Cape Business Trends newsletter December 13, 2007
Fed keeps key rate at 5.25 percent
The Federal Reserve left the federal funds rate at 5.25 percent yesterday, noting “a substantial cooling of the housing market.” It was the first time the Federal Reserve's Open Market Committee used the word "substantial" to describe the current housing slowdown.
It means the borrowing rate for a small business will remain a point or so above the prime rate of 8.25 percent.
In maintaining the current rate, the Fed noted that inflation pressures "seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.”
The committee reiterated previous warnings that interest-rate hikes could resume if signs of inflation become more pronounced.
A growing consensus: Worst of housing slump may be over
The worst of the U.S. housing slump is over, according to the National Association of Realtors.
Sales of previously owned U.S. homes will grow at an annual rate of 6.29 million in the first quarter, snapping five consecutive quarterly declines, the industry's largest trade group said. However, new-home sales, accounting for about 15 percent of the market, won't recover until fourth quarter 2007, when transactions will grow to an annualized rate of 967,000 after bottoming at 944,000 in the third quarter.
“Most of the correction in home prices is behind us,'' said David Lereah, chief economist for the NAR.
Meanwhile, a survey of 49 economists by the Wall Street Journal has twice as many now optimistic and saying the worst is over. The economists expect home prices, as measured by the government's Office of Federal Housing Enterprise Oversight, to rise 2.8 percent this year, and to fall by 0.5 percent next year.
"We're nearing the end of the slowdown for most markets," said Ethan Harris at Lehman Brothers. "Prices still have some ways to fall before they will stabilize, but there are signs that most drastic parts of the downturn have run their course." Harris expects price declines next year to be confined to "bubble" markets such as those in California, Florida and cities in Nevada and Arizona where large numbers of investors have artificially inflated prices. "There's no reason for prices to be falling in areas without a bubble. People are just slowing down their purchase decisions," he said.
Rates for merged NStar go up on Cape
The official merging of three utilities into NStar this month means a rate increase of between $2 and $4 for many Cape Cod customers effective January 1.
Although NStar has operated under one name since 1999, it has still filed different rates for each of three operating units until recently.
For an average homeowner or small business using 500 kilowatt-hours of electricity monthly, next month's increase will mean an additional $2.21 a month.
In the future, the merger should save NStar customers because filing one set of rates costs less than three, the company said. Also, NStar may get bigger discounts buying electric supply for all 921,000 "basic service" electric customers – those who pay NStar instead of a competitive supplier – as one group instead of as three.
Cape Light Compact electricity rates to drop
The Cape Light Compact and ConEdison Solutions will be dropping electricity prices for Cape Cod and Martha’s Vineyard residential and commercial consumers by 10 percent to 13 percent, effective in January.
“The lower electric prices for the Cape and Vineyard will bring welcome savings to all consumers. These prices are very competitive and offer customers savings and price stability,” said Bob Mahoney, chairman of the Cape Light Compact.
Specifically, the rate for residential customers will be 11.652 cents per kWh and the rate for commercial customers will be 11.671 cents per kWh. The price is guaranteed to remain in effect for the six-month period from customers’ January meter read dates to their July meter read dates. The rate for industrial customers will be 12.871 cents per kWh, and that rate will be in effect for the period from January through March 2007.
Cranberries captivate Europe
The cranberry is getting a boost from new markets in Germany, France and, yes, Britain, from where those first expatriates set sail.
“It’s been phenomenal," said David Farrimond, general manager of the Cranberry Marketing Committee, a quasi-public agency in Wareham, under the U.S. Department of Agriculture. "You go into a little neighborhood store in Germany now and they have cranberries.”
U.S. cranberry exports, helped by studies that show the berry's health benefits, have jumped 70 percent in the last six years. Today, about a quarter of the U.S. cranberry crop ends up abroad in one form or another, including the equivalent of more than 8 million pounds bound for Germany.
What the new export markets mean for the cranberry industry in Massachusetts, home to more than 4 in 10 U.S. growers, is nothing short of survival.
The outlook for growers was bleak as recently as 1999, when prices per 100-pound barrel plummeted to $16 from $70. Today there are 14,200 acres of cranberry farms in Massachusetts, and the price per barrel ranges from $35 to $40. Export markets are crucial because U.S. consumption has slumped.
Did you know? The cranberry was first cultivated commercially in Dennis around 1816.
Speaking of Europeans, they’re coming in droves to U.S.
A dollar once was worth 20 percent more than a Euro. Right now, it is worth 33 percent less than a Euro. That huge swing hurts Cape Codders when they travel to Europe, but right now it is proving a boon to tourism here.
And the European shoppers are heading to more than just New York City, which is inundated with tourists this holiday season.
“I was at the Wrentham Village Outlets a month ago, and everyone I walked by was speaking a foreign language,” said Wendy Northcross, CEO of the Cape Cod Chamber of Commerce.
“There is a very real benefit to the Cape [from the exchange rate],” she added.
“The international visitor stays longer [typically 2 weeks or more] because they get more vacation time – and they spend more as a result. The foot traffic through our visitor centers has been strong with international travelers and we are grateful that they like to travel in our shoulder season.”
However, there is a gray cloud on the horizon. Visa rules are getting tighter and biometrics on passports create new work for visitors, who can choose to go anywhere in the world.
Get more exposure for your business at BizWiz 2007
Exhibitor space is still available at the 2007 BizWiz Conference & Marketplace, set for March 6, 2007 at the Four Points by Sheraton Hyannis. Highlights of the Cape’s premier learning and networking event will include interactive workshops, Hospitality Outlook 2007 and guest speaker Billy Costa of NECN’s “TV Diner.”
New this year: Exhibitors get even more exposure for their business at BizWiz 2007 – leverage your brand and message with advertisements in both the Cape Cod Times and Cape Business magazine.
To learn more, contact Patti at (508) 362-9351 or click here for an exhibitor reservation form.
Upcoming events
Looking ahead to business events in 2007? Check out the Women’s Business Exchange presented by The Community Bank. This ongoing series of seminars geared towards connecting women business owners with the experts and resources to grow their business will be held January 31, 2007, and February 28, 2007. Both events will feature breakfast, guest speakers, and an opportunity for networking.
For more information on this and other upcoming business events, visit the Cape Business Calendar.
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