Summertime Expansion for the Economy, CRE Too
- Sep 03, 2015
Ahead of the jobs report on Friday, more reasonably good news about the U.S. economy. In the most recent Beige Book, formally known as the “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” the Federal Reserve said that reports from the 12 Federal Reserve Districts indicate that “economic activity continued expanding across most regions and sectors during the reporting period from July to mid-August.” In most cases, these recent results represented a continuation of the overall pace reported in the July Beige Book, which was fairly good. Respondents in most districts expected growth to continue at its recent pace, but the Kansas City report (the district, which in all cases is more territory than the city for which it’s named) cited more mixed expectations.
Retail sales and revenues continued to expand, the book reported, which is good news for retail property owners. But not quite everywhere: the Cleveland and Minneapolis Districts cited flat consumer activity since the last report; Atlanta was mixed; and Dallas reported decreased sales year-over-year. Most districts reported increased auto sales, which reflects the record number of sales being sold nationwide. Reports on manufacturing activity—which tends to benefit industrial properties—were mostly positive, although among these, the Cleveland, St. Louis, Minneapolis, and Dallas districts painted a somewhat mixed picture of their manufacturing sectors. Only the New York and Kansas City districts cited declines in manufacturing. Among districts with information on tourism, activity was strong in most reports, to the benefit of the hospitality sector.
Overall, the Fed reported, conditions in both the residential and commercial real estate markets were mostly positive. For instance, existing home sales and residential leasing widely improved, with home prices moving up in most areas. Commercial real estate activity also rose in most districts, with commercial construction activity ranging from strong in the Cleveland and Minneapolis Districts to up only slightly in Chicago, while commercial leasing was reported to have “increased across the board.”
The book’s take on the labor market wasn’t particularly sanguine, however. Labor demand was reported to be “modest to moderate”–the favorite Fed euphemisms for “not so hot.” That compares with the July edition, when employment levels were reported to have “increased or were steady in most sectors.” Even more frustrating for the overall progress of the economy—and ultimately, real estate—there has been only “slight” upward wage pressures, and in only “selected industries.”