As the leaves begin to change and the temperature dips, business contacts across New England say that economic activity has been either status quo or on the rise, and many expressed cautious optimism about the months ahead, according to the latest Beige Book report.
According to the Beige Book, the Federal Reserve’s regular measure of economic conditions, contacts in various industries across the First District generally painted a positive picture of economic conditions throughout New England. The Greater Boston area in particular benefitted from tourism-related spending and robust commercial real estate fundamentals, among other things. The First District includes all of New England, except Connecticut’s Fairfield County.
Of the First District’s 11 manufacturing contacts, five reported some weakness in sales – a higher number than in any recent cycle, the Fed noted – and cited various reasons behind that. One said that August was typically a slow month, but sales had not rebounded as expected in September, while another contact expressed concern about an "order bubble" in commercial aviation that could lead to a wave of cancellations at some point.
Business services contacts in the First District reported stronger demand for consulting and advertising services, with government and strategy consultants noting a particularly strong uptick in requests for proposals. A high-end economic consulting firm said it was overwhelmed with work, largely related to mortgage-backed securities litigation.
Commercial real estate fundamentals either held steady or improved across the First District in September and October. Contacts told the Fed that rents have increased in Boston neighborhoods, like Fort Point and the Financial District, while office leasing remained strong in Boston-area suburbs like Waltham and Burlington. Construction was steady, but high, with a particular emphasis on mixed use and adaptive reuse.
While Hartford’s office vacancy rate has declined in recent months, contacts told the Fed there has been no noticeable increase in asking rents. Still, Hartford contacts in the commercial real estate sector were cautiously optimistic in their communications with the Fed.
Sales of single-family homes and condominiums declined year-over-year throughout at least four New England states in August. In Massachusetts, prices for single-family homes and condominiums increased, and contacts there expressed concerns about affordability and lack of inventory. Connecticut contacts said the state ultimately needs higher-paying jobs so homebuyers could afford to buy some of the inventory of non-starter homes.
