PROVIDENCE – Economic activity in New England expanded at a modest to moderate pace in late February and March, according to the Federal Reserve’s Beige Book survey findings released Wednesday.
Hiring activity in the region was mixed, and wage increases in the area were moderate, the survey of local business contacts found. Headcounts in the region were said to have remained flat or increased.
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Most manufacturers in the survey reported steep price increases for goods, which raises the possibility that inflation could increase in the coming months.
Most manufacturing contacts in the region also reported stable sales or modest increases. Several contacts noted that delays in deliveries in 2020 reduced capital expenditures and that they planned to spend more in 2021 as a result. All contacts were optimistic for 2021, the report said, but had not changed their forecast in recent months.
The report noted that one of the manufacturing respondents that experienced year-over-year declines in sales was a toy manufacturer that depends on new entertainment products to boost sales and was thus impacted heavily by the pandemic.
Retailers reported strong sales in the first quarter, but some reported delays in the receipt of goods.
Travel industry contacts continued to report major disruptions due to the COVID-19 on air travel; however, many expected leisure travel to increase in coming months as vaccination rates increase. Hospitality contacts in the region also reported anticipating seasonal worker shortages this summer due to limits on visas.
Commercial real estate was said to have remained unchanged, with low industrial vacancy rates and rents increasing at a strong pace. Investors and users were said to be seeking to build new warehouses and distribution centers despite high construction costs. Construction in the life sciences sector in New England also remained robust, the report found.
Retail leasing was said to have improved for smaller urban spacesbut remained weak for big box stores and malls in the region.
The office sector in New England also continued to struggle, the report said. Rents held mostly steady, but contacts expect downward pressure on rents to increase going forward.
“Reportedly, some landlords were holding office space off the market in anticipation of stronger demand in late summer, although office footprints are expected to stay well below pre-pandemic levels for an extended period,” the report said.
The region’s residential real estate market continued to have “extremely low” inventory and high demand. A Rhode Island contact attributed a recent slowdown in sales to reduced inventories, the Fed said.
