Federal Reserve Bank of Atlanta
Summary of Economic Activity
Economic activity in the Sixth District declined slightly, on balance, over the reporting period. Labor markets were steady, and wages increased modestly. Prices and input costs were little changed since the previous report. Pricing power declined. Consumer spending fell. Tourism declined modestly, hampered by Hurricane Helene. Residential real estate activity was flat to slightly down. Commercial real estate activity slowed further. Transportation activity grew somewhat. Manufacturing output decreased. Loan growth was modest. Energy activity increased modestly. Agriculture conditions slowed.
Labor Markets
Employment in the District was fairly steady over the reporting period. The pace of hiring continued to slow amid easing demand for labor, and labor availability improved further for most positions. Firms reported plans to keep headcount roughly flat for the remainder of the year, and while a growing minority reported modest and targeted reductions in headcount in response to slowing demand, most were not planning to implement widescale layoffs. Some firms reported welcoming or encouraging attrition, hesitating to backfill positions, or reducing hours. A minority of firms were hiring for growth.
Wage growth was modest in recent weeks across most industries and position types. However, wage pressures persisted for some roles requiring specialized skills or in certain geographies.
Prices
Prices and input costs were little changed over the reporting period. Contacts noted most operating expenses remained elevated, however. Construction materials and food commodities costs stabilized, and the impacts of the three-day East and Gulf coast port strike appeared to be minor. Insurance premium increases have been accompanied by decreased coverage, leaving covered firms with greater exposure. Pricing power diminished further, as many contacts offered discounts or promotions and implemented operating efficiencies in order to maintain margins. The Atlanta Fed’s Business Inflation Expectations survey showed year-over-year unit cost growth at 2.6 percent, on average, in September, unchanged from August; firms’ year-ahead inflation expectations for unit cost growth were 2.1 percent, on average, also unchanged from August.
Consumer Spending and Tourism
Retail sales declined modestly in recent weeks. Contacts reported a continued trend of declining discretionary spending and trading down to lower-priced goods and services. Though this was still mostly concentrated among lower-income groups, middle- to high-income consumers, while continuing to spend, became more selective with purchases and sought discounts. Auto dealers noted increasing inventories and a softening in demand that was greater than the normal seasonal decline and noted that luxury car sales have not slowed as much as others, though those buyers increasingly pushed back on prices.
Due to Hurricane Helene, tourism and hospitality contacts noted an uptick in cancellations of travel to the District. Prior to the storm, group travel was strong while leisure travel was down slightly, and travelers pulled back on on-property spending. Occupancy levels at high-end hotels remained healthy; however, lower-tier properties reported modest declines in occupancy rates. Although tourism activity declined modestly, contacts were optimistic about the upcoming holiday season.
Construction and Real Estate
Despite declining mortgage interest rates, housing demand was flat or slightly down over the reporting period. Home sales saw slight to modest declines while inventory levels increased sharply, especially in Florida markets. Even with higher inventories, prices remained near peak levels. Elevated prices, combined with rising taxes, insurance, and HOA costs, offset much of the cost benefits of lower interest rates. As such, affordability remained a concern for potential buyers, incentivizing many to delay purchasing in expectation of future rate declines. Optimism in the new home market improved. However, builders still offered aggressive incentives (i.e., rate buydowns) to attract buyers.
Commercial real estate (CRE) activity across the District declined slightly. Office, industrial and multifamily sectors continued to see rising vacancy rates. Non-bank lenders reported higher levels of delinquencies of office, multifamily, and hotel loans. Increasing CRE loan maturities continued to create challenges for all lender types. Underwriting standards remained tight, making access to loans challenging. A slight uptick in transaction volume was spurred by lower rates; however, uncertain CRE values continued to create sizable headwinds.
Transportation
Transportation activity grew slightly, on net, since the previous report. Some District ports reported significant increases in container volumes year over year and leading up to the east coast dockworkers strike but reported little operational disruption. Hurricane Helene caused several short-lived port closures in late September, and little damage to infrastructure. Railroads saw increases in intermodal shipments and total traffic. Trucking activity remained mixed: one large trucking firm described relatively stable demand year over year, and slight growth in market share as smaller carriers filed for bankruptcy or shuttered operations; another noted weaker volumes over the reporting period and expectations for low single-digit growth for 2025. Demand for warehousing development remained slow.
Manufacturing
On balance, manufacturing activity declined modestly. District manufacturers noted a contraction in output, new orders, backlogs and finished goods inventories. Supplier delivery times increased. Orders of certain inputs for export, such as plastics and fabricated metal and rubber products, declined. However, demand for electronics, as well as some consumer goods, like food and beverages, rose. Demand for apparel producers was slow. An automobile engine manufacturer noted an uptick in sales year to date, including significant growth in hybrid vehicles.
Banking and Finance
Although loan growth was modest, financial institutions noted anticipating additional future loan demand in a lower rate environment. Multifamily lending increased moderately since the previous report, as demand for housing continued to exceed supply. Deposits, including large time deposits, increased modestly since the previous report. Borrowings continued to decline as banks reduced reliance on more expensive sources of funding. Rising cash balances drove increasing cash-to-assets ratios at District institutions and across the industry more broadly.
Energy
Activity in the energy sector grew modestly overall and was described as steadily slowing by several contacts. A refiner noted that slowing growth was putting downward pressure on margins, especially when combined with declining gasoline prices. Utilities contacts described steady demand across residential, small commercial, and large industrial customers; however, power infrastructure was damaged in parts of the District by Hurricane Helene. The hurricane caused minimal operational disruption offshore, including temporary halts to drilling and industrial support; inland, however, the storm halted plant activity, causing power outages at fueling terminals resulting in delays in re-supplying the hardest hit areas.
Agriculture
Agricultural conditions declined modestly. Farmers in south Georgia and parts of Florida noted significant damage and losses resulting from Hurricane Helene. Demand for beef remained historically strong but declined slightly. Dairy farmers reported strong sales amid reduced competition as high beef prices resulted in more cows being used for beef instead of dairy. Row crop farmers reported low demand, especially for cotton, and many saw disappointing yields. Demand for timber continued to weaken, with one timber producer reporting that he had to pay to get rid of the little timber harvested. Demand for citrus held steady.
For more information about District economic conditions visit: https://www.atlantafed.org/economy-matters/regional-economics.