|
Reports from Sixth District business contacts suggested that the pace of economic activity in late July and August was quite strong, but had moderated relative to earlier in the summer. District retail sales activity remained positive overall. But several contacts suggested that the higher gasoline prices were a drag on sales growth. Home construction and sales remained brisk, although the pace had slowed modestly in a few areas in Florida. Nonresidential real estate markets continued to improve. Reports from manufacturing and transportation contacts were mostly upbeat and reports from tourism and business travel contacts remained positive. Employment levels continued to improve. Temporary employment agencies and construction firms noted shortages of skilled workers. Prices moderated for some non-energy commodities, and more contacts reported that they were able to pass on a portion of increases in raw material and freight costs to their customers. Hurricane Katrina halted production in most industries along the central Gulf Coast and caused as-yet-unquantified damage.
Consumer Spending
Reports from District retailers remained mostly positive, although several contacts suggested that higher gasoline prices were moderating sales growth. Retail sales during late July and August were up from last year, with the strongest results reported by contacts in Florida and Georgia. Most District merchants said that back-to-school sales had met their expectations. Overall, vehicle sales rebounded sharply to levels not seen since late 2001. Domestic industry contacts were pleased with the high traffic and sales, but some noted concern that the price discounts that helped boost recent sales may have a negative effect on future sales. A large accumulation of used vehicles from trade-ins was also noted. Dealers offering hybrid-fueled vehicles reported particularly strong sales.
Real Estate
Overall, District construction and home sales during late July and August rose compared with last year. The strongest reports continued to come from Florida, with both Realtors and builders continuing to note shortages of homes for sale. However, about half of the Florida homebuilders contacted also reported that demand had softened relative to earlier in the year.
District commercial real estate markets improved based on continued absorption of space and low levels of new construction. Vacancy rates declined in most markets and rent concessions were less generous. Some new office projects were announced for several District cities.
Manufacturing and Transportation
Reports from the factory sector were mostly upbeat in late July and August. Manufacturing production related to construction remained robust. A producer of hurricane resistant windows and doors is doubling capacity to meet demand, and a producer of manufactured housing is running at near capacity. Activity in defense-related industries continued at a healthy pace as a result of new government contracts. Less positively, some District shipyards are planning layoffs by the end of the year because of declining new orders. GM announced a scaling back in production at the plant in Doraville, Georgia, because of slower sales of the models produced there.
Despite high fuel prices, strong demand for freight services continued in late July and August. Regional transportation services also continued to be boosted by growing international container traffic from District ports.
Tourism and Business Travel
Reports on tourism and business travel remained positive. Most contacts indicated that high-fuel prices did not have a significant impact on travel. Reservation clerks in Orlando indicated that occupancy levels remained at high levels and international passenger traffic was up by double-digits over last year at Orlando International Airport. Tourism activity in South Florida was strong with high occupancy numbers at hotels and resorts. Mississippi casino gaming revenues increased in July. Some reports did note that vacationers were spending less once they reached their destinations, and tourist industry contacts were also concerned that the earlier start to the school year in many areas will adversely affect end-of-summer tourist activity.
Banking and Finance
Most areas reported that bank loan demand was strong, especially for real estate loans. The high volume of lending for condominium construction remained a concern for bankers in Florida. Reports indicated that credit quality remained at high levels.
Employment and Prices
Reports generally indicated that labor markets conditions improved in August. Contacts noted that shortages continued in construction-related trades in Florida. A contact at a temporary staffing company said that business was very strong and that the company was starting to see shortages of both skilled and unskilled labor in several markets.
Higher energy prices continued to be noted by all contacts, whereas prices moderated somewhat for non-energy commodities such as building materials. Several contacts also reported that they have been able to pass on some of the increases in raw material and freight costs to their customers. For instance, trucking companies that had contracts with built-in fuel surcharges reported that they were able to pass along higher fuel costs.
Agriculture and Natural Resources
Most crop conditions were relatively good, with favorable weather providing adequate moisture levels to most areas of the District. Florida's citrus industry contacts noted that anti-dumping duties imposed on several Brazilian orange juice exporters would benefit the local citrus industry this year.
Hurricane Katrina
After causing several deaths and considerable damage to areas of South Florida, Hurricane Katrina struck the central Gulf Coast on August 29. At the time of this writing, initial damage assessments were being made. The most immediate economic impact was substantial damage to a large segment of the Gulf Coast. Oil and gas production in the Gulf of Mexico has been halted and energy prices have spiked as a consequence. Unemployment claims are expected to rise significantly in Louisiana and Mississippi.
|
Richmond