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Beige Book Report: Atlanta

September 11, 1996

Overview
Contacts report a mixed but generally positive economic picture for the Southeast economy in late summer. Merchants have a positive outlook for the remainder of the year and say that recent sales are at least meeting expectations with back-to-school purchases bettering those of a year ago. Although factory activity has picked up, manufacturing contacts were less optimistic than earlier about the next few months and expect some slowing in production and hiring. Theme park and resort attendance in Florida remains strong, and Olympic events in the rest of the District drew very well. Residential builders and Realtors report slowing business in parts of the District but are optimistic about activity for the remainder of the year. Multifamily and commercial real estate markets are reportedly improving with increasing rents, low vacancies, and more speculative activity. Banking contacts characterize loan demand as generally flat in both consumer and commercial sectors as compared to last year. Contacts are mostly satisfied with labor supplies at this time, and there have been few reports of wage or price pressures.

Consumer Spending
According to District retailers, sales were mixed in July but picked up noticeably in early August. More than half of the retailers contacted said that recent sales levels have met their expectations, and most merchants report that inventories are on target. Apparel continues to have a strong showing throughout the District, with men's and children's stronger than women's apparel sales. Most retailers expect back-to-school sales will exceed year- ago levels, and the outlook among retailers for the remainder of the year is generally optimistic.

Manufacturing
Contacts report that the pace of factory activity picked up in August following a sluggish July. Industry spokesmen, however, expect production as well as employment and new orders to slow over the next few months. Most contacts expect both material and finished goods inventories to remain at current levels through year-end. Production capacity contractions and employment declines continue to be recorded in the region's large apparel and textile sector, with new reports of plant closings and layoffs. However, some producers in the carpet and denim components report increasing orders and are adding to capacity. Orders for pulp and paper products and chemical products have picked up. The outlook for capital expenditures has improved with new reports of auto parts suppliers and chemical producers adding to capacity as well as large contracts for District shipbuilders. Improvement in Louisiana's petroleum industry is resulting in more business for District suppliers of oil field equipment.

Tourism and Business Travel
Reports on tourism have generally been strong, but a few non-Atlanta Olympic venues had disappointing attendance. Ticket revenues for the Olympics, overall, exceeded projections. Non-Olympic-related reports show that central Florida tourism remains strong, with growing domestic and international airport arrivals and strong theme park attendance. However, heavy discounting was required to boost traffic at some Tennessee attractions and motel bookings were weak.

Construction
Most real estate contacts reported that single-family home sales were ahead of year-ago levels in July, while reports of sales were decidedly mixed within the District during early August. Building contacts also indicated that construction had slowed recently, but most Realtors said that current new home construction was adequate for expected sales. Both Realtors and builders in the Atlanta market noted a rebound in sales and construction activity in August after an Olympic-related pause in July. Realtors and builders continue to report that housing inventories are adequate and are cautiously optimistic concerning their prospects for the remainder of the year.

Contacts from across the District report that commercial and multifamily real estate markets continue to improve. Low vacancy rates and higher rents continue to propel new industrial, office, and multifamily development. While most commercial projects continue to be build-to-suits, several speculative developments are underway and more are anticipated this year and next.

Financial
Most contacts in the banking industry report moderate overall loan demand in August as compared to July and last year. Mortgage lending was described as mixed over last month and flat compared to last year. Deposits are described as flat to slightly down, while consumer lending was mostly flat compared to last month and last year. Commercial loan demand was reported to be flat over both periods. Bankers also observed some weakening in both consumer and commercial loan quality.

Wages and Prices
Most contacts report adequate supplies of labor and expect to maintain current employment levels over the next few months, although, as before, a few service sector employers and retailers note that the labor supply is tight for entry-level jobs. The thousands of temporary Olympic employees are expected to be quickly absorbed back into the region's labor force. Although material and finished goods prices have increased slightly since the last report, most contacts expect these price pressures to be temporary.