Beige Book Report: Atlanta
May 4, 1994
Overview
Business contacts reported that the Southeast economy continued to
expand at a healthy pace in April. Retailers noted that spring sales
improved over last year's levels, and the majority of auto dealers
also saw year-over-year sales gains. Manufacturers in most sectors
reported increases in new orders, shipments, and production,
although defense-related producers continue to struggle. Bankers
said that overall loan demand was more mixed than in recent months,
mainly because of large but anticipated declines in residential
mortgage refinancings. Single-family home building remained strong
throughout the District, while commercial real estate markets also
continued to show improvement. Wages and input prices were reported
to be stable by most manufacturers. However, firms linked to the
home building industry experienced rising materials prices as well
as continuing upward pressure on wages, particularly for skilled
construction workers.
Consumer Spending
District retailers reported that spring sales have been better than
expected this year, with several noting double-digit year-over-year
sales growth. Durable goods continue to sell well, but most of the
recent improvement in sales have come from nondurable goods. Sales
of women's apparel have improved considerably over last year's
disappointing levels, while men's and children's clothing sales have
been quite strong. Despite this improvement in sales, there were no
reports of upward retail price pressures. Most retailers remain
cautious in their expectations for this year and continue to
maintain relatively lean inventories. Auto dealers continued to
report year-over-year increases in sales, and most were optimistic
about their prospects for the remainder of this model year.
Tourism
Tourism officials in Florida expect a 4 percent increase in visitor
traffic in 1994 following a "disappointing" 1993. The state hopes to
see an increase in tourists from the improving economies of Latin
America and the Caribbean. However, the number of European visitors
remains down in south Florida. Several travel agencies that cater
mainly to Europeans have been forced to lay off employees because of
the dramatic reduction in bookings. By contrast, Mississippi's
gaming industry reportedly has created 16,000 jobs directly and
"energized" tourism in the state. In New Orleans, first quarter
figures suggest record occupancy levels at local hotels.
Manufacturing
Manufacturers in most sectors reported increases in production,
shipments, and new orders in April, as well as positive expectations
for future activity. The major exceptions to this rule are defense
and aerospace producers who continue to struggle in the face of
domestic defense cutbacks and weak foreign markets. Production and
shipments of household textiles remain strong, and there have been
recent reports of improving demand for apparel fabric. Capital
equipment producers have noted increases in recent business
activity. Several consumer goods manufacturers announced plans for
plant expansions to be completed in the District within the next
year. Regional suppliers to the automotive industry are reported to
be running at near capacity, while temporary help agencies that
supply workers to the manufacturing industry continue to report
strong demand for their services.
Construction
Realtors across the Southeast generally reported that single-family
home sales were strong in April. According to several contacts, the
recent increases in mortgage financing rates have created a slight
surge in buying activity which they expect to taper off over the
next few months. Inventories of homes for sale remain low in many
areas, stimulating price increases in the most active markets. New
homes continue to be among popular sellers, keeping building
contractors extremely busy in most areas.
Commercial and multifamily real estate markets continue to improve slowly. Commercial and office vacancy rates have declined throughout the District while leasing has improved. Although no new speculative construction has been announced recently, commercial real estate agents in several areas have noted an increase in discussions about possible speculative projects. In addition, rising apartment rents have encouraged new multifamily construction in several District cities.
Financial Services
According to District bankers, loan demand was more mixed in April
than it had been in previous months. Most institutions reported
declines in home mortgage lending as the recent uptick in rates
caused refinancings to plummet. However, these declines were
anticipated, and there was general agreement that it was too early
to tell if rate increases would affect other loan areas. Commercial
loan demand generally was reported to be moderate to strong,
although contacts in several areas reported some slowdown in
business lending.
Wages and Prices
Most contacts continued to report no change in the prices paid
either for raw materials or for prices received for finished
products. Although home builders reported that lumber prices have
begun to stabilize, they noted that the prices of other building
materials, as well as wages for skilled construction labor, have
continued to rise.