May 5, 1993
Overview
According to Sixth District contacts, the Southeast economy grew at
a moderate pace through mid-April, despite minor disruptions caused
by unseasonably bad weather. Retailers reported year-over-year
increases in consumer spending. Factory activity improved moderately
with increased production noted particularly in consumer goods and
home building materials. Realtors and home builders continued to see
a favorable single-family housing market, and contractors noted some
new multifamily projects but said commercial construction is still
weak. According to banking contacts, lending activity was up
modestly, driven by increases in commercial loans and another wave
of home mortgage refinancings. Competition continues to hold prices
of intermediate materials and final goods steady, while wage
pressures were generally absent.
Consumer Spending
Despite unseasonably poor weather, retailers in the District
generally reported increases in consumer spending through March and
into mid-April compared with year-ago levels. Nondurable goods sold
well because of Easter holiday shopping, while durable goods sales
received a boost from home improvement purchases that rebounded with
the better weather in early-April. Auto sales picked up modestly
during the last month, and most dealers said they were optimistic
about the prospects for continued increases in sales this year.
Tourism and business travel continued to strengthen, and early
reports indicate that the number of spring break visitors to Florida
surpassed year-ago levels. Most contacts in the hospitality industry
expect further improvement through the summer as air passenger
traffic and convention attendance continue to outpace year-ago
levels.
Manufacturing
District factory activity improved moderately through early-April,
led by appliance, furniture, carpet, and building materials
manufacturers who continue to benefit from regional and national
increases in home building and renovation. Increasing backlogs of
orders were reported by producers of plywood and textiles, with some
plants running at full capacity. Utilities around the District saw
modest gains in new residential customers and higher sales to
existing industrial users. Although production levels generally have
been increasing, relatively few firms have reported hiring new
employees, instead choosing to extend the hours worked by current
staffs. While increases in manufacturers' shipments and new orders
were reported across a broad range of industries, many defense-
related contractors are still faced with declining backlogs of
orders and few new prospects.
Construction
Real estate agents across the District noted that home sales were at
or above strong year-ago levels. Improved sales were observed in all
price ranges, including the luxury market which previously had been
very slow. Contacts expressed optimism about the remaining spring
sales period, but were more cautious in their assessment of longer
term prospects. According to builders, single-family home
construction is gaining, although activity was slowed in some areas
by the severe March weather. In contrast, multifamily construction
continues to be generally slow, but plans for several large new
apartment developments were announced in the last month.
Despite isolated reports of improved absorption and leasing activity, the commercial real estate market remains weak. No new speculative construction has been announced recently, although several large built-to-suit projects are underway. Commercial builders generally were pessimistic about their prospects for the rest of this year.
Financial Services
Bankers in most parts of the District reported that overall loan
demand was up slightly in March and early-April. Commercial lending
has increased in recent weeks. Although contacts report that home
mortgage lending continues at a brisk pace, refinancing accounts for
nearly two-thirds of current originations. This new wave of
refinancings is approaching the record volumes recorded during 1992.
Bankers report that some consumers who refinanced mortgages in late
1991 or early 1992 are taking advantage of lower rates for a second
time. Other types of consumer lending were said to be fiat or up
slightly in the last month.
Wages and Prices
Few factory contacts reported increases in prices of either
intermediate materials or finished products. There were no reports
of increasing wage pressures.