January 17, 1996
Overview: Reports from contacts in the District suggest that the Southeast economy continued to grow modestly at the end of 1995 amid increasing signs of deceleration. Retail sales were generally below retailers' expectations and just slightly above last year's levels. Manufacturing slowed at the end of the year. On the other hand, tourism and business travel were described as strong throughout the District. New home construction remained active seasonally in most areas. Commercial and multifamily construction continued to rebound. Bankers reported that overall loan demand is steady. Most contacts reported only modest wage and price pressures.
Consumer Spending: District retailers generally reported that sales during December were below their expectations. However, most contacts noted that overall holiday sales did exceed last year's strong levels. The most positive reports came from upscale retailers. The busiest shopping period fell during the ten days before Christmas and was dominated by heavy discounting. Most retailers reported that they are comfortable with current inventory levels which were initially lean going into the season. They noted that the best-selling items during the holiday season were computers, electronics, fine jewelry, and cosmetics. Home-related products had a strong showing in New Orleans and in the Florida Panhandle because of weather-related replacement purchases. Generally, retailers' outlook for the first quarter is subdued with little year-over-year growth anticipated.
Manufacturing: Factory operations have slowed since the last Beigebook, according to industry spokespersons. Recent reports have noted general declines in shipments and production. A larger number of contacts also reported a decline in new orders. Most manufacturers anticipate modest near-term output declines and do not expect to increase payrolls significantly. However, several manufacturing firms expect to increase capital expenditures. The District's apparel sector continues to lose ground in competition with producers from abroad. Suppliers to the auto industry noted slowing new orders and shipment volumes, reflecting the sluggish auto market. Restructuring in the paper industry is resulting in labor force cutbacks at some regional plants. NASA cutbacks are expected to result in the loss of a substantial number of jobs at the Kennedy Space Center. More positively, contacts anticipate that rebounding home sales and construction will boost residential carpet and building materials production. Several regional chemical producers noted increases in exports.
Tourism and Business Travel: The tourism, convention, and business travel industry remains one of the District's most rapidly growing sectors, according to most contacts. Occupancy rates at central Florida hotels are relatively high, and new attractions are expected to lure more conventions to the area in the next year. In Miami, contacts report that the number of European visitors is up. Snowbirds are flocking to Southern Florida in record numbers, although a recent interlude of bad weather temporarily damped the number of arrivals. Advance bookings at south Florida hotels have been strong enough to suggest that tourism will continue to grow well into the new year. According to contacts along the Mississippi Gulf Coast, casino gambling continues to be a catalyst for new economic development in the area.
Construction: While home sales and construction were below strong year-ago levels in December, most contacts still felt that local markets were relatively active. Inventories continue to run low in several markets, stimulating new home building. Contacts have witnessed a rise in home prices, with escalating new home prices pushing all home prices higher. Overall, District contacts are optimistic concerning prospects for the first quarter, in large part because of the low mortgage rate environment. Most Realtors and builders anticipate gains over last year's weak first quarter results.
Contacts from across the District described commercial and multifamily real estate markets as growing robustly. Low vacancy rates and higher rents continue to propel new apartment and office development. While most office and retail projects continue to be build-to-suit, contacts also noted a number of speculative projects that have gotten underway in recent months. Most real estate professionals contacted predict that the pace of new commercial and multifamily construction will remain strong well into 1996.
Financial Services: The majority of contacts characterized overall loan demand as steady. Commercial lending continues to be stronger than consumer lending in most areas. As 1995 came to a close, activity in commercial, industrial, and real estate lending generally was reported to be growing. However, most bankers noted that consumer lending was weak, particularly auto lending.
Wages and Prices: Most contacts continue to report little change in prices received for finished goods and prices paid for materials. Those reporting materials price increases were mainly confined to the chemical or apparel industries. Fewer contacts than in the last Beigebook think that prices will increase for materials or finished goods over the next few months. Wages are generally reported to be remaining stable in the region.