Regional economy continues to expand slowly

By Robert Gavin, Globe Staff

The New England economy continued to expand in recent weeks, but signs of slowing appeared as some companies reported mixed results and most remained cautious in hiring, according to a Federal Reserve survey released today.

The survey, which comes out eight times a year, said business activity in New England was mixed after several months of broad improvement. Manufacturing, advertising and consulting firms reported increased revenues, but some retailers noted declining sales. Home sales, feeling the effects of a federal homebuyer tax credit, increased at a strong pace, but real estate firms expect activity to slow "considerably" with the recent expiration of the tax credit.

Despite a pick-up of sales of commercial buildings, commercial real estate firms remain "downbeat" about office leasing. A few companies hired more workers, but most are holding employment steady, according to the survey.

"Business activity continues to expand overall," the Fed reported, "but individual firms' gains show some choppiness."

The survey, known as the Beige Book, collects anecdotal information from businesses around the country in advance of the Fed’s rate-setting meetings. Policy makers are expected to hold the Fed’s benchmark interest rate near zero when they meet August 10.

Nationally, the economy continued to expand, but growth in most regions was modest or slowing, according to the survey. Recent data has also suggested a slowing pace of recovery, but most economists, including Fed Chairman Ben Bernanke and Boston Federal Reserve Bank president Eric Rosengren, don't expect the economy to slip back into recession.

In New England, demand for technology products helped boost manufacturing, with makers of semiconductors and related products reporting strong sales, according to the Fed survey. One semiconductor firm told the Fed that sales were 17 percent above the pre-recession peak.

Consulting and advertising firms also reported solid growth, with revenues rising 8-to-25 percent from a year earlier, according to the Fed.

Retailers, however, were concerned about consumer confidence, which has slipped recently, as some experienced slowing or declining sales. Real estate firms said they expect sales to slow over the next few months without the homebuyer tax credit. One firm, however, told the Fed that pent-up demand among buyers could help moderate the drop-off in sales activity.