Beige Book: Businesses report moderate growth

BOSTON – Most business contacts in the First District reported moderate growth in July and August, the Federal Reserve’s “Beige Book” report showed.
The report, released Wednesday, said a “couple of sizable retailers, by contrast, cite slowdowns in sales growth in recent months,” although other retailers reported year-over-year sales activity.
In addition, 10 out of 12 responding manufacturers reported ongoing demand increases, and most software and information technology services firms are seeing robust growth. With a few minor exceptions, prices are stable, the report showed.
Residential and commercial real estate markets across the region also are improving, according to the report.
First District contacts were mostly upbeat regarding the region’s commercial real estate markets. Office rents in Boston continued to climb, while office vacancy rates continued to fall and investors are “pushing prices for Boston’s commercial properties to near all-time highs,” the report stated.
In Providence, office leasing activity experienced only a “very modest summer slowdown,” maintaining a pace that is expected to strengthen this month. One Providence contact said that the number of large blocks of vacant office space is down considerably in recent months, according to the report.
Construction activity in Boston is being affected by the shortage of skilled construction workers.
As for residential real estate, sales of both single-family homes and condominiums increased year over year in all six First District states in June.
“Contacts in the real estate industry say that sellers seem to be recovering from the harsh winter weather, and increased activity that began to show up in the last Beige Book continues,” the report stated.
Inventory has decreased in every state but Connecticut. The number of days spent on the market also decreased for both single-family homes and condos in most New England states, the report said.
“Contacts express a generally optimistic outlook as the market continues to recover from the unseasonably slow winter. Some note that sellers may still be working on repairs before putting homes on the market and expect upward trends in sales and prices to continue into the fall. Many are weary of the inventory shortage and express concern that rising prices and potentially increasing interest rates will begin to present financing issues for buyers,” the report stated.
Other report highlights:

  • Business and leisure travel to the Boston area continues to grow. Over the first six months of 2015, the average hotel occupancy rate was 79.9 percent, an increase of 1 percentage point from a year earlier, while the average hotel room rate rose 7.7 percent over the first six months of 2014.
  • Many manufacturing contacts mentioned China as a performance factor. One contact, a producer of biotechnology equipment, said sales in China exceeded expectations in the most recent period. The strengthening dollar continues to present problems for some of the contacts.

Bloomberg News said that the report gives central bank officials, who next meet Sept. 16-17, an anecdotal picture of growth as they consider lifting interest rates in an environment colored by market volatility and slowing growth in China.
Boston, San Francisco and Dallas districts specifically referenced the China slowdown as a source of weaker demand for some products, including chemicals, wood products and high-tech goods.

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