Economic activity nationwide continued to expand, the 12 Federal Reserve districts indicated Thursday in their regular Beige Book report. “Four Districts reported that economic growth firmed while a couple of Districts noted that growth cooled. Other reports generally characterized growth as moderate or mixed,” the report’s summary said.
For New England, results for the late summer and early fall were “somewhat mixed,” according to the First District office in Boston. Head counts were mostly stable in retailing (except for auto dealers) and manufacturing, and hiring was planned at many consulting firms. But most sectors cited difficulties in recruiting for professional and technical positions.
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Retailers and business services firms “were mostly flat to up” in August and September, the report said, “but some cite losses.” Respondents’ year-over-year sales results ranged from double-digit gains to double-digit declines.
In retail, sales increases were reported in discount apparel and in art and office supplies; both sectors were confident growth would continue, the First District said. Input prices appeared to be stabilizing, and respondents were mostly able to pass along price increases to the consumer.
A mood of cautious optimism prevailed, though many respondents were wary about the effect of higher energy prices, especially with winter approaching, and the real estate slump. Many retailers said they were tightening capital spending, apart from already planned new-store openings.
In “selected business services” business was generally steady. Most First District contacts in advertising and management consulting reported flat to modest year-over-year revenue gains for the third quarter, though some posted declines after losing large clients.
Higher demand was seen for consultants in productivity and efficiency enhancement, health care and finance. Nearly all consulting contacts in New England planned to increase their head counts, though the market for experienced consultants continues to tighten, especially in integrated marketing and interactive services. Advertising and marketing firms reported no plans to change headcount. Wage increases, highest at consulting firms, ranged from 3.5 to 10 percent.
Advertising and consulting contacts mostly expected revenue growth to be flat or accelerate slightly in the fourth quarter. They continued to raise their prices, citing continued cost pressures, especially in prices for airfare and hotel rooms.
In manufacturing, most reported increases in revenues and expenses over year-ago levels. But most said materials energy and transportation costs have stabilized or eased in recent months, helping them avoid raising their prices. Some said they held down costs by consolidating suppliers or shifting to foreign vendors. Sales were strongest for aerospace and energy-related equipment and biopharmaceuticals. Sagging demand for certain consumer products was attributed to to weak consumer confidence, housing market declines and competition from imports and other producers.
Modest increases in domestic capital spending were planned by most companies, to produce new products or modernize production. Manufacturers were continuing to increase technical, scientific and sales staffing, while cutting factory jobs. Most said their U.S. head counts are fairly stable; a few said housing costs were hindering their New England recruitment efforts. Base pay increases were still mostly running between 2.75 and 4 percent.
Manufacturers’ sales outlook for late 2006 and early 2007 tended toward the positive. Many indicated their confidence had grown as energy prices eased and interest rates stabilized, though some cited concerns about cost containment and foreign competition.
Residential real estate showed further softening across New England, compared to 2005, with inventories and time-to-sale increasing as prices and sales declined. Contacts attributed slower sales to less-urgent, bargain-hunting buyers.
Many said that in recent months, as sellers have become more attuned to supply conditions, they have also become more willing to reduce prices, and that has led to declining prices in many New England markets. In the near term, contacts predicted, sales will remain slow, prices will stay below year-ago levels, and inventory may decline as properties are “de-listed” for the holiday season.
