Beige Book Report: Atlanta
March 15, 1995
Overview
According to contacts around the District, the Southeast economy
continued to expand in early 1995, although reports showed some
softness as well as strength. Most retailers reported flat February
sales, but expect a good spring selling season. Tourism remains
depressed in some areas, but business and convention travel are
strong. Single-family home building and sales are still slowing,
although the commercial real estate markets continue to improve.
District wage and price pressures remain moderate.
Consumer Spending
District retailers report that late January sales were up on a year-
over-year basis, while February sales were generally flat. According
to merchants, however, bad weather was mainly responsible for
February's disappointing performance. Most said that they were
pleased with current inventory levels. Retailers expect improved
sales this spring.
Manufacturing
Manufacturing activity is characterized by increases in some sectors
offsetting scale-backs in others. Since the last Beigebook, both
material and finished goods inventories have increased moderately
for most firms contacted. Some regional producers report that
weakness in the Mexican economy is slowing their exports and is
forcing changes in capital spending plans. In Tennessee, auto
industry plants are said to be operating at capacity but there is
concern that any downturn in the national economy would have a quick
adverse impact. Suppliers to the region's vehicle assembly plants,
however, remain optimistic about the near-term outlook and expect
orders to remain strong. Contacts report that both the steel and
rubber industries in Alabama are doing much better than in the past
few years. Some producers of telecommunications equipment continue
to report strong activity. Increasing commercial construction is
stimulating demand at regional firms that fabricate building
materials, and manufacturers of lumber products report strong sales
and orders. Paper and paperboard mills are operating at or near
capacity limitations. One contact, however, thinks that paper
industry activity is currently peaking and will begin a gradual
decline over the next few mouths. Although there continues to be
scattered reports of layoffs by small, niche-oriented apparel firms,
a few large apparel producers are adding to employment rolls and
expanding capacity as a result of strong product demand.
Tourism and Business Travel
While tourism is slumping in parts of the region, business travel is
reportedly taking up some of the slack, keeping hotel vacancies at
low levels. Strong convention activity continues on Mississippi's
Gulf Coast and in central Florida; advance 1995 bookings for hotels
in Atlanta are above year-ago levels. Overall, Florida tourism
remains lackluster, although attendance at major attractions is
reportedly slowly trending upward. In southern Florida, although
Central and South American tourism remains strong, visits from other
areas have not met expectations. Contacts report that this is due in
part to competition from other destinations. Cruise ship bookings
out of Miami are down sharply for some firms.
Construction
Most real estate contacts in the District report that single-family
home sales slowed once again and fell below last year's strong
levels during January and February. However, sales are described as
respectable in most parts of the region. Realtors attribute the
continued slowdown to uncertainty on the part of buyers, but most
anticipate that demand will increase this spring. The majority of
builders continue to be conservative, and, as a result, some
realtors are concerned that a short supply of new homes in some
areas will limit sales. Several areas continue to report a shortage
of skilled construction workers, but wage pressures have eased from
earlier in the housing cycle.
Commercial and multifamily real estate contacts continue to report strengthening markets. Several areas of the District report that strong demand is driving apartment construction. Large blocks of contiguous office space are reported to be scarce throughout the region. However, the majority of commercial construction remains build-to-suit with very little speculative space available. Realtors continue to be optimistic and anticipate that both commercial and multifamily markets will continue to strengthen during 1995.
Financial Services
Reports from bankers around the region about loan demand were mixed.
Overall loan demand was steady. Home mortgage lending continues to
slow as the housing sector cools off. Auto lending also has cooled
appreciably. Consumer lending in general was reported as steady or
slowing slightly, while commercial loans continue to rise slowly.
However, several bankers noted that the economy was beginning to
slow and they expect that a slowing would quickly affect new loan
generation.
Wages and Prices
Manufacturing contacts generally report higher prices for materials
and their own finished goods, but also anticipate less such price
pressure in the future. Paper, paperboard, and newsprint prices
continue to rise boosting activity by producers but adversely
affecting publishers and others who use paper products. Producers of
building materials, textiles, apparel, furniture, and plastic
products, report increasing prices paid for raw materials, and more
of these firms note that they are charging higher finished product
prices than was the case late last year. Labor availability problems
and wage pressures are limited to a few parts of the region and do
not appear to be spreading at this time.