BOSTON – Despite earlier hopes that improved consumer confidence would drive renewed economic growth in the region, New England businesses reported mixed results during May and June, pointing to slow economic growth overall, according to the Federal Reserve Board’s Beige Book released Wednesday.
Retailers in New England reported low year-over-year sales growth, and some reported declines, saying the business outlook remains challenging. Some contacts reported that consumers are still cautious, while others said consumers appear more confident. Vendor prices remain steady overall, but costs have increased for some retailers for paper products, and fuel and freight.
Boston-area hotels have continued to report strong results, with revenue growing 13.2 percent in May compared with a year ago. Attendance at museums and other tourist attractions has increased 8.5 percent year over year, the Beige Book report said. Tourism-related revenue for the 2014 summer season is expected to increase 6 percent to 7 percent over 2013, which was itself a record year for the New England tourism industry.
Seven of the Fed’s nine manufacturing contacts cited increased sales volume during the last six weeks compared with the same period a year earlier, but two of those seven reported very slow growth, and the remaining two contacts reported revenue declines. All of the contacts said that the first quarter’s harsh winter weather had no lasting impact on inventories, which currently stand at moderate levels.
In terms of employment, seven of the nine manufacturers contacted this round reported that they are making new hires in line with sales growth. One contact, a biotechnology company, plans to hire 1,000 new workers this year, while others report hiring mostly to replace departing staff.
Unlike in previous reports, no manufacturing contacts cited problems with commodity prices or supplies, and all said that investment activity has increased over last year.
Demand for analysis, consulting and advertising has increased across the board, the Federal Reserve said, led by health care consultants citing revenue growth between 5 percent and 10 percent compared with a year ago. In general, wages at business services firm have risen 2 percent to 5 percent year over year.
Health care consulting firms and a few large analysis firms plan to increase employment this year, while government consulting and smaller strategy firms report no plans to hire in the near future. All consulting contacts said they expect growth to improve going forward, though revenue growth predictions varied broadly depending on the firm.
Commercial real estate leasing activity slowed in the greater Providence area during the last six weeks, while at the same time Rhode Island’s industrial leasing market has tightened amid strong demand and limited inventory, the Beige Book reported. Elsewhere in the region, reports from commercial real estate contacts were mixed, with some in Boston seeing at least modest improvement ahead while contacts in Providence and Hartford, Conn., pointed to uncertainty surrounding upcoming elections that could have an impact on economic growth.
In the residential market, the Fed’s contacts reported declining year-over-year sales in Rhode Island, Massachusetts, Connecticut and Vermont. Real estate contacts cited inventory shortages, perceived lack of job security and economic uncertainty in explaining the falling sales.
Despite the sales drop, the median price of single-family homes has improved in both Rhode Island and Massachusetts, and New England residential real estate contacts remain hopeful that sales numbers for June will give a stronger showing than in May.