June 21, 1995
Overview
According to contacts, growth continues unevenly in the Southeast
economy with some sectors continuing to slow and others rebounding.
Retailers generally reported that sales increased during May, and
inventories were in good shape. Most manufacturers report little
change in production. Tourism remains mixed, but the outlook for
this summer is positive. Both commercial and multifamily
construction markets continue to improve, while the recent decline
in mortgage rates is reported to have reinvigorated single-family
housing markets in some parts of the region. Reports on prices and
wages suggest that pressures remain moderate.
Consumer Spending
Retailers throughout the District report that sales were up during
May, and met or exceeded their expectations. At the same time, most
merchants said that they are comfortable with current inventory
levels. Sales of home-related products continued to slow with the
exception of New Orleans where retailers found it difficult to keep
up with demand for home products after recent flooding. Retailers
generally anticipate significant sales growth this summer compared
with last year.
Manufacturing
Many industrial contacts reported little change in output during the
past month. For those reporting changes, increases matched
decreases. Export demand for paper remains strong, offsetting
declines in the domestic market. New parts production facilities for
the District's expanding number of vehicle assembly plants continue
to be announced. Steel producers are expanding operations and
modernizing, and several telecommunications equipment manufacturers
report an upsurge in orders. In contrast, competitive pressures
continue to force carpet manufacturers to scale back with new
announcements of layoffs. Sales have been slowing at low-end
furniture and bedding manufacturers, and they are paring hours
worked and near-term forecasts. Although apparel production is
steady for some products such as blue jeans, demand has fallen off
for others such as hosiery and women's clothing. Slowing dealer
orders have reduced heavy machinery production. Output for packagers
is below last year's levels and is expected to decrease further.
Some producers of lumber products note a slowdown in demand. Large
employers such as NASA continue to downsize, adversely impacting a
myriad of small suppliers.
Tourism and Business Travel
Although contacts characterize Florida tourism as spotty, tourism
and business travel are growing in the rest of the region. In south
Florida, tourism is rebounding and destination resorts are reporting
healthy advance bookings for conventions. Airport arrivals have
slowed and hotel occupancy has declined in central Florida. Travel
agents report, however, that families are arranging more expensive
vacations. Northern Florida resorts reported record-breaking
Memorial Day crowds. A new theme park and several outlet malls are
stimulating tourism in Mississippi, and hotel occupancy is above
last year levels in Nashville and New Orleans.
Construction
According to most real estate contacts, single-family home sales and
construction increased during May. Realtors attribute the increase
in housing demand to a dramatic decline in mortgage rates; however,
several contacts noted that some buyers are holding off on home
purchases because they anticipate rates will go even lower. Both
builders and realtors remain optimistic and expect to maintain their
current pace through the summer.
Commercial and multifamily real estate contacts continue to report strengthening markets. In several parts of the District builders continue to report that strong demand is driving apartment construction. The majority of commercial construction remains build- to-suit; although very little unleased space is available. Realtors anticipate that both commercial and multifamily markets will continue to strengthen during 1995.
Financial Services
Bankers report that overall loan demand is mixed. Most contacts said
there was moderate to strong activity in commercial, industrial, and
commercial real estate lending. Consumer loan demand, on the other
hand, was characterized as soft. Several bankers noted that auto
loan demand had slowed significantly. They said that so far lower
mortgage rates had not led to significantly greater mortgage
lending.
Wages and Prices
Wage increases remain generally stable. Skilled construction
workers are in such high demand in some areas that employers are
recruiting outside their states. Although there are some instances
of pressures on input prices, most contacts report that these are
not being passed on. At the same time, some construction materials
suppliers have recently noted a softening of prices. Apparel and
carpet producers are having trouble passing on higher material
prices to the consumer. Other contacts report that material prices
charged by paper, plastics, tire, and chemical producers continue to
escalate.