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Reports from contacts throughout the Southeast indicate that the District economy continues to expand at a moderate pace. Holiday sales were strong according to most contacts. Single-family construction is mixed by market, as are nonresidential and multifamily construction. The outlook for the tourism and hospitality sector remains upbeat. Bankers report that the century rollover went smoothly, and loan demand is described as healthy. Wages and prices continue to increase in a few sectors but overall remain stable.
Consumer Spending
Reports from retailers around the District were good, indicating that holiday sales were similar to national trends, exceeding year-ago levels by a healthy margin in most cases. Electronic goods sales dominated in most parts of the region; toy and jewelry sales were strong as well. Apparel sales were slow in some markets as some retailers noted that the weather was too warm despite the advent of cool temperatures during December. Inventories are generally balanced. E-commerce continued its substantial growth this holiday season. A dominant online retailer with a substantial distribution center in the region reported fourth-quarter sales more than doubled from last year. It was able to deliver 99 percent of its holiday orders on time. A delivery company, which handles a large volume of online sales, experienced few Y2K or holiday delivery difficulties. Looking ahead, District retailers expect that sales during the first quarter will be flat to slightly up compared with a year ago.
Construction
The pace of single-family construction within the District has varied considerably from market-to-market during November and December. Half of the builders contacted said that new home sales were flat during November compared with a year ago. For December, more builders said that sales were down from a year ago. Reports from Realtors on home sales also were mixed by market. The majority of contacts report that home inventories are balanced. Looking to the future, builders anticipate home construction during the first quarter will be even with or slightly below strong year-ago levels, and construction during 2000 will be flat to slightly below 1999 levels in most areas of the District. Realtors expect another good sales year, with little change in the level of activity expected.
The pace of District nonresidential construction remains slightly ahead of a year ago but varied across the states in the District. Construction accelerated in Louisiana and Florida, but it has slowed in Georgia and Tennessee. Growth levels are little changed in Alabama and Mississippi. District multifamily construction year-to-date remains slightly above the year-ago level, although activity continues to slow.
Manufacturing
Factory production has held essentially steady, according to contacts. A spokesman for a firm producing security systems notes increasing business activity. Chemical production is up from a year ago for a Mississippi firm, and a large refinery is expanding in the state. Orders and production are increasing for a paper mill, and a building product manufacturer and a pharmaceutical maker are expanding to meet increased demand. A number of high-tech companies are expected to locate in the Gulf Port area in conjunction with the Mississippi Space Commerce Initiative. On a less positive note, another apparel producer plans to shutter domestic plants and move facilities overseas. One contact expects that manufacturers' purchases of computers and software will decrease dramatically in the New Year as a result of Y2K upgrades; others have pointed to a number of new projects since the New Year passed without problems.
Tourism and Business Travel
The outlook for the tourism and hospitality sector remains positive. In Miami, hotel and motel bookings are reported to be above last year's levels. Canada's largest vacation wholesaler is expected to begin offering charter flights to the Mississippi Gulf Coast in February, further stimulating the gaming industry there.
Financial
Bankers expect that overall loan demand will continue to expand at a moderate pace into the New Year, and contacts report that regional financial institutions have continued to operate normally during and after the century date change. Consumer loan demand remains very strong, commercial loan activity is healthy, and mortgage demand remains flat. Consumer withdrawals, borrowing, and deposits were in line with expectations, and there were no reported liquidity problems as the year began.
Wages and Prices
Wages are accelerating in a few sectors, but most contacts indicate that overall labor costs are not increasing more than productivity. Labor shortages in south Florida have contractors turning away work and putting major projects on hold. Help wanted ads there are at record linage. Expansion in the retail and fast food segments in New Orleans have been put on hold until workers become more plentiful. As before, skilled construction workers, nurses, and information technology professionals remain in especially high demand throughout the District and are commanding greater than average wage increases.
Contacts expect few significant changes in prices over the next few months. Health-insurance premiums and pharmaceutical prices are expected to continue to rise. Contacts remain mostly optimistic about current strength in the energy sector, but some are concerned about the sustainability of the improvement. Prices paid for building materials, metals, and paper are moving upward for some firms.
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Richmond