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N.E. economy poised for recovery, Fed report says

Some firms ready to hire, restore pay

By Robert Gavin
Globe Staff / December 3, 2009

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The New England economy is showing signs of improvement, as most businesses surveyed by the Federal Reserve expect a recovery next year.

The survey released by the Fed yesterday, known as the Beige Book, found that some companies are either beginning to hire and reverse pay cuts, or plan to do so next year. Overall, business activity has been mixed over the past several weeks, with some firms reporting sales are increasing, but others saying that business remains slow, according to the Fed. Many businesses worry how long the economic rebound will last, but still expect economic growth to pick up in the coming months.

“Contacts in a number of sectors express uncertainty about whether recent improvements will last,’’ the Fed report said, “but most - outside of commercial real estate - expect recovery to take hold in 2010.’’

The Beige Book, which is released eight times a year, collects anecdotal information from businesses to help assess economic conditions in advance of the Fed’s rate-setting meetings. The Fed is expected to hold its benchmark interest rate near zero when policy makers meet Dec. 15 and 16.

The brightening outlook in New England reflects an improving national economy. Eight of the Fed’s 12 districts experienced some pickup in economic activity over the past several weeks. The others reported that conditions were changed little from the last survey in October.

In New England, retailers reported results that ranged from sales declines to increases in the mid-single digits. Consumers remain cautious in spending, retailers told the Fed, but selling prices have stabilized.

Biopharmaceutical and equipment makers reported increasing sales, although other manufacturers, particularly those that sell to retailers, restaurants, and personal service firms, said they remain in a slump. Most companies expect sales to grow next year.

Technology firms also reported mixed results. One company, for example, said that its customers remain hesitant to complete deals; another said it has experienced strong demand across several product lines. Some companies plan to expand workforces, while those that imposed wage freezes expect to lift them soon.

Commercial real estate continues to struggle. In downtown Boston, office leasing rates have plunged about 30 percent from their peak and vacancy rates continue to rise. Sales remain scarce, and many commercial real estate firms expect the outlook to remain bleak for at least another year.

Home sales, meanwhile, continue to rise across the region, boosted by the federal government’s $8,000 first-time home buyer tax credit, the Fed reported. Prices continue to drop in most local markets, except for Boston, where the September median price was up 6 percent from a year earlier.

Robert Gavin can be reached at rgavin@globe.com.