| Skip to content
|
Economic activity continued to push ahead at a stable pace in the Southeast, and the outlook is upbeat, according to most contacts. Merchants' sales in May were stronger than a year ago, and inventory accumulations are on plan. Single-family residential sales and construction are also above last year's figures. Commercial real estate markets remain healthy. Contacts in the manufacturing sector report mixed activity, with some industries registering renewed strength while others continue to decline. Tourism officials are optimistic about summer prospects. Bankers report moderate loan demand growth. Tight labor markets are causing problems for some District employers; however, increased wage pressures have been reported in only a few sectors. Most contacts report stable prices.
Consumer Spending
According to retail contacts, sales during May were weaker than April on a year-over-year basis. However, April sales were boosted by a late Easter holiday this year. Despite the weakening, most retailers reported that May sales exceeded last year's levels. Most contacts reported that recent sales had gone as planned, but a significant minority noted their disappointment. Inventories are generally on target. The majority of retailers expect that second quarter sales will slightly exceed last year's level.
Construction
Reports from real estate contacts indicate that home sales in May were above last year's levels in most areas of the District. Most District builders continue to report that new home sales and construction are ahead of last year, if only slightly. Contacts report that overall inventories are balanced; many noted that lower-priced homes are in high demand. Looking forward, builders expect that new home construction will be flat or slightly up on a year-over-year basis; Realtors are a bit more optimistic.
Commercial real estate markets remain healthy throughout much of the region. Office development generally continues at a strong pace; however, several markets are exhibiting some signs of slowing. The industrial market remains stable in most areas. Retail markets remain healthy across much of the region. Overall, both developers' and real estate agents' outlooks remain optimistic for the remainder of the year.
Manufacturing
Although more reports indicated that factory production has increased recently, more contacts than a month ago expect output and employment to weaken in coming months. Flagging new orders and plant shutdowns continue in the region's apparel sector. In Louisiana, bookings for onshore drilling and production equipment have decreased because the falloff in energy prices has forced independent energy extraction companies to cut back operations. Weak sales for its small cars has caused one large regional manufacturer to shorten its factory workweek, but continued strong demand for SUVs is boosting regional production of new utility vehicles and prompting some suppliers to expand. Although the pulp and paper industry is operating far below capacity, demand for paper products is reportedly slowly improving. New aerospace contracts are expected to boost factory payrolls in the Huntsville area and to benefit parts of Florida.
Tourism and Business Travel
The tourism and hospitality sector is expected to continue to post strong numbers into the summer, according to industry contacts. Recent reports indicate that attendance is good at major central Florida theme parks. Although tourist traffic into Miami leveled out in recent months, notable growth is predicted during the summer. Resort hotels in the Palm Beach area are reportedly fully booked, and the cruise industry in south Florida continues to boom. Two recently completed attractions in the Birmingham area are expected to stimulate tourism there. Gross gaming revenues for Mississippi casinos have broken all-time records for the state recently and are expected to rise higher because some casinos will finish building new hotels over the next few months.
Financial
Bankers report that overall loan demand continues to expand at a moderate rate. Consumer and automobile loan demand have increased, according to most contacts, and commercial loan demand has maintained its strength. Home sales and refinancings continue to fuel the mortgage loan market. Overall, consumer loan quality is holding steady despite the ongoing high levels of bankruptcies relative to the past.
Wages and Prices
Labor shortages continue to plague parts of the District, but reports of upward wage pressures are not widespread. High-tech jobs are going unfilled in much of the District. The unfilled demand for welders in south Louisiana is estimated in the thousands, mostly because of the boom in shipbuilding. In Georgia, the retail sector has been the hardest hit by the labor shortage, according to state officials. One contact is concerned that the lack of workers will discourage corporate relocations to south Florida, and a major retailer has postponed expansion plans in the area because it cannot adequately staff existing stores. The tight labor market is reportedly forcing more companies to attempt to increase productivity by investing in more efficient equipment and ratcheting up training of current employees. Prices remain fairly stable for most inputs and finished goods, although one report indicates that low petroleum prices are taking a toll on independent producers in Louisiana. Other contacts note an end to the downward trend in health benefit costs.
|
Richmond