CHICAGO—The United States Federal Reserve Board just released another “Beige Book” analysis of economic conditions, the first since April, and continues to give high marks to the Chicago and Midwestern real estate markets. “Demand for residential construction grew steadily, as multifamily construction remained strong and single-family construction continued to improve,” the Fed researchers note this time, part of an overall pattern in which “construction and real estate activity continued to increase gradually in June.”

To produce the “Beige Book” Fed economists conduct a series of informal talks with key business contacts, economists, market experts and others in each sphere of economic activity and publish the anecdotal results eight times a year.

One of the Feds' key contacts, a homebuilder, “noted that while new single-family development remained limited, improvement of vacant lots in existing developments was increasing. Activity in the residential real estate market continued to increase as well, with home sales, prices, and rents rising.”

Furthermore, the nonresidential market in the Midwest also exhibited strength during the last few months, driven in part, the Feds believe, by the expansion of auto manufacturing. The industry has been on the rebound for several years, pushing up job numbers and growth across the Midwest, especially in Michigan and Ohio. The board is not alone in highlighting how its positive economic effects can ripple out into other sectors. According to a recent Hospitality Research Quarterly Update from Marcus & Millichap, for example, the auto rebound helped hotel occupancy in Michigan rise 130 bps during the first four months of the year. Ohio also exceeded U.S. trends in this sector. However, another Fed contact noted “that planned upgrades to auto supplier facilities were nearly complete; and that with auto production getting back to pre-recession levels, any additional capacity expansion was likely to be incremental.”

The auto industry wasn't the only bright spot for the industrial sector. Demand for construction equipment picked up and manufacturing production in general increased in June. “Steel production again grew at a moderate pace, and specialty metal manufacturers reported a modest improvement in new orders and order backlogs,” the Feds note. Not surprisingly, some areas, such as the demand for heavy equipment, remained a bit weak, but their contacts anticipated an improvement in latter half of the year.