July 26, 2006
Federal Reserve Districts
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Reports from Sixth District business contacts were mixed in June and early July. Retail sales varied by type and location, with strongest reports coming from high-end retailers and in the areas affected by last year's hurricanes. Automobile sales continued to lag, especially in the domestic truck and SUV segments. Housing contacts reported further declines in home sales in most Florida markets, and some moderation was noted in other areas as well. Nonresidential construction displayed modest growth, spurred by Gulf Coast infrastructure repairs. In coastal areas, the availability and sharply higher cost of insurance coverage has emerged as a major concern for homeowners and businesses. Reports on factory activity were generally positive, and transportation contacts continued to report they were operating near capacity. Tourism contacts remained cautiously optimistic. Lower real estate loan demand was noted in most areas outside the Gulf Coast. Reports of shortages of skilled labor continued to be widespread. Price pressures persisted, although the ability to pass on higher costs remained limited. Agricultural production was adversely impacted by drought conditions in many areas. Oil production in the Gulf Coast improved.
District vehicle sales remained mixed. Domestic dealers struggled with declining demand for full-sized trucks and SUVs despite increased promotional rebates and incentives. In contrast, most foreign auto distributors reported another good month.
District nonresidential commercial contractors reported that new development during June and early July was slightly ahead of last year's pace. Infrastructure repairs continued to dominate the recovery effort along the Gulf Coast, although some commercial projects have been put on hold until after the hurricane season.
Manufacturing and Transportation
Reports from transportation sector contacts continued to be upbeat. Inter-modal centers in Huntsville and Atlanta were reportedly benefiting from a steady growth of regional domestic and global trade. Georgia Ports recently announced an $82 million capital improvement plan to upgrade port facilities in Savannah and Brunswick.
Tourism and Business Travel
Banking and Finance
Employment and Prices
Contacts noted continuing price pressures. A building-supply company reported that prices for all petroleum-based products such as roofing, vinyl flooring and insulation were still increasing. A large producer of asphalt reported that rising prices will have a tremendous effect on the cost of state and federal highway programs. Insurance costs have also jumped sharply higher for businesses in coastal areas. Businesses reported that they were coping with rising input costs in various ways, including lower levels of staffing and service, and increased productivity. Many companies continued to state that they were unable to pass on all their energy cost increases because of competition, and were thus faced with eroding profit margins. However, some medical service providers, attorneys, restaurants, and roofers have reportedly been able to successfully implement price increases.
Agriculture and Natural Resources
Crude oil availability from the Gulf of Mexico continued to improve in June with one major platform returning to production. Reports also indicated strong demand for labor and equipment.