April 14, 2010 Federal Reserve Districts Sixth District--Atlanta

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Business contacts around the District described economic activity as improving in March and early April. Retailers saw an increase in traffic and sales and their outlook improved. Auto sales increased on a year-over-year basis, while revenues in the District's tourism segment were described as stable. Residential real estate contacts indicated that both new and existing home sales improved and were above weak levels from a year earlier. Commercial contractors, on the other hand, continued to cite weakness in nonresidential construction activity. District manufacturers noted further improvement in new orders and production. The flow of bank credit to businesses remained subdued. Permanent hiring remained weak. However, temporary help agencies noted an increase in job orders. Manufacturers and homebuilders reported increases in input prices but indicated that they were not able to pass them through to consumers. Consumer Spending and Tourism District merchants indicated an improvement in traffic and sales in March. Retailers reported that despite the uptick in sales, they continued to keep inventory levels lower than normal; several merchants related that they preferred risking lost sales to having excess inventories. The outlook among retail contacts also improved with the majority expecting sales to increase over the next couple of months. District vehicle sales increased from a year ago, largely driven by an expansion in fleet sales deferred from last year. Tourism-related spending was described as stable in most parts of the District. Contacts in Atlanta, Miami, Nashville, New Orleans, Orlando, and Tampa all reported hotel occupancy rates above the national average from February to March. Cruise lines noted increased demand and have unwound some earlier price discounting. The near-term outlook among hospitality contacts remained generally upbeat. However, corporate bookings remained at very low levels at some high-end resorts. Real Estate and Construction Homebuilders reported improved new home sales across the region, and that construction activity increased modestly from very low levels. Several homebuilders noted that difficulty in obtaining mortgage financing and lower property appraisals were impeding sales. New home inventories remained down, sharply from a year earlier, and the majority of homebuilders continued to cite year-over-year price declines. Overall, the outlook for home sales and construction improved modestly from the previous report. Realtors indicated a slight improvement in existing home sales with nearly half of those contacted reporting modest increases. Sales at the low-end of the market continued to outpace those at higher price points. However, sales growth at the low-end moderated from late-2009 levels, while mid- to high-end home sales stabilized. Similar to comments from homebuilders, many Realtors also noted that difficulty in obtaining financing was impeding home sales. Most continued to cite downward pressure on home prices. The outlook for sales over the next several months continued to be modestly positive. Low levels of commercial construction continued across much of the District. Most contractors described activity as relatively flat compared with previous reports, and a few cited additional weakness. The volume of backlogs was little changed but remained lower than a year ago. Most indicated that the demand for new construction continued to be soft. Looking ahead, the majority of contacts anticipated commercial construction will continue to be weak for the remainder of the year. Manufacturing and Transportation The majority of District manufacturers reported that new orders increased and production levels improved. Contacts noted increased hours worked and many anticipated employment gains in the short-term. A few auto assembly plants recalled some workers. Freight demand continued to improve from low levels. Regional rail shipments through mid-March were up notably for automotive, chemical, and other raw industrial materials. Banking and Finance The flow of bank credit to businesses remained subdued. District bankers continued to indicate that ample credit was available to qualified borrowers, and many noted that the volume of loan applications was low for households and small businesses. In contrast, several firms noted that tighter credit standards were making it difficult for them to obtain loans. Some contacts suggested that trade credit terms also tightened with some suppliers having modified terms or reduced credit without regard to payment history. Employment and Prices Unemployment remained high across the District in February and March. Some employers indicated that public policy uncertainty had contributed to some reticence to hire permanent workers. However, many businesses continued to increase hours worked for existing staff, and some increased the number of temporary staff, particularly in Florida. District manufacturing and homebuilder contacts reported increases in commodity-related material prices compared with a year ago, though prices softened somewhat on a monthly basis. Several businesses expressed concern that supply chain capacity reductions in some industries could lead to further input price increases if product demand increased rapidly. Natural Resources and Agriculture Crude oil production in the District edged up in late February and March. The increase in output, combined with soft energy consumption, pushed crude inventories in the Gulf of Mexico close to the top of their seasonal average for this time of year. Recent wet weather and colder-than-usual temperatures have negatively affected some crops in Alabama and Florida and limited farm work in some areas. Return to top Richmond Chicago