Fed report cites ‘mixed’ N.E. economic picture
The latest snapshot of the regional economy paints a “mixed picture,” according to the Federal Reserve Bank, with retailers reporting flat to moderate sales increases while tourism sector contacts say business is “robust.”
In a Beige Book report released Wednesday, the Federal Reserve’s Boston-based First District contacts said that manufacturers were citing weaker results, while consulting and advertising sector officials were reporting “quite positive” results.
On the real estate front, the nation’s central bank described commercial markets in the region comprising most of New England as “level or improving,” while residential real estate contacts “mostly report declines in sales and prices.”
“Firms are not generally hiring, on net, but those with substantial increases in business - one manufacturer and several in consulting and advertising - are raising their headcounts,” the Fed reported. “Price pressures remain minimal according to contacts, with manufacturers and retailers noting only selective and modest price increases.”
Fueled by a “healthy demand” for space and a lack of new office construction, commercial rents are rising in Boston’s Fort Point Channel area and the city's Financial District, the Fed said. Office leasing in suburbs like Waltham and Burlington has also been “strong.”
“Labor shortages and associated high labor costs are seen as potential constraints on the growth of construction activity moving forward, in Boston and more broadly within Massachusetts,” the Fed reported.
Rising residential real estate prices in Massachusetts were cited as “the exception” among New England states, with contacts reporting steady demand, but a shortage of inventory and affordability concerns.
On the manufacturing front, five of the Fed’s 11 manufacturing firm contacts reported some weakness in sales, citing various reasons, and the contacts said the outlook in the sector was “positive but very guarded.” None of the contacts were laying off workers. The one contact to report substantial hiring, a biotech firm, also cited rising costs of hiring skilled workers in New England, according to the Fed.
In the retail sector, contacts described spending locally as “strong”on furniture, household items, leisure and sporting goods, and apparel.
Hotel occupancy rates were up 12 percent over-the-year in the Boston-area, with average nightly room rates up almost 18 percent from August 2013. The hotel industry is predicting a 7 percent revenue increase for 2015 over 2014. Restaurant revenues were up 3.5 percent year-over-year, the Fed reported, and museum attendance was up 2.2 percent.
Business contacts, such as government and strategy consultants, told the Fed there was a “strong uptick” in requests for proposals and said they were “eagerly” awaiting decisions on contract awards. All business service contacts said they were “hopeful about the future” because of improving macroeconomic conditions.
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