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Contacts around the Sixth District report that economic activity continues to grow at a moderate pace. Retailers' reports on December sales were mixed. A slight decline in production and new orders was noted in the manufacturing sector, while tourism and business travel was generally reported to be at high levels. Single-family home sales varied across the District, while commercial real estate markets continued to improve. Banking contacts reported flat loan demand. In spite of shortages of qualified workers, industry contacts report that wages generally appear to be holding steady.
Consumer Spending
District retailers give varied reports on December sales; on balance these are positive. The majority of retailers reported that sales exceeded year-ago levels, with a significant number of those reporting strong increases. Almost two-thirds of the retailers contacted said that holiday sales met or exceeded their expectations. Apparel sales had by far the strongest showing across the region. Inventories were described as low or on target in much of the District. Looking forward, most retailers anticipate that first quarter District sales will be up slightly compared with last year. Additionally, most retailers do not expect labor or product prices to rise over the next six months.
Manufacturing
More factory contacts note declines in production, new orders, and the factory workweek since the last Beigebook. Despite these declines, more also expect production to accelerate in the coming months, although over half of the manufacturers contacted expect to maintain current employment rolls. Suppliers for the region's auto and recreational vehicle plants note increasing shipments. Lumber manufacturers are pleased with shrinking inventories and paper manufacturers note improving sales, although a glut of wood pulp is hurting some companies. Producers of electrical equipment and appliances report an increasing workweek and improving new orders. Commercial and Department of Defense aircraft orders are benefitting aircraft engine producers in Florida and Louisiana. Less positively, inventories are reported to be excessive for some furniture producers, orders are falling at a large packaging firm, and employment rolls continue to contract at some apparel mills.
Tourism and Business Travel
A strong tourism and convention sector is expected to continue to support the region's economy in coming months. Local markets in central Florida, where theme parks are breaking attendance records, report increases in hotel occupancy. Theme parks on Florida's space coast have recently announced expansion plans in addition to park expansions already underway in central Florida. South Florida appears to be experiencing one of the best tourist seasons on record, with good weather and little negative news about crime, according to tourism officials. Hotel bookings for spring are up from a year ago in Miami. Trends in the New Orleans hotel and hospitality industry reportedly remain positive with more emphasis being focused on foreign travelers.
Construction
According to real estate contacts, single-family home sales and construction varied widely in markets throughout the District on a year-over-year basis in December. The majority of contacts report that home inventories are adequate, although several builders expressed concerns that new home inventories may be moving too high. Realtors generally believe home sales in the first quarter will exceed the previous year's level, while most builders anticipate construction activity will be flat to slightly down. Most builders and Realtors contacted expect home prices to rise over the next six months.
Contacts generally report that commercial construction continues to increase. Declining vacancy rates and higher rental rates continue to drive forward new industrial, office, and retail development. Most commercial projects continue to be build-to-suits; however, several speculative projects are now underway and more are anticipated this year. Overall, the multifamily sector remains healthy; however, some markets have weakened.
Financial
Most contacts in the banking industry reported flat lending. Consumer loan demand was mixed with softness reported in automobile financing. Commercial loans were level, and mortgage lending slowed slightly. Overall loan quality held steady.
Wages and Prices
Locating and hiring qualified workers remains difficult, according to contacts in some industries, but wages appear to be holding steady in most cases. Contacts in Tennessee report that shortages of skilled workers are a common concern. Demand for qualified technology workers is said to be especially strong; some employers are resorting to out-of-state recruitment and signing bonuses in order to secure talent. More company contacts than before expect prices for materials and finished goods to increase moderately over the next few months.
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Richmond