November 2, 1994
Overview
The southeast's economic expansion held steady in early fall,
according to business contacts. Retailers reported mixed results,
but with strength in men's and women's apparel. Holiday sales are
generally expected to be strong, although merchants generally expect
pressures to grow on prices. Business travel and tourism remain
robust in most of the region, and positive reports of advance winter
bookings in south Florida may signal improvement there. While
factory activity may have slowed a little since the previous report,
contacts have become more optimistic about the near-term outlook.
Home sales and building have slowed somewhat in most of be region,
while rising rental rates and occupancies have boosted the
multifamily market, and commercial real estate markets are reported
to be tightening somewhat. Overall loan demand is said to be
increasing modestly. Contacts report labor market tightness in a few
parts of the region, and wages generally remain stable. Reports of
pressures on prices of inputs continue to mount.
Consumer Spending
Reports from retailers were mixed, with some contacts noting double-
digit growth and others saying that unseasonably warm weather slowed
sales in the last half of September. Back-to-school sales were
characterized as fair, with denim items continuing to be strong
sellers. Generally, women's apparel sales are said to be improving
while those for men's wear maintain a strong pace. Retailers note
that traditional apparel lines are selling better than faddish ones.
Merchants generally anticipate a strong holiday selling season.
Currently, prices are remaining stable, but pressures are reported
to be growing, and many retailers expect vendors to raise prices in
the near future. Auto dealers report that sales are brisk, although
many dealers continue to complain about inventory shortages of
popular models.
Manufacturing
The District's manufacturing sector continued to expand, although
most contacts said the pace of activity had slowed a bit from a
month before. Although several reported higher inventories of
finished goods, most factory contacts were more optimistic about
future prospects than before. Firms producing paper, pulp,
chemicals, forest products, textiles, and aluminum products are
currently increasing production at their plants. Shipbuilding and
repair facilities report strengthening activity. Producers of heavy-
duty trucks are running at capacity levels. Other sectors, however,
are not so vibrant. The region's important apparel manufacturing
sector continues to shrink with new layoff announcements, which
producers attribute to foreign competition, corporate efficiency
measures, and soft demand for certain products. Uncertainties
surrounding the ongoing downsizing of defense manufacturers and
cutbacks in the space industry are continuing to adversely affect
central Florida.
Tourism and Business Travel
There are reports of signs of a turnaround along Florida's southeast
coast. Advance winter bookings at major resorts are said to be up,
and interest from Canadian and Latin American tourists has been
increasing. Tourist, convention, and business travel is well above
1993 levels, according to reports from the rest of the region, and
is providing an especially strong boost to the economies of New
Orleans and Atlanta.
Construction
September home sales have moved below last year's strong level,
according to District realtors. The fall-off in sales is attributed
to rising mortgage rates which have squeezed some buyers out of the
market and prompted others to wait and see. Even though home prices
appear to have stabilized in most areas of the District, most
realtors report that the market continues to be tight. Residential
construction has slowed in much of the District with the exception
of flood damaged areas that are experiencing a surge in
construction.
Commercial and multifamily real estate contacts continue to report improving market conditions. Both occupancy and rental rates continue to rise within the multifamily market. New apartment developments are currently under construction in several cities whose markets are said to be tight enough to easily absorb the new space. Commercial realtors continue to report falling vacancy rates and rising rental rates. Increasing demand for space in some areas is said to be bringing about some speculative building.
Financial Services
Banks noted flattening commercial loan demand, especially from
larger companies, but healthy demand from small and medium-size
companies. Commercial real estate lending was also strong and some
felt there was too much money chasing deals in that area. Consumer
loan demand was described as either flat or up modestly by most
contacts. Auto lending is mixed, with some banks reporting demand as
flat, and others noting a modest uptick. Home mortgage lending
continues to slow in most areas of the District.
Wages and Prices
Contacts in some local area labor markets say that they are
tightening, making it difficult for firms in the retail, service,
and light industrial sectors to attract and retain employees.
Reports of rising wages are becoming more numerous but are still
limited to only a few parts of the region. The number of reports of
price pressures continues to mount. A growing number of factory
contacts expect finished goods prices to increase in the coming
months. Price increases for lumber, paper, and other raw materials
were reported.