Beige Book Report: Atlanta
December 6, 2000
The District economy continued to expand at a moderate rate during November, largely matching the slower pace noted in the last report. The outlook is for a continuation of slower growth through the remainder of the year. Retailers' reports were generally subdued, with warm weather stalling apparel sales in many parts of the region, while larger automobiles and sport-utility vehicles were selling more slowly than a year ago. Growth in Thanksgiving retail sales appeared to be strong, particularly at discount stores. New residential and nonresidential construction and sales continued to soften in the District. Factory activity also slowed, but some new projects were announced in the transportation equipment sector. Reports from the tourism and hospitality industry were more positive than in our last report. Loan activity remained strong but was expected to slow in the near term. Labor market pressures eased slightly, while reports of price increases remained limited.
Consumer
Spending
Unusually warm weather through the middle of November dampened apparel
sales in many parts of the District, and larger automobiles and
sport-utility vehicles were also selling more slowly than a year
ago. Some retailers reported that sales results during early November
had fallen below expectations, and there were more instances of
higher than desired inventory levels than in the last report. Stores
reported mostly brisk sales during the Thanksgiving weekend, with
the strongest reports coming from discount retailers. The use of
discounting and other sales promotions appeared to be more widespread
than last year. Many District retailers said that they expect fourth-quarter
sales results to moderately exceed last year's levels.
Construction
Single-family home construction and sales remained sluggish. New
home sales declined notably during October and early November compared
with a year ago. Homebuilders continued to report slow customer
traffic and greater use of price concessions. However, inventories
were mostly described as balanced. Most realtors and builders contacted
anticipate further slowing in the housing sector through the first
quarter of next year.
Nonresidential construction also slowed, continuing a trend from the third quarter. Office vacancy rates rose moderately in several key markets, although net absorption continued to be strong in most areas. Industrial vacancy rates fell in some markets. Multifamily construction continued to slow, with several locations experiencing higher vacancy rates. Reports continued to indicate little near-term risk of oversaturation in the commercial real estate market. Overall District construction employment payrolls in October were estimated to be around 1.5 percent higher than a year ago, which was the slowest annual growth since 1992.
Manufacturing
Activity slowed in many manufacturing industries, but contacts reported
new orders or planned expansions in some areas. Nissan recently
chose a Mississippi location for a new plant to produce sport-utility
vehicles and minivans. The facility will reportedly cost nearly
$1 billion and eventually employ around 4,000 workers. Also, some
District shipyards gained new contracts for ships, and work at drilling
rig fabricators continued to expand. In response to slower demand,
cutbacks by producers of heavy-duty truck and trailers continued,
and the slowing housing market is reported to have resulted in closings
and layoffs at several producers of housing materials. Production
has also continued to slow at many of the District's paper mills.
Tourism and Business Travel
Most contacts were cautiously optimistic about the winter tourist
season in Florida and along the Mississippi Gulf Coast. Major Miami
convention and tourist hotels reported strong forward bookings.
Rising passenger traffic through Miami International Airport over
the next six months is anticipated. With recreational travel to
the Middle East having been largely curtailed, many travelers are
expected to opt for travel to Florida and the Mississippi Gulf instead.
There was an unexpected surge in demand for hotel rooms in Tallahassee
during late November.
Financial
Bankers indicated that strong consumer and commercial loan demand
continued to fuel overall growth in bank lending in the District,
although demand for automobile loans slowed slightly and mortgage
demand was mixed. Reports suggested that the number of nonperforming
loans and charge-offs has increased but remains at relatively low
levels. Banking contacts expected overall loan growth to slow in
the near term.
Wages and Prices
Overall labor market conditions loosened slightly in the District.
Many firms observed that unskilled and semi-skilled workers were
easier to find than earlier in the year. However, skilled and professional
staff remained scarce. Local technology companies reported making
increased use of foreign temporary workers to meet demand. Reports
also suggested that hospitals are having great difficulty attracting
and retaining key personnel.
Reports of price increases were more frequent than in our last report, but limited to certain sectors. Some contacts mentioned increasing prices for industrial commodities such as copper and aluminum. Higher fuel prices have caused problems for local truck manufacturers and transportation firms. Health care costs continued to increase throughout the District, while lumber and paper prices were down notably. A few reports noted accelerating wage growth.
Agriculture
Cotton production forecasts for 2000 have been revised lower for
Georgia and increased for Mississippi, Louisiana, and Tennessee.
In Florida, the damage from the citrus canker remained limited,
and the initial forecast for this season's orange crop is 3 percent
higher than last season.