Beige Book points to busy year for industry.
Retail sales were up in more than half of the business districts and residential markets held strong, hailing positive news for those of us in the real estate industry. Tourists are still visiting cities throughout the U.S. Manufacturing activity is rising to higher levels. Commercial real estate conditions were described as "varied" and price pressures and energy costs were still of concern, but overall this snapshot of the U.S. economy produced a beautiful picture.
These are the findings from the latest Beige Book Report, a regular anecdotal report, named for the color of its cover, that is released by the Federal Reserve. This important report, which will have been used by Fed policymakers on May 3 to set interest rates, examines economic activity across the nation during the most recent period, in this case from late February to early April.
Let's take a closer look at the activity, broken down by district:
District 1--Boston: Business continued to boom in New England, with first quarter retail sales up year-over-year. Apparel and electronics were huge sellers. Manufacturers reported order levels and revenues exceeding first quarter 2004 levels. Some retailers and manufacturers are restraining capital spending more so than in quarter's past. Advertising and business consulting firms saw strong demand. The residential market was more of a mixed bag. Tourism improved, with hotels noting a double-digit increase in revenues since last year.
District 2--New York: Growth continued, but varied considerably by sector, in the Second District. Especially robust were the hotel industry and other tourist-related businesses, as well as the residential market. Retail sales were impacted by unfavorable weather and were "on or below plan." Manufacturing growth slowed due to price pressures. Office and industrial markets were somewhat stronger, the securities industry showed signs of growth in the first quarter, and bankers reported modest declines in delinquency rates. Commercial loan demand was on the rise.
District 3--Philadelphia: March was a wonderful month for the Third District. Increased business activity was witnessed in the manufacturing sector, auto sales were up, and banks reported an abundance of lending activity. Service firms saw business grow at a moderate pace. On the retail front, general merchandise sales were healthy. More improvement is anticipated in the months ahead.
District 4--Cleveland: Business conditions continued to demonstrate signs of recovery since the last report, although somewhat less evenly. Durable goods manufacturing was on an upward trend, while non-durable goods held steady. Sales, while slower than this time last year, improved for residential builders. Retail sales were less vigorous than earlier in the year. Bank lending strengthened, while demand for shipping services tapered off. While hiring was limited throughout the Fourth District, staffing firms reported an increased number of openings and a lack of suitable candidates to fill the positions.
District 5--Richmond: The economy picked up in early April, following a slower March. Tourism was mixed, with ski resorts faring better than coastal areas. Washington, DC's Cherry Blossom Festival saw an impressive, record-setting level of attendance with over one million tourists. Big-ticket retail sales were especially weak in March, but recovered somewhat in the beginning of April.
District 6--Atlanta: Above average retail sales set the tone for robust economic activity. Retailers exceeded expectations and apparel and seasonal merchandise were strong sellers, although auto sales were less stable. Tourism reports were upbeat. Manufacturing and factory activity rose. The job market modestly improved, although healthcare costs may stunt growth.
District 7--Chicago: The economy continued to grow moderately in late February and March, although activity lagged in Michigan. Consumer spending was muted, while business spending rose. Construction and real estate activity differed by location and market segment. Manufacturing activity was generally solid. Lending activity increased slightly and price increases were reported throughout the supply chain.
District 8--St. Louis: Manufacturing activity was generally positive and business activity fared well. Retail sales climbed in February and March compared with this time last year. Home sales increased and commercial real estate activity showed evidence of rebounding.
District 9--Minneapolis: Consumer spending, manufacturing, construction, real estate, energy, and mining all displayed notable growth. Agriculture was down slightly, while tourism stayed level. Moderate growth was seen in employment rates and wage increases. Prices jumped on gasoline, home heating oil, and college tuition. A condo construction boom was noted in Minnesota.
District 10--Kansas City: Economy expanded solidly in March and early April and retail sales and tourism were extra robust. Apparel, appliances and jewelry were among the more sought-after items. Factory activity also rose briskly, and the energy sector strengthened. Residential real estate activity increased, while the commercial market was somewhat weak. In less optimistic news, layoffs surpassed new hires for the first time in more than a year.
District 11--Dallas: Factories rebounded, coinciding with the growth of financial and business services. Economic activity also expanded somewhat although retailers reported being unhappy with sales growth. Residential construction slowed but the commercial real estate markets seem to be improving.
District 12--San Francisco: Solid expansion was seen and inflation remained modest, though businesses noted a minor increase in inflation for final goods and services, partially due to elevated energy prices. Compensation pressures were seen, with rising health-care expenses and a pickup in demand for skilled workers creating the shift. Retail and service businesses reported solid demand recently, and manufacturing activity continued to expand. Real estate markets--both residential and commercial--were seen as "vibrant."
As predicted the last time I wrote about the findings, this year is off to a great start. We are nearly a third of the way through 2005, a year for which many economists have forecast an average of 3.6% growth, and the predictions already seem to be coming to fruition. Whether you are on the residential, commercial, retail, construction or lending end of the real estate business, we have a busy remainder of the year ahead of us!
FAITH HOPE CONSOLO, CHAIRMAN,
RETAIL LEASING AND SALES DIVISION
PRUDENTIAL DOUGLAS ELLIMAN
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|Title Annotation:||Commercial Sales & Leasing|
|Author:||Consolo, Faith Hope|
|Publication:||Real Estate Weekly|
|Date:||May 4, 2005|
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