|
Sluggish growth characterized economic activity in the Sixth District in late summer, according to business contacts. Merchants' sales improved modestly from earlier in the summer, but inventories were high. Auto sales remained lackluster in spite of incentives. Single-family construction and sales were near year-ago levels, but commercial real estate markets were sluggish. Reports from the factory sector were mostly negative, with new layoffs and weaker new orders. Business and leisure travel weakened. Contacts reported few instances of rising price pressures.
Consumer Spending
According to District retailers, sales growth in August was better than the modest results posted in July. More than two-thirds of retailers contacted said that recent sales had met or exceeded their expectations; however, inventories were described as high. Several retailers noted that heavy discounting and tax rebates helped recent sales. Discount retailers continued to fare the best. Looking ahead, most retailers anticipate holiday sales growth to be modest at best, and some noted that they are stocking up on inexpensive gift items and value-priced items.
Manufacturer incentives and lower interest rates have not yet appreciably stimulated District car sales. Through July, growth in new vehicle registrations was well below the national pace in all District states except Florida. Dealers selling domestic models reported that August car sales were off from year-ago levels.
Construction
Single-family construction remained near last year's levels in July and August, but sales of new homes weakened slightly in August compared with July's pace. Reports from realtors indicated that home sales around the District closely mirrored year-ago levels. The strongest reports again came from Florida, with both low-end and high-end home sales described as particularly strong in south Florida. Inventory remained in short supply in Florida markets but was generally balanced across the rest of the District. In Atlanta, demand has been strong at the low end of the market while expensive properties have been difficult to sell. Across the District, the pace of home sales is expected to remain fairly constant through the rest of the year, and residential construction is expected to slow somewhat in the fourth quarter.
Most commercial real estate markets continued to weaken in August. Sublease space in office and industrial markets was still entering the market at a brisk pace, with widespread use of incentives. Office, industrial and retail construction and expansions have slowed significantly from last year's strong pace and are expected to remain subdued through year-end.
Manufacturing
Reports from the factory sector were mostly negative in August. Large textile mills continued to close, and high-tech manufacturing firms continued to downsize operations. The region's paper industry remained weak, and the metals industry posted declines in new orders and shipments. One factory executive reported that most of the local industry in his area was taking a "wait and see" attitude concerning capital investment. One notable exception is the recent surge in construction of electricity-generating plants in the District. Commitments for orders of military planes boosted the District's aerospace industry, and some auto plants in the District have been gearing up for new models.
Tourism and Business Travel
Business travel remained weak in the District in late summer, and reports from Florida's leisure travel industry noted slowing from last year's record-breaking numbers. Resort tax collections and airport traffic in central Florida were down from last year, and theme parks reported a slump in attendance. Reduced convention attendance and business travel negatively affected the hospitality industry across the District. A large casino in Louisiana laid off over 100 workers, reportedly in part because of the weaker national economy, and gaming revenues at casinos along the Mississippi Gulf Coast continued to post lackluster growth.
Financial
Overall loan growth was flat at most banks in the District in August. Residential lending--particularly mortgage refinancing--rose in parts of the District, but auto installment lending weakened. The business sector remained on the sidelines, with credit demand by large corporations particularly low. Lending for new commercial construction remained slow. Credit quality was stable, with problems remaining largely confined to the leveraged syndicated market.
Wages and Prices
Wage pressures remained subdued, according to most reports, and firms continued to cut workers' hours and eliminate temporary workers during August. Firms, particularly technology companies, reported being more selective in hiring. One contact noted that it now takes up to three months to find a job in the technology sector. District contacts again cited only a few instances of escalating prices, and most noted significant energy price reductions from recent highs. Health care costs and liability insurance premiums continued to increase at a substantial pace.
Agriculture
Through early August, cotton, soybean and peanut crops were rated from good to excellent, with favorable rainfall and warm weather conditions. However, cotton crops were harmed by heavy rains in early September. Regional contacts report that poultry production increased and broiler exports are up sharply this year, led by higher demand from Russia and Eastern Europe.
|
Richmond