By Kimberley Donoghue PBN Web Editor Twitter: @kydonoghue
BOSTON - The Federal Reserve Bank of Boston reported improved economic conditions, with manufacturers especially showing strength, in its quarterly Beige Book.
First District contacts said demand has increased for firms in software and information technology and staffing services, with manufacturers reporting “the most strength.”
Commercial real estate markets were improving modestly, retail reports were mixed and residential real estate markets were weak, according to the Beige Book - named after the color of its cover – based on anecdotal information collected on or before May 27.
“Outlooks remain generally optimistic, although cautious,” the First District summary said.
Nevertheless, retailers and manufacturers reported input cost increases, which they have been able to pass onto customers.
Rising fuel prices are a concern for both manufacturers and retailers, with the latter concerned not only about the negative impact on their own costs, i.e. shipping, but also the effect on consumers’ shopping habits.
For manufacturers, those affected by the gas prices have been able to raise prices and “a number” of them plan further price hikes for the summer. Pharmaceutical manufacturing contacts said they plan to expand their work force between 5 percent and 10 percent to meet increased demand.
Most respondents of the Beige Book survey in the manufacturing field plan merit increases for their employees this year between 2 percent and 5 percent.
New England software and IT firms reported “modest increases” in activity through May, with year-over-year revenue increases between 4 percent and 20 percent fueled by software license revenues.
“[IT] contacts generally cite a tightening labor market, especially for specialized technical positions, but note that it has not resulted in upward pressure on wages,” it said, while noting the outlook for the rest of the year is positive.
As for the commercial real estate market, office leasing volume in Providence was “very light” but rents were firming up. The residential real estate market throughout New England experienced “significant” declines in sales and median prices in April compared to a year earlier.
Nationally, the 12 Federal Reserve Districts said that economic activity generally continued to expand since the last report; a few, however, indicated some deceleration.
Elevated food and energy prices, and unfavorable weather in some parts of the United States weighed on consumer spending.