Federal Reserve: Economy Expands While CRE Remains Strong

U.S. economic activity expanded modestly to moderately between mid-January and late March while commercial real estate activity remained strong, the Federal Reserve reported yesterday.

Activity increased in each of the Federal Reserve’s 12 districts. “The pickup was evident to varying degrees across economic sectors,” the Fed said. “Manufacturing continued to expand at a modest to moderate pace, although growth in freight shipments slowed slightly…Tourism and travel activity generally picked up.” 

The Fed’s Beige Book noted that residential construction growth accelerated somewhat even as home sales growth slowed. “[Commercial real estate] construction remained strong but became more mixed in some regions; leasing activity generally improved at a more modest pace,” it said. 

More than half of the Feds’ contacts said that loan volumes increased, “while only one said they were down modestly,” the report said. 

Several Fed districts reported that worker shortages and increased labor costs restrained growth in some sectors including manufacturing and construction. “Businesses generally expected labor demand to increase moderately in the next six months and looked for modest wage growth,” the report said.

Federal Reserve contacts called New York-area commercial real estate markets “steady to slacker,” the Beige Book said. Minneapolis district contacts reported modestly increasing economic activity and “strong” commercial real estate activity. But “consumer spending was down and a wave of retail closures continued across the [Minneapolis] district, affecting both large and small stores,” the report said.

The San Francisco district’s labor market continued to tighten, the Fed noted. “Activity in the retail sector improved moderately and sales of business services remained strong,” the report said. Fed contacts in the area reported strong housing market activity and “moderate” overall lending activity growth.