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The Southeastern economy continues to expand moderately in early spring, according to most contacts. Factory activity has been mixed, with increasing payrolls, despite declines in orders reported by several manufacturing firms in the region. The outlook is positive in the tourism and hospitality sectors as the expansion continues in the travel industry. Most retail merchants report that April sales were above last year's, with levels meeting expectations. Bankers note moderating loan demand. Single-family home sales and construction were generally flat, but commercial construction markets are displaying continued strength. Despite difficulties in hiring and retaining qualified workers and some reports of higher input costs, wage and price pressures remain relatively subdued.
Consumer Spending
Most District merchants reported April sales above those of a year ago, with levels meeting expectations. Generally, they indicate inventory accumulations are currently on target, and the outlook for future sales of most product lines is upbeat. High consumer confidence has helped to keep sales strong, according to some contacts. Retailers note especially strong current sales of spring apparel, shoes, and cosmetics. Household goods sales, however, have apparently weakened recently. Product prices are expected to remain about unchanged over the next few months, according to most contacts.
Construction
Real estate contacts report that single-family home sales and construction were flat in the District on a year-over-year basis in March and early April. Inventories of unsold homes remain adequate for expected sales, while expectations for second quarter building are mixed. They are slightly more positive for the third quarter of this year.
Contacts report that commercial real estate markets remain strong. They believe that new industrial and office development continues because of lower vacancy and higher rental rates. The multifamily sector is said to be past its peak, but there are some reports of slight increases in the number of projects.
Manufacturing
Reports of factory activity have been varied. Although new orders and the factory workweek declined for a number of firms, an increasing number of companies also added to payrolls. Aerospace firms continue to gain new contracts and expand. Shipyards along the Gulf Coast reportedly can't find skilled workers to keep pace with their recent business boom. New orders are increasing for some building product producers, particularly some carpet producers, and electrical equipment manufacturers are adding to employment rolls. Some producers of bedding, sheets, and towels report good business activity, but weakness continues in much of the apparel segment. The factory workweek is increasing for auto parts producers. In contrast, furniture manufacturers contacted are cutting back production because of weak orders. A paper company spokesman reports it is being forced to lower prices to boost sluggish sales, and a producer of �paper-making machinery also notes slowing activity.
Tourism and Business Travel
Expansion continues in the tourism and hospitality sectors and the outlook is positive. Industry representatives say that tourism is especially strong in south Florida and the trend is expected to continue. Double-digit passenger growth rates posted by Orlando International Airport and high hotel occupancies in the Orlando area are evidence of continuing strength of central Florida's theme parks. Attraction attendance and spending are up from a year ago in Tennessee; finding quality employees is reportedly the number one problem for Nashville's hospitality industry. Tourism, conventions, and gaming continue to thrive along the Mississippi Gulf Coast, and casino revenues from some gambling boats in Louisiana have grown at double-digit rates from a year ago. Although overall airline passenger traffic declined moderately in Atlanta from a year ago, international traffic increased.
Financial
Most banking contacts report that consumer and commercial loan demands have flattened in recent weeks. Reports on the volume of mortgage and automobile financing were mixed. Most bankers said loan quality had been steady.
Wages and Prices
Despite continuing reports of labor shortages, wage pressures, as well as prices, are said generally to be in check. Locating and hiring qualified workers continues to be a problem, according to most contacts. Closure of apparel plants has increased the labor supply in parts of the District, and part-time and "retired" employees are filling some shortages. One contact notes that more employees are leaving one job to do the same job at another company for higher pay, and that companies are increasingly paying more for experienced employees. Although some contacts report higher input prices, they also mention an inability to pass increases on to the end user, reflecting in large part competitive pressures from both domestic and foreign markets.
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Richmond