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Summary
Reports from the Sixth District indicated that the pace of economic growth remained favorable during November and December. District retailers gave encouraging early reports on holiday sales and most contacts noted that activity met or exceeded year-ago levels. Auto sales were mixed, with foreign models outperforming domestic brands. Strength in the District's residential housing markets continued, whereas commercial construction remained generally weak. Reports noted modest improvement in the industrial sector, and some contacts reported an increase in capital spending during November and December. The District's tourism and hospitality sector continued to improve late in the year. Responses from the financial sector were also mostly positive. Labor market reports firmed a bit in November and December, although employers remained cautious. Prices were described as stable overall.
Consumer Spending
Initial reports from District retailers indicated that holiday sales met or exceeded year-ago levels. Contacts noted that the combination of lean inventories and strong sales resulted in fewer discounts than in recent years. In particular, less discounting was noted after Christmas. Several contacts reported that high-end merchandise did well over the holiday season. Electronics and home-related products were also strong sellers. Generally, retailers were upbeat about their prospects for first-quarter sales.
Vehicle sales in November and December were mixed, according to reports from auto dealers. Some contacts noted that December is traditionally a low-volume month, although foreign model sales were quite strong late in the year. Most contacts reported that a reduction in the level of incentives had not significantly reduced sales or floor traffic at dealerships.
Real Estate
District single-family housing markets ended the year strongly, with both construction and sales continuing at a steady pace. Commercial markets were mixed. Commercial construction remained generally weak in November and December, while leasing activity continued to improve. Local industry analysts reported that improvements in the commercial real estate market were expected in 2004.
Manufacturing and Transportation
District contacts reported that manufacturing production continued to recover in November and December, and industrial energy sales had stabilized in some parts the District. Some contacts noted that previously delayed capital spending plans have been revived, especially IT equipment and infrastructure. Reports cited increased confidence in the sustainability of economic growth, tax law changes, and the need to replace outdated and worn equipment as reasons for the pickup in capital spending. Auto parts producers continued to announce plans for new plants, and tractor and trailer producers reported increasing orders over last year. New military contracts boosted activity for shipyards and military equipment suppliers. Less positively, Louisiana's petrochemical industry continued to pare employment rolls.
District trucking contacts continued to report gains in seasonal freight demand late in the year. Airfreight tonnage improved from year-earlier levels for both domestic and international cargo in Atlanta and Miami.
Tourism and Business Travel
The District's tourism and hospitality industry continued to improve at year-end. In Miami, restaurants were said to be hiring aggressively, and south and central Florida tourism officials were upbeat about the current tourist season. Tennessee hotel occupancy rates were picking up in November and December from a year earlier as well. New Orleans tourism industry officials were upbeat about the first half of 2004, and Atlanta contacts reported a modest increase in convention bookings for 2004.
Banking and Finance
Responses from the financial sector were mostly positive. Deposit growth held steady or improved in much of the region from a year ago. Commercial loan demand, however, remained weak. Credit quality continued to strengthen and past due loans at banks were below year-ago levels. Most banks were reported to be moving ahead with capital expenditures to improve operating efficiency.
Employment and Prices
Reports on hiring were more positive in November and December than in previous reports, but employers continued to be cautious regarding adding full-time staff. Several businesses reported that they were keeping a lid on current payrolls but were increasing the amount of outsourcing. In south Florida, seasonal hiring was reportedly stronger than it has been for several years. Hospitals throughout the District continued to recruit internationally to help meet the nursing shortage.
Most reports indicated that businesses were not raising prices. But one report did note that increases in raw material costs were being passed on to customers, whereas wage and benefit increases were not being passed on. Prices for timber products remained high because of relatively low supplies and strong housing construction activity in the District.
Agriculture
Conditions remained mostly favorable for the District's crops. The harvest of sugar cane, citrus crops and vegetables was underway in some areas. The discovery of mad cow disease in Washington was expected to have an effect on the region's economy through lower cattle prices.
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Richmond