BOSTON – Despite severe winter weather during the first months of 2014 that put pressure on New England business owners in several industries, the overall economic outlook remains cautiously optimistic, according to the Federal Reserve Board’s Beige Book released Wednesday.
Retailers generally reported year-over-year sales increases ranging from 3 percent to the mid-single digits for all of 2013, with one Fed contact citing an increase in the mid-teens. And while several retail contacts indicated strong results during the last six weeks, others said sales have slowed due to weather-related issues. Others said that recent sales look slow due to poor year-over-year comparisons with the post-Hurricane Sandy rebound in early 2013.
Prices remain steady overall, but some retailers expect a modest increase in apparel prices, reflecting a rise in raw material costs and overseas labor costs. The majority of retail respondents anticipate continued overall improvement in U.S. economic conditions and consumer sentiment in 2014.
Boston-area hotels achieved record occupancy rates and revenue in 2013, building on strong records set in 2012. The Fed’s contacts expect strong growth to continue through 2014. While severe weather in January and February gave a boost to hotels, other venues such as restaurants and museums saw declines in revenue due to exceptionally harsh conditions.
New England staffing firms also were affected by adverse weather conditions, reporting “softened” business conditions in recent months. Although the Fed’s staffing contacts generally reported year-over-year revenue increases, revenue is down on a quarter-over-quarter basis.
However, labor demand remains strong across most industries – particularly in the software, engineering, legal, specialty manufacturing and health care sectors. Staffing firms cited a shortage of candidates to fill nursing, specialty manufacturing and IT roles, reflecting a skills mismatch “amplified by the holidays and severe weather.”
In response, firms have continued to invest in social media initiatives to reach a broader range of candidates, and most reported that temporary-to-permanent conversion rates remain strong. Looking forward, staffing contacts said they are optimistic that growth will accelerate as weather conditions improve, although several expressed concerns about continued uncertainty regarding how health care reform will affect the staffing industry.