May 10, 1995
Overview
According to most contacts in the District, the deceleration in the
pace of growth in the region was becoming more evident. Retailers
generally said sales were flat during March, but that they picked up
in April. Comments from manufacturers were mixed, with some increase
from earlier in the year in the number of those indicating a
deceleration. Business travel is said to be up on a year-over-year
basis, offsetting some weakness in tourism. Real estate contacts
report that single-family home sales and construction continue to
cool throughout the region, while activity in commercial and
multifamily markets is still rising. Reports on prices and wages
suggest that pressures remain moderate.
Consumer Spending
Retailers reported that sales during March were restrained by a late
Easter season but improved during April. Inventory levels are
generally deemed in good shape, although a few contacts note that
they have begun to rise by more than they would like. Most retailers
anticipate a good, but slowing, second quarter as compared to the
first quarter.
Manufacturing
Reports from manufacturers suggest, on balance, a deceleration in
growth that is becoming more generalized. Some firms linked to
residential construction note slowing production and sales. Carpet
production is down from a year ago at some regional plants and slack
demand has forced layoffs. Producers of roofing products and
concrete blocks point to slowing orders, while shipments have
declined for cabinet manufacturers. A large producer of industrial
equipment and machinery reports declines in both shipments and in
the workweek, although new orders for export have recently picked
up. Layoffs by military contractors continue to adversely affect the
region, especially in Florida.
Other industrial respondents, however, report ongoing or new strength. Apparel contacts indicate that the two-year decline in employment at District plants has slowed. Denim production continues to increase, with a jeans manufacturer saying they are booked up through the end of the year. There are scattered reports of apparel producers adding to capacity. The weakness of the dollar is said to be generating significant increases in exports for Louisiana's chemical industry. Contacts report that the region's paper industry continues to do well. Tire producers say they are running at capacity and have shortages of some key materials such as carbon black. Steel plants in Alabama are said to be aggressively adding to capacity in response to strong demand.
Tourism and Business Travel
Although international travel is down for key parts of Florida and
the baseball strike hurt March hotel business, domestic business
travel is currently boosting occupancy at Florida hotels and in the
rest of the region. Travel officials note a serious decline in south
Florida tourism, which they attribute to the decline in the Mexican
peso. Cruise companies out of Miami report a huge drop-off of
bookings. In the wake of the dollar's decline, the number of
international tourists visiting New Orleans has increased
dramatically and local tour companies are reporting revenue gains.
Construction
According to real estate contacts, single-family home sales and
building continued to slow within the District during March and
early April. Realtors continue to attribute the slowdown to
uncertainty on the part of buyers despite a recent decline in
mortgage rates. Several builders reported that new home inventories
have begun to increase, and some added that inventories are
uncomfortably high. However, most contacts remain optimistic that
sales will pick up during the next couple of months.
Commercial and multifamily real estate contacts continue to report improving markets throughout the District. Several developers indicate that strong demand is driving multifamily construction; however, some are concerned that the pace of development within their market will lead to oversupply. Most contacts are optimistic and anticipate that both commercial and multifamily markets will continue to strengthen during 1995.
Financial Services
Bankers report that overall loan demand is moderate. Commercial
demand is growing, and was generally reported to be stronger than
consumer loan demand. Many contacts said there was strong
competition on the commercial side, as institutions compete to give
borrowers the best deals. Home mortgage lending continues below last
year's levels, but some lenders noted increased activity in recent
weeks. Auto finance is reported to be holding steady at levels lower
than a year ago.
Wages and Prices
Contacts indicate that wage and price pressures around the District
are generally moderate. Compared to the last Beigebook, fewer
manufacturers report receiving higher prices for their own finished
products, and fewer expect to receive higher output prices in the
near future; however, they continue to say they are facing price
pressures for materials. Building material contacts note that prices
are falling and inventories are up in some locations because of a
housing slowdown. However, producers of transportation equipment,
rubber, plastic, paper, and textile goods report rising prices of
raw materials. Wage increases were said to be stable in most of the
District, and reports of labor shortages continue to be confined
mainly to parts of Tennessee.