August 7, 1996
Overview
Reports from contacts provided a mixed but positive
picture of the District economy through mid-July. While retail sales
generally have been above year-ago levels, they have been below
merchants' expectations for this summer. Manufacturers slowed
production seasonally in July, and many revised downward their
expectations for growth through the end of the year. While tourism
generally has been strong in most of the District, several popular
regional travel destinations have reported year-over-year declines
in business. Home sales and construction continue to outpace year-
ago levels, but Realtors and builders have become more cautious
about their prospects for the remainder of the year. Commercial and
multifamily real estate markets continue to improve, and Realtors
report that the number of speculative developments underway in the
District is increasing. Bankers noted that overall loan demand
improved slightly during the last month, with commercial lending
growing more rapidly than consumer lending. Although several local
area labor markets continue to be tight, wage pressures remain
muted. Factory and retail contacts reported little change in the
prices they are receiving for goods and services rendered.
Consumer Spending
A majority of District retailers reported year-
over-year increases in sales through mid-July, although many also
commented that sales have been below their expectations. While sales
of apparel have improved over this period, sales of durable goods,
particularly home products, have slowed. Retailers generally say
that they expect flat to modest increases in fall sales compared to
year-ago levels. Inventories were characterized as on target
throughout the District.
Manufacturing
Factory activity slowed seasonally in July, with
contacts reporting decreases in production and shipments in most
industries. Inventories of finished goods increased, and contacts
reported that they were less optimistic than before about the near-
term outlook for their businesses. An increasing number of firms
expect new orders to slow in the next few months, with production
remaining relatively flat over the period. Apparel producers
continue to report declines in overall business along with plant
consolidations and closings. By contrast, producers of home
furniture and appliances expect to see modest improvement through
the end of the year, as recent home buyers furnish their new
domiciles.
Tourism and Business Travel
Tourism and business travel continues
to be strong in most of the District through mid-July. Approximately
two million visitors are expected to visit Atlanta and other
District cities during the Summer Olympic Games. However, while many
local sites have seen significant gains in tourism prior to and
during the first week of the Olympics, in Atlanta contacts
characterized the situation as "feast or famine." Generally, heavy
spending near Olympic venues has provided a notable contrast to the
disappointingly light traffic recorded at some of the District's
other traditional tourist destinations, and a large suburban sports-
related festival was prematurely closed after very light attendance.
As of this writing, the tragedy in Centennial Olympic Park has had
no negative impact on event attendance, and is unlikely to have any
notable economic consequence. Outside of the Olympic spotlight, many
cities in Florida have benefited from a surge in tourism and
business travel, much of which has been fueled by the large number
of Atlantans who are vacationing and doing business outside of the
city for the duration of the Games.
Construction
Most real estate contacts reported that single-family
home sales were above year-ago levels in June and early July.
However, builders said that by mid-July the pace of home
construction had slowed from the rapid pace recorded earlier in the
year. Contacts in much of Georgia reported year-over-year declines
in homebuilding in the last two months, although gains were reported
in northern Alabama and Nashville. Most Realtors characterized
current home inventory levels as adequate, although supplies remain
tight in some local areas. Realtors generally said that their
outlook had become more cautious in the last month.
Multifamily homebuilding and commercial construction continue to improve in most areas. Low vacancy rates and rising rents continue to support new industrial and office development, although the pace of retail construction has moderated. While most commercial projects continue to be build-to-suit, several speculative developments are underway, and more are expected to be announced in the next six months. Most real estate agents anticipate moderate-to-strong growth in commercial and multifamily construction through the end of the year.
Financial
According to contacts in the banking industry, overall
loan demand rose in July compared with June, although it was flat
when compared with year-ago levels. While mortgage lending generally
has held steady, auto lending slowed during the month. Commercial
lending improved moderately.
Wages and Prices
Contacts generally said that wages were stable
over the last month, with fewer complaints of labor shortages being
reported. While service and retail sector employers continue to note
a lack of applications for entry-level positions, a majority of
contacts in the skilled professions characterized labor supplies as
adequate. Fewer contacts expect to hire new employees than was the
case in early summer. Manufacturers and retailers both indicated
that prices remain subject to intense competitive pressures, both
from international firms seeking to increase their share of U.S.
markets, as well as from domestic consumers who remain vigilant in
their search for bargain-basement prices.