Fed’s Economic Report – Growth in Sectors, Housing Construction Flat
The Federal Reserve latest report that was released on Wednesday on the nations regional economics showed positive signs of activity with the exception of the housing market.
Eight times a year, the Federal Reserve issues what is called the Beige Book, (use to be called the Red Book) that is a snapshot of business conditions in the 12 regional bank Districts for the Federal Reserve. Information is obtained by contacting industry leaders, economists, financial experts and businesses from retailers, hotels, manufacturers, travel, restaurants and building professionals.
The Beige Book is part of the information discussed by the Federal Open Market Committee that is comprised of Fed board members and regional bank presidents that meet eight times a year to determine the Fed's approach to interest rates and policies. The formal tile of the book is the
"Summary of Commentary on Current Economic Conditions by Federal Reserve District."
Report Findings
The report confirmed consumer spending was stronger at the end of 2011. The New York district described the retail activity as "brisk," and Dallas called it "robust." Travel and tourism performed solidly in most areas and Manufacturing continued its "steady overall expansion". Heavy-equipment production and steel activity was strong based on needs in energy, farming and auto manufacturing. There also was an increase for computers and electronic parts in the Kansas City, Dallas and the San Francisco Districts. Providers of professional and business services such as consulting, advertising, and legal services expanded their activities according to Boston, Richmond, St. Louis and Minneapolis Districts.
Real Estate and Construction
Certain districts reported gains in home sales from a year earlier, as well as indicating an increase in apartment and multifamily construction with the tightening of rental properties in the Boston, Philadelphia, Chicago, Kansas City, and Dallas Districts.
As a whole, the report indicates the residential real estate markets remained at "very low levels" throughout the U.S. This is driven by extensive inventories in many Districts of abandoned and distressed properties reported and were a source of limited growth and price restraint in Boston, Richmond, Chicago, and San Francisco. Single-family home sales remained slow throughout the U.S. with the exception of Dallas that reported a modest increase over the prior period. Boston and Atlanta indicated home sales exceeded levels from twelve months earlier, but mainly because the earlier levels reflected a substantial drop following the expiration of the homebuyers’ tax credit in mid-2010.
Demand for nonresidential real estate remained soft overall but improved in a number of Districts. Vacancy rates and other indicators in markets for office space were largely unchanged in the major metropolitan markets in the Boston, Philadelphia, Cleveland, Richmond, and St. Louis Districts. New York reported that the demand for office space “picked up in late 2011,” causing vacancy rates to edge down and rents to rise. Minneapolis, Kansas City, Dallas, San Francisco, Atlanta, and Chicago reported stronger demand for commercial real estate compared with earlier in 2011. Cleveland and Chicago reported the strongest demand for industrial and health-care facility construction and San Francisco construction demand was driven by the need within the information technology sector.
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