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Contacts reported that economic activity in the Sixth District remained lackluster
in January and February. Retail sales were sluggish, while manufacturers noted
continued weakness outside of defense and auto-related production. The District's
tourist sector continued its gradual improvement. Labor markets displayed a
modest improvement in January and February; employers reportedly remained reluctant
to add permanent staff but increased their use of overtime and part-time workers.
The District's single-family housing market remained strong, but commercial
real estate markets continued to suffer from low demand for space. Most contacts
indicated that geopolitical concerns and higher fuel prices were weighing on
near-term expectations for the District's economy.
Consumer Spending
The majority of District retail contacts reported that January and February
sales were about the same as they were a year earlier. Aggressive discounting
remained prevalent, especially among apparel merchants that were clearing out
winter clothing. Most retailers contacted indicated that inventories were balanced,
and some noted that stocks were lower than this time last year. Several national
retail chains announced planned store consolidations in the District. Automobile
industry contacts reported mixed light-vehicle sales in January and February,
while the demand for used-car sales remained soft.
Real Estate and Construction
Low mortgage rates continued to propel District housing markets in January and
February. The strongest reports in the District were from Florida, while contacts
reported that home sales and construction elsewhere were mostly stable. High-end
homes remained difficult to sell in most parts of the region. Reports noted
that commercial real estate markets remained weak in January and February. Vacancy
rates increased in some metropolitan markets, and new construction was largely
limited to public works projects. Several contacts noted that generous lease
incentives were prevalent, but absorption remained at low levels.
Manufacturing
Overall, factory activity remained lackluster in January and February. Most
manufacturing firms reported no significant increases in demand. Inventories
remained lean, and capital spending plans were subdued. Petrochemical and ammonia
plants in Louisiana have announced job reductions because of high natural gas
prices. Production has been scaled back at a steel plate plant in Alabama because
of slack industrial demand. The District's timber and forest products industry
continued to experience low prices and stiff competition from imports from Canada,
Europe, and South America. Contractors for NASA in Florida and Louisiana expressed
concern that activity may slow following the Columbia tragedy. The most positive
reports came from firms supplying the new vehicle assembly plants in the District
and from defense contractors.
Tourism and Business Travel
Tourism contacts reported a gradual improvement in business conditions in January
and February. In Florida, reports suggested that the level of activity still
lagged behind that of early 2001 but exceeded year-ago levels. The number of
visitors to Miami over the past few months was boosted by the success of several
special events in the city and particularly inclement weather in the North.
Cruise activity remained strong through Florida ports. Gaming revenue was characterized
as exceptional for Louisiana casinos over the holidays, but the pace dropped
off in January.
Banking and Finance
Responses from the banking sector were mostly positive in January and February.
Residential loan demand and refinancing activity continued to be strong overall,
although there were reports of increasing mortgage default rates in some areas.
The vast majority of commercial loan activity was among businesses refinancing
existing loans. Banking contacts reported ongoing moderate deposit growth. Venture
capital investment activity remained low in most of the District.
Labor and Prices
Most business contacts continued to report that they were reluctant to increase
permanent staffing levels. However, a number of firms noted that they had increased
the use of overtime and part-time workers during January and February. Local
and state governments were cutting back on hiring plans because of budget constraints.
The main areas of employment growth were in the health-care sector and at newly
expanded vehicle production facilities in the District. Insurance costs continued
to escalate throughout the District, and while most reports indicated little
change in output prices, input costs related to oil and gas increased significantly.
Agriculture
Some crops in southern Florida and south Louisiana received moderate frost damage
in February, but most areas emerged largely unscathed from recent cold snaps.
Winter rains have helped reduce drought conditions in several District locations.
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Richmond