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Reports from most contacts suggest that growth remains moderate across much of the District. Manufacturing in the region has been mixed, and retailers continue to see only a modest rise in sales over last year. Realtors indicate that recent sales are near last year's strong levels, while builders say that new home construction has dipped below last year's levels in many parts of the District. However, tourism and business travel remain strong, especially to destinations in Florida. Wage pressure remains subdued in most areas of the region, with the exception of south Louisiana, which is experiencing a boom created by the reemergence of the oil and gas industry.
Consumer Spending
Most District retailers contacted reported that sales exceeded, in some cases only slightly, last year's levels in June and early July. Apparel sales remained strong, while sales of home-related products were mixed. Sales were generally below merchant's expectations; however, inventories are close to target. Looking forward, the majority of retailers contacted expect that third quarter sales will be up slightly compared with last year, and most expect no change in product prices over the next six months.
Construction
Overall, the single-family housing market continues to show signs of slowing. For the month of June, a majority of Realtors contacted reported that home sales were up from a year ago, but a notable minority said that sales were similar to last year. The strongest reports came from Florida. District builders generally indicated that construction was down in June and new home sales were spotty. Several said that concessions are creeping in and a significant minority of Realtors felt that there was too much construction in their markets.
District commercial real estate markets remain strong. Office markets continue to improve as vacancy rates drop, and construction remains at a brisk pace. Speculative office construction is underway in many District markets. The industrial market also remains strong across most of the region. However, lack of suitable land is slowing development in several areas. The weakest segment of the commercial real estate market continues to be multifamily housing, with several markets showing some overbuilding, declining occupancy rates, and increasing incentives to attract new renters.
Manufacturing
Reports from factory contacts are mixed, with strengthening in some sectors offsetting weakness in others. The energy sector is posting especially strong growth. A Louisiana oil rig platform fabricator says that his contract backlog has quadrupled since the beginning of 1996. New commercial ship orders, along with U.S. Navy contracts, will mean thousands of additional jobs for the region's shipyards. A spokesman for an industrial chemical producer notes that his company is operating at full capacity, and a packager is adding to employment rolls and increasing production. Industrial and commercial machinery contacts report increasing production and a positive-near term outlook. Less positively, some producers of apparel report softness in the market for lightweight leisure wear, leading to further plant closings. New orders are declining for a large producer of electronic equipment, but product demand is expected to increase over the next few months. The factory workweek and shipments have decreased for some regional auto component suppliers, which one contact attributes to a softening auto market.
Tourism and Business Travel
Reports from the tourism and hospitality industry indicate further expansion, with continued strength expected. The cruise industry out of Miami is doing well, and airlines flying into south Florida are operating at capacity. Advance bookings are "looking good," according to hoteliers there. Hotels are offering fewer off-season discounts and are seeing no decrease in occupancy rates. The luxury hotel segment continues to post strong growth. In Orlando, new attractions at Universal Studios are expected to further stimulate tourism to the area. Amusement parks in Georgia and Tennessee are reporting more visitors than last year with new attractions, new rides, and no competition from Olympic events.
Financial
Bankers throughout the Southeast continue to report moderately strong loan demand with some signs of softening apparent. Consumer and auto loan demand varies across lenders, and there are intermittent reports of declines in consumer loan quality. Mortgage loan demand remains relatively flat, while commercial loan demand continues to be strong. Area banks report profits are still strong.
Wages and Prices
With a few exceptions, contacts report that wage pressures are being held in check and prices remain stable. One industry contact noted that wage increases are being counteracted by capital investment and continuing gains in productivity. Wage increases have generally been required to attract and keep qualified employees in the high-tech sector. Contacts in several parts of the region also note that their competitive environment has left them unable to increase prices to match even moderate wage increases. Labor shortages were noted in Louisiana's booming shipbuilding and marine-supply industry and by some high-tech firms in Florida. Low unemployment rates in parts of the region are reinforcing contacts' concerns of labor shortages for both skilled and non-skilled positions.
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Richmond