Fed report tepid on New England economy
Business managers interviewed by Federal Reserve researchers conducting their eight-times-a-year review of the New England economy “cite mixed results amid signs of improvement, although activity generally remains below year-earlier levels,” the analysts wrote in the report, which was released Wednesday.
“Some respondents are beginning to hire and/or reverse pay cuts or freezes, or planning to in 2010,” the researchers wrote in the summary often referred to as the “beige book.”
“Prices are generally said to be stable,” they wrote. “Contacts in a number of sectors express uncertainty about whether recent improvements will last, but most — outside of commercial real estate — expect recovery to take hold in 2010.”
By sector:
• A number of retailers told the researchers “consumers are much more cautious than in previous years.” And executives in the category worried about the impact of unemployment on consumer spending.
Several retail concacts told the researchers they are maintaining lower inventory levels than a year ago.
Capital spending in the sector is “guarded,” the Fed team wrote, though there is some spending planned on renovations and IT.
“Seasonal hiring is mixed,” the report states. “Wages remain mostly steady, although one respondent reports wage cuts were successfully taken in order to prevent a cut in headcount. Selling prices are reportedly stable.”
• In manufacturing, the report states, “biopharmaceuticals companies indicate that their revenues continue to increase. Some equipment makers report that sales have picked up from their depressed levels in the first half of the year, while others say their business remains in a slump.”
The researchers wrote: “Respondents across a variety of industries note that sales to retailers, restaurants, and personal services establishments remain depressed.”
Materials costs and selling prices remained largely unchanged.
“Some firms that cut wages and salaries earlier in 2009 have recently restored pay to pre-cut levels or plan to do so in 2010,” the researchers wrote. “Most contacts say that they have held their domestic headcounts relatively steady in recent months, but biopharmaceutical firms continue to expand employment.”
They add: “Some seeking to fill specialized technical positions indicate they are disappointed with the quality of the applicant pool.”
“For the most part, capital spending remains subdued,” the report states. “Many note that they have adequate cash to fund both needed and discretionary investments.”
For the sector, it concludes: “Most manufacturers and related services providers are anticipating modest to moderate revenue increases over the coming six to 12 months.”
• Software and Information Technology Services could see some new hiring in 2010.
“Those firms that implemented wage freezes this year anticipate lifting them in 2010, with raises expected to be in the 3-percent to 5-percent range,” the report states.
It states: “Expectations range from gradual upticks over the course of 2010 to high levels of growth from the start of the year.
• “New England staffing contacts report upticks in activity through the end of the third quarter and
into the fourth,” the report states. “While year-over-year revenues are still down — from 10 percent to 60 percent — revenues are improving on a sequential basis, with increases reported in billing hours and number of assignments.”