Fed Reserve Beige Book Report Not All Gloom And Doom

Manufacturing Sector Shows Some Growth Amidst Pandemic

Keith Griffin

April 15, 2020

Manufacturing worker | Image by Manfred Schindler from Pixabay

The Federal Reserve Bank’s monthly economic report, called the Beige Book, shows not all is gloom and doom for the Boston Fed district. Some sectors are reporting good numbers and even flat growth can be considered good amidst the COVID-19 pandemic.

The report says not surprisingly economic activity slowed markedly in March, except among manufacturing firms in the region whose products saw increased demand because of the pandemic. Software and IT services firms continued to see strong demand, but few new customers. Retailers and tourism contacts cited dramatic falloffs in demand, and they laid off customer-facing workers. Real estate activity in the region paused in March.

Commercial Real Estate

Commercial real estate activity in the First District had continued to strengthen before the COVID-19 outbreak but fell sharply afterwards. Before the outbreak, the Boston leasing market was robust in both the office and industrial sectors, and rents were increasing.

In the Providence leasing market, vacancies were low and rents were steady. In the Greater Hartford area, both the leasing and investment sales markets were slow but steady.

The COVID-19 outbreak began affecting commercial real estate markets across the district in mid-March, with a near-total freeze in new office leasing activity, collapse of some sales in progress, growing disturbances in credit markets, and steep declines in construction activity. Retail tenants were especially hard hit, enacting store closures and mass layoffs, and many have received at least temporary forbearance on rent payments.

In contrast, the industrial sector experienced increased demand for warehouse space to support e-commerce in response to the outbreak. Contacts on balance were cautious and observant, but all expressed significant concerns about the near-term outlook for commercial real estate activity in light of the COVID-19 pandemic.

Residential Real Estate

Residential real estate markets in the First District continued to experience very low inventory levels in February (the latest data available for Rhode Island, Massachusetts, Boston, New Hampshire, and Maine, with no data available for Connecticut and Vermont). For single family homes, sales were up in February from a year earlier in Rhode Island and Maine but down in Massachusetts, Boston, and New Hampshire. For condos, sales rose in Rhode Island, Massachusetts, and Boston while dropping moderately in New Hampshire and Maine.

Median sales prices generally increased and inventory declined substantially for both single family homes and condos. Contacts from Rhode Island, Massachusetts, Boston, and Maine all noted that inventory levels have been "desperately" low.

Click the link for more information about Boston District economic conditions.

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