Current Economic Conditions by Federal Reserve District
Reports from the twelve Federal Reserve Districts suggest economic activity continued to expand gradually in July and early August across most regions and sectors. Six Districts indicated the local economy continued to expand at a modest pace and another three cited moderate growth; among the latter, Chicago noted that the pace of growth had slowed from the prior period. The Philadelphia and Richmond Districts reported slow growth in most sectors and declines in manufacturing, while Boston cited mixed reports from business contacts and some slowdown since the previous report.
Commercial Real Estate
Commercial real estate market conditions held steady or improved in nearly all Districts in recent weeks. New York, Philadelphia, Minneapolis, and Kansas City all reported that commercial leasing increased and vacancy rates fell. New York and Kansas City reported increases in office rents as well; Kansas City also cited a rise in commercial construction. Commercial building permits were up significantly from one year ago in portions of the Minneapolis District. Chicago’s report was mixed: office vacancy rates remained high, restraining demand for new office construction, but office leasing demand improved modestly and industrial construction picked up. Atlanta reported rising apartment rents and small gains in office leasing, with weakness in the retail and industrial sectors. Boston reported that office fundamentals were flat on average, with rising rents in portions of Boston proper and muted but steady activity elsewhere in the District. Nonresidential construction picked up in the Boston and Cleveland Districts. Office and industrial real estate markets remained healthy in Dallas. The St. Louis report noted an increase in commercial construction across much of the District and varied reports on leasing across areas within the District. In San Francisco, demand for commercial property was stable while commercial construction was limited. Richmond reported a decline in office leasing volume in Washington, D.C., but some portions of the District recorded increasing sales and construction. Multifamily real estate remained a strong submarket and a key driver of construction in many Districts, including Boston, New York, Philadelphia, Cleveland, Atlanta, Chicago, Minneapolis, Dallas, and San Francisco.
Eleventh District – Dallas
The Eleventh District economy grew at a moderate pace over the past six weeks. Manufacturing activity continued to expand, demand for business services remained solid, and transportation services activity increased. Respondents said retail sales edged up, while automobile sales held steady. The housing and commercial real estate markets remained healthy. Financial firms noted softening loan demand. Energy activity remained robust, and agricultural conditions improved slightly. Employment levels were steady to slightly higher. Wage and price pressures were modest. Most contacts noted that European debt issues and the upcoming national elections added uncertainty to their outlooks.
Construction and Real Estate (Eleventh District)
Housing activity remained strong since the last report. Contacts said sales of new and existing homes continued at a good pace and were well above expectations. Builders noted strong traffic and reported rising backlogs, while realtors said shrinking inventories had led to price gains. Apartment demand remained strong, and contacts noted rising construction activity as investors continue to be attracted to the market. Housing outlooks remain positive.
Office and industrial real estate fundamentals remained healthy over the past six weeks. Leasing activity continued at a good pace and some contacts noted a pick-up in property sales. Outlooks were optimistic but cautious. Since the last report, there were a few signs that investors were becoming less aggressive in pursuing commercial real estate deals, outside of multifamily.