March 13, 1996
Overview
Reports from contacts in the District suggest that the
Southeast economy grew moderately in January and February, despite
the adverse effects of some locally harsh winter weather. Retail
sales in January were damped throughout much of the District by
weather conditions which forced stores to close or cut hours;
however, some retailers report a rebound in February. Manufacturing
performance edged up, halting a slowdown reported previously, but
near-term expectations became more restrained. Tourism and business
travel continued to grow vigorously throughout the District.
Although bad weather slowed construction in many areas of the
District, single-family home sales picked up in January and February
after slowing at the end of last year. Commercial and multifamily
markets continued to improve. Bankers characterized overall loan
demand as mixed. Most contacts reported that wages and prices
remained steady.
Consumer Spending
District retailers report that January sales were
weak around the region; February sales results continued to be weak
in the northern part of the District but rebounded in the south.
Merchants in the north, an area hit by harsh winter weather,
reported disappointing sales in February. Many stores operated on
restricted hours or closed their doors because of icy conditions
early in the month. As a result, inventories are a little heavy.
These retailers noted that sales picked up at the end of February as
the weather warmed up. Merchants in warmer climates reported a year-
over-year rise in sales in February--a rebound from January--and
describe current inventories as on target. Retailers throughout the
District are optimistic that spring sales will exceed year-ago
levels.
Manufacturing
Factory performance improved in late January and
February after two weak months, with modest gains in shipments and
production, according to most industry spokespersons. The volume of
new orders also picked up, and more employers added to their
payrolls. Most contacts said inventories declined moderately.
Expectations of future improvements in manufacturing conditions
generally declined, despite the recent pickup in activity. Contacts
generally expect production, new orders, employment, and the
workweek to wane over the next six months; however, they expect
capital spending to continue to increase as manufacturers seek to
become more competitive in domestic and international markets. A
regional producer of industrial machinery reports that strong
foreign markets have increased his firm's order backlogs. Electrical
and electronic equipment producers across the District also report
increasing business. Regional chemical producers continue to operate
at full capacity. By contrast, suppliers to the auto industry
describe conditions within the District as sluggish. Some apparel
producers report continued weakness in their industry, with the
factory workweek and volume of new orders remaining below year-ago
levels. Orders are declining for a paper manufacturer, and packagers
note slowing production and sales.
Tourism and Business Travel
The tourism, convention, and business
travel industry continues to lift the region's economy.
Representatives for Atlanta's tourist industry say the area's
convention attendance is surging and is not expected to decline this
year over last, even though the Olympics will engage major
facilities in a portion of the summer. Officials for South Florida's
tourism industry report that hotel and motel bookings hit a peak in
February with Northerners escaping the miserable weather. The number
of domestic, European, and Brazilian tourists has increased
significantly in Florida, but Mexican tourists have stayed away.
Tourism officials expect that hotel occupancies in New Orleans will
be greater in 1996 than in 1995 because of a series of large
meetings booked there and a continued strong flow of visitors to the
city's attractions.
Construction
Most real estate contacts reported that single-family
home sales rebounded in January and February after slowing at the
end of last year. Home sales in January and February generally
surpassed last year's disappointing levels. However, construction
was slow in many areas because of extreme cold. Inventories of new
and existing homes continue to run low in several markets. Most
Realtors and builders expect a strong spring housing market.
Contacts from across the District report that commercial and multifamily real estate markets continue to improve. Low vacancy rates and higher rents continue to propel new apartment and office development. While most commercial projects continue to be build-to- suit, several speculative developments are underway and more are anticipated this year. The retail market remains strong in most areas, but several contacts report an increase in vacancy rates after some stores went out of business following the holiday season. Most real estate professionals continue to anticipate that new commercial and multifamily construction will grow this year.
Financial Services
Contacts in the banking industry described
overall loan demand as mixed. As in previous reports, contacts in
most areas report that commercial lending is stronger than consumer
lending. Mortgage refinancing continues to increase, but several
contacts noted that auto lending remains weak and credit card
delinquencies are on the rise.
Wages and Prices
Wages generally remain stable in the region since
the previous Beigebook, even with scattered reports of labor
shortages. Most contacts say that prices paid for materials and
finished goods have remained essentially unchanged. Fewer contacts
than in our previous survey anticipate that prices paid for
materials or finished goods will increase over the next few months.