Beige Book Report: Atlanta
September 8, 1993
Overview
Reports from Sixth District contacts indicate that economic activity
in the Southeast grew somewhat more slowly in July and August than
during the first half of the year. After recording relatively strong
growth in the first two quarters, retail sales gains tapered off
early in the third quarter and have maintained this slower pace of
growth since. Reports from manufacturers also varied over the same
period. Firms in the apparel, packaging, and aerospace industries
reported decelerations in new orders and current production, while
manufacturers of home furnishings, appliances, and building
materials reported steady to slight improvements in overall
activity. Demand for housing-related items continues to be supported
by single-family home sales and construction, which have remained
healthy in most of the Southeast. Multifamily and commercial
construction activity, however, has continued to be sluggish.
According to bankers, consumer loan demand increased slightly during
the last two months, while commercial lending was generally flat
over the same period. Prices generally were said to be stable; some
firms reported modest wage increases.
Consumer Spending
Retailers reported that consumer spending growth slowed unseasonably
in July and August. Sales of apparel and other consumer nondurables
were said to be particularly sluggish. Although sales of furniture,
appliances, and automobiles have continued to improve on a year-
over-year basis, recent gains have been more muted than earlier in
the year. While most retailers reported that they continue to expect
sales during the upcoming holiday shopping season to equal or
surpass year-ago levels, they said that the recent softening in
consumer demand has made them more cautious in placing orders.
Tourism remains strong in the Southeast. Hotel occupancy rates and
convention attendance are above last year's levels, and most
industry contacts expect further improvement through the end of the
year.
Manufacturing
Reports on factory activity in the Southeast were mixed in July and
August. Textile and apparel industry contacts reported that sluggish
retail sales had led to reduced orders overall, with the exception
of denim. Producers of packaging materials reported a fall in new
orders that they attributed to the recent weakness in consumer
spending. Chemical producers expressed concern that the floods in
the Midwest could later contribute to reduced demand for
agricultural chemicals, while cutbacks in the space station program
are expected to add to the job losses already experienced in the
aerospace industry. On the other hand, industries that are closely
linked to regional and national housing markets have continued to
report increases in overall business activity. Producers of lumber,
carpets, appliances, and furniture continued to experience gains in
production and shipments. However, even in these industries the
expansion in the volume of new orders has declined frown the more
rapid pace recorded earlier in the year.
Construction
Realtors again reported strong single-family home sales through the
end of August. Contacts noted that after slowing briefly at the
beginning of the summer, home sales have picked up again. Year-to-
date sales continue to outpace last year's relatively strong levels.
New mid-priced homes were said to be selling particularly well, and
agents noted that inventories of both new and existing homes for
sale were tight in many market areas. Home builders reported that
increases in demand had kept them extremely busy through August, and
that they saw signs of a shortage of subcontractors available to
work on new projects.
Multifamily and commercial construction activity remained sluggish across the District, though several contacts noted improvement in vacancy and rental rates in their market areas. In particular, large blocks of space are becoming scarce in some of the more desirable locations. However, no new speculative building projects were announced.
Financial Services
Bankers from across the Southeast reported that loan demand was flat
or up modestly in August. Loans for automobile purchases have been
the source of most of the growth in new consumer loans. Residential
mortgage lending also has continued to increase, but bankers said
that about three-quarters of this activity was due to refinancings.
Business lending has been flat and dominated by debt refinancing.
Wages and Prices
Factory contacts reported that prices for both raw materials and
finished goods have been stable in the last two months. However,
home builders noted that lumber prices were beginning to rise again
in anticipation of increased demand from the rebuilding in the
Midwestern flood areas. In regard to wages, several firms said that
they were giving their employees only cost-of-living wage increases.