BOSTON – New England is continuing to experience modest economic expansion, the Federal Reserve’s Current Economic Conditions brief – otherwise known as the Beige Book – reported Wednesday.
Retail, manufacturing, consulting and other industries either held steady or experienced small increases in sales through the end of the 2013 second quarter.
In real estate, rents increased on commercial properties, and minor increases in interest rates on residential real estate seem likely to spur more buying activity because of the concern that rates will continue to rise from their still historically low levels.
In addition, most firms, while not doing significant hiring, are maintaining their workforce. Most respondents in all industries expect moderate growth in 2013.
Residential real estate continues to be a major story for the Federal Reserve Bank of Boston report. The Fed’s contacts anticipate that in addition to the incentive to buy that the prospect of higher future interest rates creates, demand for housing, particularly in urban New England, is strong, evidenced by sales increases in May of single-family homes and condominiums.
Despite these promising signs, inventory in Massachusetts and smaller cities across New England remains tight, which in turn is helping prices to rise. Respondents indicated that “inventory remains the most significant constraint on sales growth.”
According to the report, New England commercial real estate markets are “maintaining a solid footing.” Rents in Boston for prime retail properties and offices are either consistent or rising.
In Providence, office leasing negotiations are proceeding “slowly” due to a spike in long-term Treasury rates and the rising rent demands of landlords.
Contacts for retail, tourism and the manufacturing sector reported improving sales trends. Retailers’ year-over-year comp-store sales increased between 1 and 5 percent and demand for apparel, furniture, sporting goods and mobile technology was strong. Hotel and restaurant revenue increased as well, 1.5 and 2 percent, respectively.
The majority of the Fed’s 13 respondents in manufacturing experienced growth in sales as well. Despite the growth, it was also noted that “Europe remains a source of weakness, and China continues to inject volatility for manufacturing exports.”
The Fed’s business services contacts reported a modestly successful quarter as well. Economic consulting experienced high demand though health care, pharmaceuticals and strategy consultants had “mixed results.” Marketing and advertising respondents experienced minor growth.
Half of business services firms reported no new hiring, while the other half planned to grow their workforces by 3 to 5 percent. All but one contact were optimistic about growth staying consistent or improving for the coming year.