BOSTON - The Federal Reserve says the region’s economy continues to suffer the effects of a sluggish real estate market and a dip in international tourism. But other sectors showed growth or stable prospects
A dip in international tourism and a sluggish housing market are acting as drags on the Greater Boston economy, according to a report by the Federal Reserve Board.
Wednesday’s “beige book” report gauges the economic climate based upon interviews with business figures in each of the Federal Reserve’s 12 bank districts. It said the New England district had pockets of strength in such sectors as advertising and consulting, and mixed results among manufacturers and retailers.
“Economic activity continued to expand but that it wasn’t a very robust expansion,” said Yolanda Kodrzycki, a senior economist at the Federal Reserve Bank of Boston.
The Fed describes the mood of the business community in Boston as “varied.” International tourism is declining in Greater Boston and San Francisco, trailing positive reports from other districts of the Federal Reserve Bank. But hotel employment in Greater Boston remains steady.
“It might be due to increased international tensions and security measures that make travel more difficult,” Kodrzycki said.
One of the strongest sectors appears to be advertising and consulting firms, which benefited in the second quarter from the strong prospects of clients in the health care, pharmaceutical, financial services and technology sectors.
“Their clients are doing well and therefore they’re doing well,” Kodrzycki said.
In fact, companies in the sector said wages are rising and making it difficult for them to retain good employees. Efficiency consultants also said demand for their services remains strong.
Declines in sales of residential real estate are hurting some manufacturers, while high energy prices are dampening retail sales. About half of the manufacturers contacted for the survey said business had declined from the previous year, primarily because of the declining demand for home construction, renovation and consumer products. The remainder said sales were growing at typical historical rates. However, most manufacturers indicated they expected modest increases in production in the near future.
Retailers also reported mixed results. Sales of men’s clothing, sporting goods and seasonal items were strong, while women’s clothing sales declined.
The Fed’s report echoed two other reports issued Wednesday showing continuing weakness in the nation’s real estate market. The National Association of Realtors said sales of existing homes fell to the slowest pace in more than four years, with the biggest dip in the Northeast where sales declined 7.3 percent.
And mortgage applications fell to a five-month low, the Mortgage Bankers Association said in its weekly report.
One encouraging sign for the housing market: a 0.1 percent increase in the median sales price during June. It was the first time in 11 months that median prices rose compared with the previous year, according to the National Association of Realtors.
Still, it’s too soon to declare a turnaround in the market, Kodrzycki said.
“That’s a sign of strength but I don’t think anyone is really too eager to bet on when home sales will turn around,” she said.
Steve Adams of The Patriot Ledger (Quincy, Mass.) may be reached at firstname.lastname@example.org.