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Reports from contacts throughout the Southeast indicate that the District economy continues to expand at a moderate pace. Retail sales continue to be mixed, although Thanksgiving weekend sales were generally good. The outlook for the tourism and hospitality sector remains upbeat. Single-family construction and new home sales have been flat, and the pace of District nonresidential construction is slightly ahead of a year ago but varied across the different states in the District. Overall loan demand and funds availability continue to expand at a moderate rate. While factory production has recently increased, the near-term outlook is a little less positive than before. With only a few exceptions, contacts again expect mostly stable prices for inputs and outputs. Even as tight labor markets continue to adversely impact parts of the District, reports of increasing wage pressures remain infrequent.
Consumer Spending
Sales around the District continue to be mixed during October and early November, although reports indicate that results improved slightly during early November. Most retailers said that recent sales have met their expectations; however, several merchants noted that unusually warm weather has slowed apparel sales. Most retailers continue to expect a slight increase in sales during the fourth quarter compared with last year. Preliminary reports from around the District suggest the Christmas season is off to a strong start.
Construction
The pace of single-family construction and new home sales in early November has been similar to October. Most District builders report that construction has been flat to slightly down compared with a year ago, while new home sales have declined
somewhat from last year's record highs. Also, a majority of District Realtors report that home sales in October and early November have been down from last year's strong levels. The majority of both builders and Realtors report that inventories are balanced; however, there are more reports of imbalances.
The pace of District nonresidential construction is slightly ahead of a year ago but varied across the states in the District. Contacts in Florida report that while growth remains positive, activity has slowed. In Georgia, construction growth is characterized as steady as the Atlanta market experiences rising industrial and office vacancy rates. For the year, construction activity remains below year-ago levels in Alabama and Louisiana but picked up some during the third quarter. Industrial development is taking up the slack in the Tennessee commercial market as tight market conditions continue, although the office market has slowed.
Manufacturing
Factory production has recently increased, according to most contacts. However, the near-term outlook is a little less positive than before. Suppliers to the auto industry continue to expand or build new plants in the District in spite of concerns from some contacts about overcapacity. A number of chemical plants in Louisiana are expanding. The region's high-tech sector continues to grow aided by new U.S. Department of Defense contracts. Reports from the textile and apparel industry, however, are downbeat with news of declining employment rolls, decreasing factory workweeks, and plant closures as production is moved offshore. Apparel employment in Georgia, for example, is down by 3,500 workers (over 11 percent) from a year ago. A large lumber producer notes a slowdown in production, which he attributes to housing market declines. Some manufacturers are reportedly adjusting inventories down and are delaying purchases and expansions until the "New Year" because of Y2K concerns.
Tourism and Business Travel
The outlook for the tourism and hospitality sector remains upbeat. Seasonal visitors are reportedly arriving earlier than usual and in greater numbers to south Florida. The world's largest cruise ship terminal was recently dedicated in Miami, built to accommodate the largest cruise ship, the 142,000-ton Voyager of the Seas.
A decline in hotel and motel occupancy rates in theme park dominated Orlando is mostly attributed to a surge of new rooms coming on line rather than falling demand. Passenger traffic through Orlando International Airport is above that of a year ago, especially for international visitors. The recent opening of Harrah's huge land-based casino in New Orleans is expected to draw more visitors to the city.
Financial
Financial contacts report that overall loan demand and funds availability continue to expand at a moderate rate throughout the Sixth District. Consumer and automobile loan demand remain strong, and commercial loan activity is healthy. Mortgage and refinancing loan demand are subdued, while credit quality is good and bankruptcies have continued to gradually decline.
Wages and Prices
Tight labor markets continue to adversely impact parts of the District. Reports of increasing wage pressures, however, are infrequent. Some contacts say that they are still striving for efficiencies and reducing labor costs by installing labor saving devices, while others report that discretionary projects are being postponed until the year 2000. One firm reports that they are adjusting to increasing costs of hiring skilled workers by hiring less-experienced workers and utilizing apprentice-style training while on the job. Firms have reportedly been forced to find new ways to find qualified employees, such as looking for able-bodied retirees, and issuing signing bonuses and cash awards for current employees who find new employees. In addition to the long-standing trend for high-tech workers, wages for health-care workers are reportedly increasing significantly.
Contacts again expect mostly stable prices for inputs or outputs, with only a few exceptions. A plastic manufacturer sees significant price increases in his crude oil based raw materials. A paper producer notes "improving" prices. Another contact mentions that a continuing shortage of building materials is driving up prices of drywall and brick. More reports indicate increasing pharmaceutical prices.
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Richmond