October 15, 2003
Reports from Sixth District contacts suggested that business activity continued to expand during September. District residential housing markets continued to post steady growth, whereas commercial real estate markets displayed small improvements. Factory activity showed further signs of stabilizing and transportation contacts reported increased freight volumes in September. The pace of retail and auto sales moderated somewhat, although several reports noted that sales for the month exceeded expectations. Commentaries on the District's tourism and hospitality sector were mixed: reports from South Florida were mostly upbeat, but others were more subdued. Responses from the banking industry noted steady deposit flows and a further drop-off in mortgage refinancing. Overall, employers appeared to be reluctant to add to payrolls, and wage increases were modest in most sectors. Environmental conditions were favorable for the District farmers' in September.
Consumer Spending
Retail contacts indicated that sales growth moderated somewhat
in September from the strong pace set in August, but activity
still managed to exceed retailer's expectations in many cases.
Contacts noted that apparel sales improved in September and electronics
and home-related products continued to sell well. Overall, inventories
were described as balanced. Reports noted that the retail outlook
for the fourth quarter remained positive, and some regional consumer
confidence measures showed a modest improvement in September from
August. Meanwhile, District auto dealers reported weaker sales
in the first part of September than in August.
Real Estate
District single-family housing markets were generally stable in
September. Homebuilders continued to report that new home construction
and sales were flat to up slightly during September. Reports from
District real estate agents mirrored those of builders. Most contacts
appeared more optimistic regarding single-family housing through
year-end than they had in the last report. Higher mortgage interest
rates have apparently not curtailed activity as much as had been
initially expected. The region's commercial real estate markets
continued to show only small, isolated improvements, and contacts
reported that vacant space continued to fill slowly. Commercial
construction remained at low levels.
Manufacturing
Manufacturing production in various industries picked up or was
stable in September, although there were some reports of layoffs.
Many firms were still reportedly planning to limit the extent
of new capital spending and hiring in the near term. However,
factory contacts in Tennessee saw a pickup in orders for machine
tools and equipment as their customers' sort to improve productivity.
Florida contacts noted stabilization in manufacturing activity,
but saw little evidence of a rebound. An Alabama steel producer
indicated that business was improving, but capacity utilization
rates remained low. A manufacturer in Georgia reported that the
weaker dollar was helping exports, but a textile producer noted
smaller sized orders. Further layoffs were announced in the District's
chemical industry.
Tourism and Business Travel
Reports from the District's hospitality and tourism sector were
mixed. Although early fall is traditionally a slow period for
tourism in south Florida, visitor traffic was better than expected
and restaurant business was reported to be quite brisk. In contrast,
the international market remained weak and the sluggish demand
for lodging in central Florida reportedly forced the closing of
at least two hotels there. As before, hotels throughout the District
catering to business travelers reported low-occupancy levels.
Convention attendance in Atlanta, Nashville, New Orleans, and
Miami continued to suffer from restrained business spending.
Financial
Most reports indicated a steady flow of deposits into banks and
that the rate of loan delinquencies remained manageable. Reports
also noted a drop in demand for mortgage refinancing because of
higher interest rates. Some loan officers reported that they were
receiving more business loan requests for projects aimed at reducing
costs or increasing productivity. However, overall business loan
and venture capital investment activity remained low.
Transportation
Reduced capacity combined with higher than normal seasonal demand
for shipping services led to improved conditions for the District's
transportation sector. Trucking firms reported increased freight
volumes and stable rates in September. In Georgia, an increase
in shipments of pulp and paper for the packaging industry was
noted.
Employment and Prices
Contacts reported that labor markets were stable overall in September,
although the demand for additional permanent staff was rising
in only a few sectors and was notably absent in manufacturing.
Some factory contacts, however, reported that they had increased
the amount of overtime as production turned up. Part-time and
temporary workers also continued to be in demand. Some businesses
noted that they were reluctant to hire permanent employees because
of the associated benefit costs.
Prices for most goods and services remained stable in September. However, the rising cost of healthcare and pension benefits were holding down salary and wage increases according to some contacts. Local lumber prices were reportedly the highest in several years because of wet weather, fires in the West, and recent high demand for plywood.
Agriculture
Rains and cooler weather produced favorable conditions for most
of the District's agriculture sector in September. Some commodity
prices moved higher in September. Local poultry growers were encouraged
by the new U.S.-Russia market access agreement that should lead
to additional poultry exports to Russia.