bank reported this week.
In a compilation of analysis and insights from business and banking contacts around New England, the Fed said that economic activity in the region “slowed slightly amid persistent uncertainty” during May and that the outlook heading into summer here is “characterized by a mix of cautious optimism and blunt pessimism.”
“The more optimistic contacts pointed to the possibility that resolution of uncertainty could unlock economic activity moving forward; the more pessimistic contacts, in contrast, emphasized the potential negative impacts on demand from tariffs and other federal policies,” the Fed wrote about the New England economy in its latest Beige Book, published Wednesday.
The Beige Book said spending has slowed modestly at restaurants and retailers in recent months and tourism activity has been flat in the region, which borders Canada and has been on alert for impacts from President Donald Trump’s antagonistic attitude towards the northern neighbor. One Massachusetts restaurant industry contact told the Fed it was a “very slow” winter and that April and May sales were below 2024’s levels.
Employment was down across New England last month, and the Fed said its “contacts agreed that economic uncertainty would probably continue to hold back labor demand going forward.” With some hiring on pause, people already holding retail and restaurant jobs “became less likely to quit or seek new jobs” and government-sector layoffs have added new jobseekers to the pool.
The Beige Book, which officials at the Fed say can help policymakers get a sense of where the economy could be headed before it shows up in collected data, included a warning for consumers: get ready for prices “to rise substantially in the coming months.”
“A clothing retailer, which typically tags items with prices months in advance, took the rare step to retag items with higher prices to cover the cost of tariffs, and those items will hit store shelves this summer. Restaurant menu prices were stable, but tariffs on imported foods could drive menu prices higher over the summer,” the report said. “Hotel prices in Boston increased modestly year-over-year. Staffing firms’ billing rates were unchanged, although their insurance costs increased sharply.”
The New England district was one of six of the Fed’s 12 districts to report a slight to moderate decline in activity, while three districts reported no change in economic activity and three reported slight growth.
“All Districts reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions,” the report said.
