Beige Book: Economic conditions remain mixed in New England

ACCORDING TO THE BEIGE BOOK REPORT released by the Federal Reserve Bank of Boston, economic conditions remain mixed in New England. / BLOOMBERG FILE PHOTO/BRENT LEWIN
ACCORDING TO THE BEIGE BOOK REPORT released by the Federal Reserve Bank of Boston, economic conditions remain mixed in New England. / BLOOMBERG FILE PHOTO/BRENT LEWIN

PROVIDENCE – Economic conditions remain mixed in New England, with manufacturers citing weaker results, but those in the tourism industry reporting gains, according to the Federal Reserve’s Beige Book released Wednesday.
It also reported that commercial real estate markets remained steady or improved in the region, while residential real estate markets mostly had declines in sales and prices.
In Providence, commercial real estate leasing activity picked up modestly in both the office and industrial sectors since the previous report, and industrial space remains in short supply in relation to demand. Contacts in Providence were cautiously optimistic that commercial real estate will continue to improve.
“In both Providence and Hartford, contacts note that uncertainty over the outcomes of upcoming state and/or local elections is contributing to uncertainty in the local economic outlook,” the report stated.
The report found that New England firms are generally not hiring, except for those with substantial increases in businesses, such as one manufacturer and several consulting and advertising companies.
Retail spending was strong for furniture, household items, leisure and sporting goods, and apparel. Respondents cited some modest price increases – 2 to 3 percent – on certain items and anticipate this trend will continue. For the rest of the year, contacts continue to predict low-to-mid single-digit sales increases on an annual basis, with an outlook for the U.S. economy that ranges from “sideways growth” to “an optimistic outlook for steady growth.”
The Boston regional economy continues to experience a strong boost from travel-related spending, as hotel occupancy rates were 12 percent higher in August year over year and average nightly room rates were almost 18 percent greater than in August 2013.
Through August, Boston restaurant revenues increased 3.5 percent year over year, while attendance at museums and other attractions increased 2.2 percent.
Of the 11 manufacturing firms contacted in New England, five reported some weakness in sales, a higher number than in any recent cycle.
Reasons cited for the weakness varied. One manufacturer of industrial motors and brakes said August was typically slow but that sales had not bounced back in September as much as they usually do, with orders about 5 percent below the previous year. A furniture maker cited a 10 percent drop in sales during the winter which continued through the summer.
Only one of the manufacturers reported large hiring increases. A contact in the media business said they are “very careful with headcount.” The one firm to report substantial hiring, a biotechnology firm, cited rising costs of hiring skilled workers in New England.
“In general, the manufacturing outlook is positive but very guarded,” the report stated.

Most contacts report that demand for consulting and advertising is greater than a year ago, although the pace of growth varies across sectors and firms.
“A high-end economic consulting firm is still overwhelmed with work, mostly related to mortgage-backed securities litigation, and at 12 percent growth year over year is now beyond capacity,” the report stated.

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