January 19, 1994
Overview
Sixth District contacts reported that growth in economic activity in
the Southeast accelerated moderately in December and early January.
Merchants were generally pleased with holiday sales, especially for
durable goods, although some types of apparel sales were flat, and
retailers are cautiously stocking for spring. Auto dealers continued
to report strong year-over-year sales gains. New orders and
production increased moderately for District manufacturers, and most
factory contacts expect further near-term improvement. Home builders
and realtors reported increasing activity and anticipate a busy
spring; commercial real estate is also slowly improving. Consumer
loan demand is continuing to grow modestly throughout the region,
according to bank contacts. There were scattered reports of
increased wage pressures at this time and with few exceptions
contacts noted stable prices.
Consumer Spending
Retailers around the District reported generally stronger-than-
expected holiday sales, although many contacts said that
improvements were due in large part to deep discounting, and those
specializing in women's apparel reported clothing sales were flat-
to-only-slightly improved over last year. Home furnishings,
furniture, and home electronics sales continue to benefit from the
strong single-family housing market. Many contacts noted that post-
holiday sales have also been good, and several stated that this
could lead to healthy spring sales. Nonetheless, most retailers
stated they are keeping their inventories for spring merchandise
lean until they better assess interest in the new spring lines.
Reports from the tourism and recreation industries suggest that bookings from domestic and South American tourists are up, while those from Europe are lower. Winter travel to Miami is said to have fallen this year because of reports of crime; however, activity north of the city is reported to be a bit stronger than normal. Casinos and riverboat gambling continue to stimulate tourist activity in Mississippi and now in Louisiana.
Manufacturing
The District's manufacturers continue to report expansion in
December, and most factory contacts were more optimistic than before
about future prospects. Nonapparel textile products, such as carpet
and home furnishings, continue to report strength coming from
residential home sales and refurbishing. Building materials
producers as well as furniture and fixture producers also note an
increasing volume of new orders for both residential and commercial
construction. Business hookups for telecommunications firms are
reportedly ahead of plan. Regional capital equipment producers note
a recent upsurge in optimism about future orders because of
improving economic conditions and they expect to expand capacity.
In contrast, the region's apparel producers continue to report strong foreign competition and soft demand resulting in further employee cutbacks and a shrinking factory workweek. Firms that rely on defense spending continue to downsize, although contacts expect defense conversion to civilian production to help stabilize employment rolls for some of the affected District manufacturers.
Construction
Realtors from across the District reported strong end-of-year home
sales. Most contacts stated that December sales outpaced year-ago
levels by a large margin. Many noted that homes are selling much
faster than in the recent past, and in some areas contract prices
are rising. Demand for new homes remains strong, and home builders
continue to report increased construction in anticipation of a busy
spring selling season. However, many builders noted that a short
supply of subcontractors has pushed up wages. Real estate agents and
builders are optimistic that home sales in 1994 will at least equal,
and in many areas surpass, the levels achieved in 1993.
Commercial and multifamily real estate contacts said that market conditions are improving. While build-to-suit and retail projects continue to provide most new construction, slowly falling vacancy rates for office and industrial space have helped effective rental rates improve. In addition, several contacts reported that large blocks of space are becoming difficult to find in the most desirable areas, and that some speculative building may be possible in these areas by the first quarter of 1995.
Financial Services
Bankers around the region reported that loan demand was up modestly
in late November and December. The majority reported increased
consumer demand, many citing auto lending as the strongest area.
Residential mortgage lending continued on a torrid pace as the
recent uptick in rates and the end of the calendar year caused a
flurry of closings in December. Activity has calmed since, but is
expected to pick up again at the end of the quarter. Commercial loan
demand was spottier, reported as flat in some areas, and up
moderately in others.
Wages and Prices
There were minor reports of increased wage pressures in December.
Although most manufacturers continue to report that prices for
finished products and raw materials have remained unchanged,
producers of building products as well as some realtors note
recently increasing prices.