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Federal Reserve’s Beige Book Shows Increased Retail Leasing, Steady Prices in New England

  • Federal Reserve’s Beige Book shows strong resurgence in restaurant sales in New England in the spring
  • Manufacturing sees moderate revenue increases despite supply chain constraints
  • Office leasing situation likely to remain uncertain until after Labor Day

Summary by Dirk Langeveld

The New England region saw a strong return in restaurant visitors this spring along with moderate to strong revenue increases in the manufacturing sector, according to the Federal Reserve’s latest Beige Book update. The region also experienced higher wages amid labor shortages and an increased demand for workers, although prices generally held steady despite pressures.

The Federal Reserve Bank of Boston reported that restaurant sales in late April and early May exceeded 2019 levels. This was due in part to seasonal factors, namely the reopening of eateries that had closed for the winter and the return of outdoor dining arrangements. Restaurant prices were higher due to increased food costs as well as labor shortages prompting businesses to offer higher wages.

Manufacturers were experiencing some higher input prices, but were generally countering them with cost-cutting measures instead of raising prices on their products. Suppliers to the semiconductor and health care industries saw strong growth. Despite supply chain problems and labor constraints creating challenges, most manufacturers were able to meet their output goals and maintain their production schedules.

Among other trends, auto and home furnishings sales were flat but elevated. More employers were using sign-on bonuses and enhanced recruiting efforts in an effort to attract workers during an ongoing labor shortage. Hotel occupancies remained depressed, although there was optimism that they will pick up as many major events are set to resume in the autumn.

Retail leasing in the region improved with the reopening of restaurants and the launch of small shops, although large-format retail leasing remained weak. Office leasing showed no signs of improvement, and a clearer picture on its future is unlikely to resume until after Labor Day – the time many companies have set to begin returning employees to in-person work in greater numbers. The Federal Reserve Bank of Boston also reported a robust demand for warehouse space.

Residential real estate sales were also strong, with homes going for higher prices. Demand was especially pronounced for condominiums.

National trends included a moderate economic expansion amid relaxed business restrictions and COVID-19 vaccinations, persistent supply chain disruptions leading to inventory shortages and delivery delays, and a moderate increase in sales prices as higher input costs were passed on the consumer. Food service, hospitality, and retail businesses all saw recovery after suffering major disruptions during the COVID-19 pandemic, but many companies struggled to find workers – especially low-wage hourly laborers, truck drivers, and skilled tradespeople.

The Beige Book is published eight times a year and details economic activity in each of the Federal Reserve’s 12 districts. Information is gathered from the banks as well as interviews and online questionnaires completed by businesses, community organizations, economists, market experts, and other sources.

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