October 30, 1996 Federal Reserve Districts Sixth District - Atlanta

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With a few notable exceptions, contacts report moderating growth of economic activity throughout the Southeast in September and early October. Retailers indicate that sales are exceeding last year's levels. Contacts generally have an optimistic outlook for tourism and business travel. The single-family housing market slowed, while commercial real estate markets continued to improve. Banking contacts report that overall loan demand held steady. Despite current increases in production and new orders, manufacturing contacts are less optimistic about future production. Wage and price pressures have apparently not systematically emerged, in spite of increasing reports of labor shortages. Consumer Spending According to District retailers, sales in August and September modestly exceeded year-ago levels. More than half of the retailers contacted said that recent sales have met their expectations, and most merchants report that inventories are on target. Apparel and shoes continue to make a strong showing, while home-related product sales have rebounded somewhat recently. Looking toward the holidays, most respondents anticipate strong sales growth, despite this year's shorter than usual selling season. Manufacturing Factory contacts report increasing activity in early fall, with rising production and a growing volume of new orders following the modest growth posted through most of the summer. The manufacturing outlook, however, was not as optimistic as before with fewer plant managers expecting significant increases in output, orders, or employment rolls in the next few months. Moreover, several expect a moderate contraction in the factory workweek. Although contacts continue to report weakness in the region's apparel sector and are concerned about newly reported layoffs and continuing competitive pressures, other sectors appear to expand, or at least, preserve their workforces. Contacts report that business continues to improve for plywood and building product producers. Order backlogs for electrical equipment are up for regional plants. Reduction in paper prices is stimulating Tennessee's printing and publishing industry. Auto component suppliers are also adding to employment rolls and expanding capacity in Georgia and Alabama. Tourism and Business Travel The outlook for tourism and convention activity is upbeat. Tourism and business travel to Florida resorts have been stronger than expected, with a notable increase in the number of overseas visitors. The future continues to look good for central Florida with a number of new attractions coming on line. Newly added flights to the Mississippi Gulf Coast areas are expected to boost tourism there. New Orleans contacts expect continued tourism strength for the remainder of 1996. Tourism officials are confident that Olympic recognition will boost future tourism and convention activity for Georgia and Atlanta. Construction According to real estate contacts, the single-family housing market slowed in September throughout much of the District. Home sales during September and early October were mixed according to Realtors, while a majority of builders contacted said that construction activity had fallen below last year's levels. Inventories of new and existing homes are said to be adequate throughout most of the District. Most builders anticipate that activity will decrease through the remainder of the year, while a majority of Realtors expect sales during the fourth quarter to exceed year-ago levels. Contacts from across the District generally report that commercial real estate markets continue to improve. Low vacancy rates and higher rents continue to propel new industrial, office, and retail development. Most commercial projects continue to be build-to-suits, several speculative developments are underway, and more are anticipated this year and next. Overall, the multifamily sector remains healthy; however, some markets have weakened. Financial Most contacts in the banking industry report that overall loan demand held steady in September and early October. Consumer loan activity was flat to slightly up, while commercialloan demand was said to be mixed throughout the District. Mortgage activity has slowed slightly. There are scattered reports of some deterioration of loan quality. Wages and Prices Wage pressures are not evident in the region at this time; however, reports of labor shortages are becoming more frequent, and unemployment rates in parts of the region are approaching historically low levels. Some contacts note that strong demand for management talent is bidding up benefits and fringes instead of resulting in higher wages and salaries. Craftsmen such as carpenters, masons, and plumbers are in especially short supply. One contact expects the shortage of skilled laborers to get worse before it gets better. Although there have been a few scattered reports of increasing material prices for residential builders, most contacts expect no change in material or finished goods prices over the next few months. Return to top Richmond Chicago