Economic activity in the Boston region expanded at a slight pace in recent months, but business leaders voiced growing alarm about inflation, according to the First District Beige Book report published September 2, 2026, by the Federal Reserve Bank of Boston. The report, which gathers anecdotal information from bank directors and business contacts across New England, found that while most sectors posted small gains, the outlook turned more pessimistic overall as firms expressed concerns about energy prices, tariffs, Middle East conflict, and longer-term interest rates.
Consumer spending climbed slightly, driven by modest tourism revenue growth while retail remained flat on balance. Hotel revenues rose modestly on average, powered by increases in daily room rates, especially at higher-end properties and Boston locations. Restaurant and retail sales in Boston surged considerably from the previous summer, bolstered by June's World Cup and July's tall ships festival tied to the nation's semi-quincentennial celebration. Meanwhile, Cape Cod restaurant and retail sales fell modestly as above-average temperatures kept visitors at beaches rather than shopping areas, and higher lodging costs left households with less money to spend elsewhere. Manufacturing activity and revenues ticked up slightly, with profits increasing somewhat on average but ranging from slight decreases to large gains. Employment edged up overall, reflecting minimal to moderate increases among manufacturers, tourism and retail businesses, and nonfinancial services firms, though hospitals and financial services firms saw flat head counts and higher education experienced moderate layoffs. Wages and benefits rose slightly on average, with most gains occurring among manufacturers. Output prices continued climbing at a slight pace, although many firms kept prices unchanged.
Business contacts across industries expressed heightened uncertainty and upside risks to inflation centered on elevated energy prices and potential new tariffs, the report found. Cost pressures varied across industries, but fuel and energy emerged as common drivers, with restaurants raising menu prices modestly in response to higher food and energy expenses, and retailers citing elevated transportation and fuel costs as factors behind small price hikes. Manufacturers reported slight increases in input prices, pointing to cost pressures from fuel and energy, raw materials, tariffs, and transportation.
The report attributes the more cautious outlook to multiple sources of uncertainty weighing on business planning. Many consumer-facing contacts cited high energy costs as a strain on household budgets and worried the impacts could intensify during the home heating season if conflict in the Middle East remained unresolved. Banking contacts expressed growing uncertainty related to inflation, interest rates, tariffs, and how those factors might affect spending and borrowing by households and businesses. A polymer manufacturer cited tariff uncertainty as a drag on demand for its materials, while some consumer-facing firms experienced softer demand. Despite these headwinds, most manufacturing contacts expected business activity to expand overall, and the outlook among professional services firms became more optimistic on balance, with contacts anticipating activity to pick up somewhat going forward.
The report signals a fragile expansion marked by uneven sector performance and mounting concern over cost pressures. While most industries registered small gains and labor markets showed modest improvement, the combination of geopolitical risk, energy price volatility, and trade policy uncertainty has shifted sentiment in a more negative direction. For New England businesses, the path ahead hinges on whether energy markets stabilize and tariff concerns ease—factors largely beyond their control.