Beige Book Report: Atlanta
September 14, 1994
Overview
According to business contacts, the Southeast economy continued to
expand in August, although at a somewhat less rapid pace than
before. Retailers again reported higher sales, and their
expectations for Christmas are mildly optimistic. Activity among
District manufacturers has been mixed; however, most expect orders
to increase over the next few months. Building remains strong,
although single-family home sales slowed in August. Commercial and
multifamily residential real estate markets continue to improve,
with rising rental prices and falling vacancy rates. Commercial loan
demand is generally on the upswing, while consumer loan demand is
said to be weaker. Contacts report that some input prices are on the
rise, but wage increases are described as stable except for a few
specific sectors.
Consumer Spending
District retail contacts generally report improving sales. Women's
apparel sales are showing gains, while sales of men's wear continue
to increase. Back-to-school sales have been mixed in the region.
Some contacts note strong sales with double digit growth while
others report that children's apparel has not sold well. Sales of
home-related products continue to slow. However, retailers generally
expect year-over-year gains in fall and Christmas sales. Apparel
sales are expected to make the largest gains over last year. In
response to these better expectations, many retailers report that
they are building up inventories, although some continue to purchase
closer to time of need than they have in the past. Auto sales have
slowed somewhat; the ending of the model year has some customers
delaying purchases and some dealers running out of popular product
lines, although the slowdown seems concentrated in imports.
Merchants say that competition remains strong throughout the
District, keeping pressure on retailers and manufacturers to hold
the line on prices.
Manufacturing
Factory activity has been mixed since the last reporting period. The
outlook over the next few months remains upbeat, however, as most
contacts expect to see increasing orders. Structural steel producers
note strengthening orders for new building and bridge construction.
Business is also increasing for paper and newsprint producers. Some
textile markets, like denim, are improving, although other apparel
fabric production reportedly remains weak. Home textile production
remains at high levels. Some manufacturers of healthcare textiles
and bedding fabric are adding employees and increasing factory
workweeks in response to strong product demand. Suppliers to the
auto and light truck industry continue to expand operations and
increase production at plants in the region. Less positively,
suppliers to the aerospace industry are operating at low levels of
capacity due to a continued dearth of new orders. The recently
announced purchase delay of F-22 fighters by the Air Force is
expected to affect future hiring of production workers in Georgia.
Other regional military contractors note declining orders and are
concerned about future prospects.
Tourism and Business Travel
Tourist traffic remains heavy at casinos on Mississippi's Gulf
Coast. Convention activity continues to push hotel occupancies to
high levels in New Orleans. Florida tourism officials, however, are
concerned about a sustained slowdown in visitor arrivals. Hotel
occupancies are down from a year ago in southern and central
Florida; officials blame this sluggishness on competition from other
tourist destinations and adverse publicity about crime. Continuing
growth in the Asian and Latin American markets, however, appears to
be offsetting some of the reported slowdown in visitors from Europe,
and cruise industry bookings remain strong year over year.
Construction
According to District realtors, home sales slowed in August, with
most attributing this to higher mortgage rates. However, home prices
continue to rise across the region. Existing home sales are reported
to be stronger than sales of new ones. Builders said that activity
has increased in August compared with July, because of better
weather conditions. Builders also report that construction time for
homes has increased because of the reemergence of a shortage of
skilled laborers seen earlier.
Commercial and multifamily real estate contacts continue to report improving conditions in their markets. Multifamily occupancy rates continue to rise and rental rates have also been on the increase. New apartment and condominium developments have been announced recently in many parts of the District. Commercial realtors continue to report tightening markets characterized by falling vacancy rates and rising rental prices, though commercial construction is reported to continue at low levels, except in the retail sector which is seeing moderate gains, and the Atlanta metro area, in which there is some new building in preparation for the 1996 Olympics.
Financial Services
Bankers around the region reported that overall lending was steady.
Commercial loan demand outpaced consumer demand in most areas.
Several bankers noted significantly increased competition on the
commercial side. Some banks described consumer loan demand as
disappointing. Auto lending has slowed at the end of the model year
with the decline in sales. Mortgage lending seems to be slowing in
most markets as refinancings have disappeared and home sales
decelerate.
Wages and Prices
Although there have been some recent reports of labor market
tightness in parts of the region, they have mostly been limited to
clerical and some service personnel as well as skilled construction
workers and are not widespread. Reports of price increases have
become more numerous since the last reporting period, especially at
the raw material level. Some contacts in the paper, apparel, metals,
and building products industries now that their input prices are
trending upward, but few say that they are able to pass on these
rising costs. The competitive environment appears to be holding
finished goods prices steady.