Economy Watch: Beige Book Upbeat

The latest Beige Book from the Federal Reserve—released on Wednesday and more formally known as the “Summary of Commentary on Current Economic Conditions by Federal Reserve District”—has reasonably good news for the real estate industry. Most of the kinds of economic activity involving the industry are at least seeing “moderate” growth.

• Residential and commercial real estate activity is generally improving, according to district reports. Stronger activity tended to be in multifamily construction and other kinds of commercial real estate. Residential prices and commercial rental rates also rose somewhat in most places.
• Labor markets continued to improve, with employment increases reported in seven of the 12 districts, and four districts mentioned signs of labor market tightening. Those are positives for office markets. However, there was overall change in wage and price pressures, with wage increases running from flat to moderate, while price increases tended to be minimal.
• Growth of consumer spending, which affects retail health, ranged from slight to moderate in most of the Fed’s 12 districts, while auto sales were somewhat mixed, as activity in that sector has begun to drop off from previously high levels. Reports of tourism activity, which benefits the hospitality industry, were also mixed.
• By contrast, with the exception of motor vehicles and aerospace, most manufacturing sectors suffered weaker activity; if that trend continues, it will impact industrial real estate. Several districts reported the strong dollar’s negative impact on demand, while some noted that low energy prices have had a smaller, mixed effect.