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Contacts reported that the Sixth District's economy remained sluggish during October and early November. Retail sales were lackluster overall, and auto sales were well below last year's robust levels. Most housing markets continued to exhibit strength, although softness persisted in the high-end segment. Commercial real estate markets continued to suffer from low demand and vacancy rates remained high. Outside the defense sector, manufacturing activity in the District was generally subdued. Most reports on tourism and business travel continued to be disappointing. Labor market conditions showed little improvement over the month, with many businesses continuing to seek cost savings rather than expanding payrolls. Price increases remained limited.
Consumer Spending
Reports on sales activity during October and early November were mixed but generally near year-ago levels. Retailers noted that apparel sales were slow because of unseasonably warm temperatures. Contacts indicated that inventories were in good shape, but there was concern expressed by a number of contacts that some merchandise orders would not arrive in time for the holiday season because of delays caused by the West Coast port disruptions. District retailers reported that there was a great deal of uncertainty surrounding the upcoming holiday season because of geopolitical concerns and sagging consumer confidence.
Auto sales declined sharply from year-ago levels in October. A number of dealers that handle domestic brands indicated that October had been one of the weakest months of this year. Several dealers said that buyers were less encouraged by the new round of factory incentives than they had been in the past. Some dealers of Japanese and Korean makes reported shortages caused by the disruption of shipments through West Coast ports. Contacts also noted that in Louisiana sales were adversely affected by two tropical storms that erased six selling days from the month. Through September, District's new vehicle registrations remained below comparable levels last year, despite gains in light truck registrations.
Real Estate and Construction
Housing markets continued to benefit from low mortgage rates during October and early November. Most contacts indicated that home sales and new home construction were near strong levels from a year ago. However, several contacts noted some softening in early November--mostly in the high-end market. Reports from Florida continued to be the most upbeat. Weakness persisted in commercial real estate markets across the District. Leasing activity and construction continued at low levels across much of the region.
Manufacturing
Factory activity remained subdued in October and early November. Reports continued to indicate that capital spending plans have been delayed or cancelled as manufacturers wait for the flow of new orders to improve. A producer of carpet tiles for offices reported layoffs, and a textile manufacturer indicated that they expected an especially tough holiday season. The West Coast dock strike forced Asian-owned vehicle manufacturers in Tennessee to fly parts in to keep plants operating. More positively, Daimler Chrysler indicated that they might build a $700 million van assembly plant near Savannah, employing around 3,000 workers. District military contractors continued to receive new defense contracts.
Tourism and Business Travel
Reports from the District's hospitality and tourism sector were mostly negative in October and early November. Disappointing travel activity continued to hurt the south Florida economy. In Miami, some reports indicated that hotel and motel bookings for the Thanksgiving and Christmas period were lower than expected. Business travel throughout the District remained at low levels, and business travel expenditures were not expected to improve substantially in the near term, according to contacts. More positively, south Florida contacts reported that the winter cruise season was shaping up to be the busiest ever with strong advance reservations. Also, several tourist destinations in Tennessee reported solid attendance in recent weeks. In New Orleans, construction plans for expanding the city's tourism industry remained on track.
Financial
Reports from the banking sector were mixed for October and early November. Loans outstanding remained at relatively high levels and the pipeline of new loan activity remained steady in some parts of the District, while in other areas loan demand was reportedly slowing. The pace of mortgage originations and home-equity loans decelerated in most areas, and refinancing activity appeared to have slowed in early November. One report indicated that investment banking in the region had displayed some signs of improvement during October.
Labor and Prices
Apart from hospitals, District businesses reported that they were reluctant to add significantly to payrolls in October and early November. Overall, plans for hiring holiday workers were mixed, but most reports indicated that merchants were more cautious about hiring than last year. The ongoing shortage of health-care professionals has caused some regional hospitals to begin recruiting medical personnel from overseas. Health-care costs continued to be widely cited as a significant concern for District businesses. Medical malpractice premiums were increasing for both hospitals and physicians, and some contacts reported sharp increases in commercial insurance rates.
Agriculture
Significant rainfall during October benefited local cattle ranchers, but delayed harvesting of the cotton crop in several areas. Contacts also noted that damage from recent tropical storms was expected to reduce Louisiana's sugarcane crop by as much as 35 percent this year.
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Richmond