Thursday, June 6, 2013

June Beige Book: Economy in district grew at 'modest pace'

The tenth Federal Reserve district, which includes Colorado, grew at a 'modest pace' during May, according to the latest Beige Book released by the Federal Reserve yesterday. 

According to the report's section on real estate and construction: 
Residential real estate activity remained strong, and commercial real estate improved modestly in late April and early May. Residential real estate sales continued to rise sharply. Prices trended upward and inventories are lower compared to the prior survey period. District contacts reported that low inventories have slowed sales and put upward pressure on prices in some areas. They also reported concerns that appraisals were not keeping pace with price increases. Contacts expected residential sales and prices to increase further, supported by low interest rates and a rise in consumer confidence. As a result of improved sales activity and higher traffic of potential buyers, many agencies hired additional real estate agents over the past month or expected to hire in coming months. Residential builders reported steady construction activity with expectations of moderate growth over the next three months.  Commercial real estate activity rose modestly during the past month. Construction activity strengthened and prices and sales inched up, while vacancy rates fell slightly. Contacts expected stronger activity in coming months, noting that several future projects are currently in planning stages. Optimism differed across District states, with commercial real estate construction in Oklahoma expected to be particularly strong, and construction in New Mexico and Missouri fairly soft. 

On wages: 

Wage pressures increased slightly but remained weak during the survey period, while prices rose for raw materials and most finished goods across industries. Labor shortages and wage pressures inched up, with strong demand for skilled workers including technicians, truck drivers, engineers and software developers. Many employers remained concerned about the impact of recent healthcare legislation on labor costs and how these costs might be passed onto consumers or impact profit margins. Retail prices increased moderately over the survey period, and retailers planned to raise prices at a similar pace over the next few months. Food costs continued to rise, and restaurant owners increasingly expected to raise menu prices in response. Similarly, raw material prices rose moderately for manufacturers. While finished goods prices remained fairly flat over the survey period, manufacturers planned to raise finished good prices over the next few months to partially offset higher input costs. Builders and construction supply firms continued to report higher prices for construction materials, particularly lumber. In some cases, construction supply costs rose faster than anticipated, which resulted in more frequent price adjustments and reduced margins. Transportation firms also noted an increase in input prices. 
Read the full report.