Federal Reserve Board structure and functions

Federal Reserve Board

The First District (Boston) economy shows few signs of improvement. Retailers cite disappointing December (2002) results, although some gained in January and February (2003). Most manufacturing contacts report weak demand for goods. Commercial real estate markets in New England remain very slow - no one wants to buy. Most software and information technology providers report that demand is declining. The outlook for Boston is highly uncertain and virtually no contacts are making plans based on expectations of an upturn.

Tourism

Conditions in the travel and tourism sector in the First District seem to remain weak; contacts report hotel occupancy rates in the Boston area remain low because of light corporate and international travel.

Insurance

Those in the insurance industry report prosperous financial results, in combination with continuing rate increases for the last quarter of 2002. Companies in the property and casualty arena continue to purport high demand and healthy revenues, as rates are up twelve percent to twenty-five percent from 2001. Though the majority of firms remain unaffected by the economy's tedious recovery, non-collectible receivables from the manufacturing sector are starting to become worrisome. Low interest rates and weaker investment performance have also put strain on earnings, causing downward revisions to capital spending and employment, efficiently putting a freeze hiring. However, some say the short- and long-term outlook remains positive as they foresee strong sales.

Life insurance companies report robust results in traditional life insurance in spite of rising compensation costs and flat product pricing. Employment continues to remain level and capital budgets are stationary. Providers of disability insurance report higher levels of disability claims; these combined with lower interest rates are depressing profits. Revenues are somewhat below objectives, with a subsequent slowdown in managed capital spending and hiring.

Comparisons

Reports from the twelve Federal Reserve Districts indicated subdued growth in economic activity from mid-November through early January (2002), with little change in overall conditions relative to the last survey period. Most Districts characterized growth as "sluggish" or economic activity as "soft" or "subdued." The weakest report came from Dallas, where economic activity "remained anemic." As in the last survey, conditions in the New York, Philadelphia, and Cleveland Districts were more favorable overall than in other Districts, with each, especially New York, describing various signs of improvement.