October 17, 2007 Federal Reserve Districts Sixth District--Atlanta

Skip to content Summary Districts Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Full report

Reports from District contacts indicated that economic activity remained mixed in September. Overall, merchant sales were described as being modestly higher than a year ago. Vehicle sales improved in September for some fuel-efficient models, but other sales were generally disappointing. Reports from the tourism sector were mostly positive with activity exceeding expectations. According to Realtors and homebuilders, the pace of residential home sales and construction continued to decline, and housing inventories increased throughout the District. Manufacturing activity slowed, especially for industries linked to housing markets, and this contributed to reports of weaker regional freight activity. Banking contacts indicated tighter mortgage lending standards and higher foreclosure rates in parts of the District. Several contacts said that the market for skilled workers remained tight, and this contributed to strong wage increases in the skilled trade categories. Florida contacts noted that the overall pace of hiring had slowed. Reports on prices were mixed. Drought conditions continued to adversely affect District crops. Consumer Spending and Tourism Most District retail contacts indicated that September sales increased modestly compared with a year ago and were in-line with expectations. Merchants reported that inventories were up slightly compared with a year ago, but most agreed that they were comfortable with current levels. The majority of contacts continued to anticipate modest sales growth over the next several months. September vehicle sales were mixed. Some foreign make dealers reported improved sales compared with September 2006, led primarily by an increase in sales of fuel-efficient models. In contrast, domestic brand dealers noted another disappointing month with deliveries to both retail and rental fleets off from a year ago. Reports on the tourism sector were upbeat. Several Florida contacts said that late summer activity met or exceeded expectations. Contacts in the Orlando market noted that theme park attendance was up, and upscale properties were reporting good occupancy and higher room rates. Passenger traffic through Miami International Airport bettered that of a year ago, including an increase in international visitors. Convention bookings continued to improve in New Orleans, but attendance numbers remained below pre-Katrina levels. The Mississippi Gulf Coast casinos reported another strong month in September. Real Estate Homebuilders and Realtor contacts reported that new and existing home sales remained well below year-ago levels in September, and the pace of new home construction continued to decline sharply. Most contacts across the region noted the continued rise in home inventories from a year ago. However, some Florida homebuilders indicated that the rise in new home inventory had moderated. The majority of contacts anticipated that the weakness in District housing markets would persist. September reports on commercial construction continued to indicate that activity was flat to slightly up compared with a year ago. Florida contacts also continued to note that fewer projects were in the pipeline. Manufacturing and Transportation Most reports indicated slowing factory activity. The residential construction slowdown continued to adversely affect firms linked to the building industry. Several reports noted weaker orders and sales relative to a year ago, and this had resulted in a reduction in work hours. The District's textile industry contracted further. More positively, several firms linked to the defense and auto parts supply industries continued to expand production. Freight demand continued to weaken through the end of September. Most contacts noted that weaknesses in housing and vehicle sales have negatively affected rail and truck tonnages. Banking and Finance Banks in the District reported tighter mortgage lending standards in September. Contacts noted a tighter market for jumbo and other non-conforming loans. Delinquencies and foreclosures were up in some parts of the region. Commercial lending was stable according to most reports. Employment and Prices Contacts continued to note difficulty finding workers in certain skilled trade categories, and were paying higher wages as a consequence. For example, welders, ironworkers, and crane operators were reportedly in short supply in parts of the District. The shortage of labor was characterized as being severe in the oil industry. Some contacts suggested that the shortage of skilled workers caused production delays, and increased the cost of projects. In Florida, several contacts noted that the pace of hiring has slowed, with workers laid off from the homebuilding sector finding it more difficult to find alternative employment. Price information was mixed. Producer prices for metals were characterized as volatile. Fabrication costs for petrochemical and oil and gas equipment continued to escalate. Some residential and commercial builders noted moderating lumber prices, while others noted that cement prices have increased from a year ago. Increases in insurance costs continued to be cited by most contacts. Agriculture and Natural Resources Drought conditions in areas of Alabama, Georgia, and Tennessee continued to hamper production of key District crops. Also, the shortage of feed has accelerated the processing of some livestock. The region's cotton harvest is expected to be smaller than in 2006 because of poor weather and crop substitutions during the spring. Poultry producer prices were higher because of improved domestic and foreign demand. Oil and gas drilling activity declined in September from August, although rigs and platforms in the Gulf sustained no damage from recent tropical disturbances. Refinery production and drilling activity was hampered by mandatory worker evacuations. Return to top Richmond Chicago