The Federal Reserve recently published July’s Beige Book, which summarizes anecdotal evidence and surveys from the Fed’s 12 District banks to gauge how the economy is doing. Senior housing providers will be happy to learn that according to the Beige Book, the economy is continuing to expand. As the economy grows and the unemployment rate falls, more people will be able to purchase goods and services that they need, including senior housing. With demand on the upswing and the economy improving, now is a good time for senior housing providers to take advantage of low interest rates by contacting the Chicago-based financing firm Cambridge Realty Capital to learn more about the many different financing programs that it offers for acquisitions and other purposes as well.
Consumer Spending Increases Across the Districts
According to July’s Beige Book, each one of the Federal Reserve’s 12 Districts reported increased economic activity. The New York, Dallas, San Francisco, Minneapolis, and Chicago Districts all reported moderate growth and the remaining Districts reported modest growth. Further evidence of economic growth was given by the Districts when all of them reported an increase in consumer spending. Consumer spending makes up roughly two-thirds of the economy, so any increase in this category is a positive sign for economic growth. With respect to some specific expenditures, most Districts reported moderate to strong sales of automobiles and modest growth in non-automobile sales. Increases in sales of big ticket items such as automobiles is especially important for the economy because of the sizable impact they have on economic growth relative to smaller purchases. For example, when someone purchases a new car, in addition to benefiting the dealership that sold it, it also benefits the manufacturer who built it, the suppliers who produced its component parts and it will eventually benefit auto repair and maintenance shops who will help keep it running smoothly once the buyer begins using it. Accordingly, when someone buys a car or other big ticket item, there’s a larger jolt to the economy than if they were to purchase a smaller, less expensive item.
Real Estate and Construction Have Mixed Results
In addition to consumer spending, real estate sales and construction are also key indicators of economic growth. Residential real estate activity was mixed in the 12 Districts as many homeowners are still underwater and low inventories also affected sales. For example, the Dallas, Boston, and New York Districts all reported that home sales were hurt by low inventory; however, the Philadelphia, Cleveland, and Richmond Districts all reported an increase in home sales since the last Beige Book was released in June. Although home sales weren’t as robust as economists were hoping for, the news in construction was much better. For example, commercial construction activity increased in nearly all of the Districts and Kansas City, Dallas, Boston, Richmond, Chicago, and New York all reported tightening in vacancy rates for commercial properties.
The Banking and Financial Sectors Show Improvement
According to the Beige Book, banking activity improved slightly in most of the Districts. For example, nearly all of the 12 Districts reported an increase in loan volume and commercial industrial lending increased in the Chicago, Richmond, Cleveland, New York, Philadelphia, and St. Louis Districts. Also, the New York and Atlanta Districts reported decreases in delinquency rates across all loan categories and in Atlanta the delinquency rates dropped to pre-recession levels.
Results for the Labor Market, Wage Rates, and Prices are Mixed
Reflecting the positive results from the most recent jobs report, the Beige Book also noted that labor conditions have improved in all 12 Districts. Unfortunately for unskilled workers, it also confirmed June’s jobs report’s findings that minimum pressure on employers to raise wages for unskilled labor continues to dampen wage growth. Lastly, the Beige Book confirmed that inflation remains low as most of the Districts reported only slight to modest increases in prices.
The findings in July’s Beige Book indicate that the economy is continuing to expand and also gives additional credence to previous reports from the Federal Reserve and Labor Department that also pointed to an improving labor market and low inflation. Accordingly, the Beige Book should encourage Fed officials to stick to their goal of completely winding down the Fed’s quantitative easing program in October and then they can focus even more attention on the central bank’s benchmark federal funds rate and continue to discuss when they should raise the rate and by how much. Before this happens and the cost of borrowing increases, senior housing providers and investors who are seeking inexpensive capital for acquisitions or other purposes should continue to look toCambridge Realty Capital for their financing needs.
